The following is contained in a letter from Sen Bernard Sanders to the editor of the Wall Street Journal May 10th.
The Journal ignores the most important reason for the Postal Service’s financial troubles: a $5.5 billion annual mandate to pre-fund 75 years of future retiree health benefits in just 10 years. This onerous requirement, unmatched by any entity in the private sector or government, is responsible for more than 80% of the Postal Service’s debt. But for this prefunding mandate, the Postal Service would have posted a profit of $700 million from 2007-2010 and a $200 million profit in the first quarter of this fiscal year. The Senate-passed bill effectively resolves that issue. It also addresses the reality that the Postal Service overpaid $11 billion into the Federal Employees Retirement System.
While this is technically correct in terms of accounting, it misses the point. We should be concerned why there is such a large liability, not how to manipulate or eliminate the funding which is exactly what got many states in trouble. Various bills in Congress want to waive the retiree medical funding requirement. How’s that for solving a problem? The liabilities exist even if they are not funded even as the USPS continues its financial decline.
The USPS lost $486 million in the period ending March 31, 2012 excluding the funding for retiree medical benefits alluded to by Senator Sanders.
Now consider these facts reported on Bloomberg Business Week:
- The postal service wants to reduce payroll by 20%, but union contracts prohibit layoffs.
- 80% of post offices lose money.
- The Bureau of Labor Statistics reports the average hourly compensation for a postal worker is $41 vs $28 in the private sector.
- 80% of the USPS budget goes to employee salaries and benefits compared with 43% for FedEx.
- The last union contract provided for a 3.5% pay increase over the contract period plus seven uncapped cost of living increases.
- Postal workers contribute 21% toward their health benefits versus 28% for most federal workers.
- 79 percent of USPS total costs are the wages and benefits of its employees.
It short, it is the same old story of an unholy alliance between public unions and politicians. Even when postal service management attempts to solve it’s problems their actions are blocked by Members of Congress.
- Postal Service loses $3.2B in 2nd quarter (kansascity.com)
- Postal Service Scales Back Scaleback: Will Close Nothing, Nowhere (reason.com)