So screamed the headline, wedged between ubiquitous Olympic news. What does this hyperbole mean? Not much for you and me at the moment. The hullabaloo regards federally mandated payments to the US Treasury for prefunding future retiree health benefits.
What is prefunding? Why is it necessary and why is the US Postal Service (USPS) the only organization that is federally mandated to do this? Most organizations contribute to retiree health benefits as those expenses accrue. But back when the living was easy, USPS was handed a federal mandate to prefund future retiree health benefits. Fredric Rolando, President of the National Association of Letter Carriers (NALC), told Lori Ann LaRocco of CNBC “The congressional notion was that the Postal Service was making lots of money selling its products and services, and so it might be a good idea to put those profits into pre-funding future retiree health care benefits for the next 75 years and do so in a decade. No one else, public or private, does this – but it would put the Postal Service that much more ahead of the game in terms of future liabilities. And so, in 2006, Congress mandated that the USPS do so, at a price tag of about $5.5 billion a year.”
At first glance, this decision makes sense. We’ve all heard of retirees who reach the golden milestone only to discover that their retirement funds were mismanaged and there’s nothing there for them. And, the retiring baby boomers will strain future healthcare budgets. As I’ve researched the issue, I’m finding that some states are prefunding retiree health benefits to some degree. But, 75 years of prefunding set aside in ten years? That’s ludicrous. Combine that mandate with a global economic slump which effected USPS just as it did every other industry and things start looking real dicey. Now let’s add the growing obsolescence of the Postal Service’s mission and it’s inability to successfully reinvent itself and we have a crisis.
Guess why UPS & FedEx, though also struggling financially, are in better shape the USPS? In addition to no mandate to prefund retiree health care, they also have no federal mandate to serve geographically isolated and sparsely populated areas at the same cost as high density areas like New York City. So, the guy in Dutch Harbor, Alaska get’s his Amazon.com book, right? Maybe it’s a day late, but the book arrives in his mailbox for the same price that the same book would arrive in the mailbox of the guy living 20 miles from Amazon’s distribution center. And most likely, the book was shipped via UPS, but delivered by a USPS carrier through a pre-arranged contract. There are a host of other disadvantages burdening USPS, like an unwieldy Postal Board of Governors that controls postal rates, making it impossible for USPS to fluctuate up and down with the market as its competitors do. And let.s not get into federally regulated hiring procedures.
Reality bites. When was the last time you opened your mailbox to find something that brought bona fide joy to your heart? More likely, you find a bill that has already been automatically, electronically paid. I continue to sign up for the hard copy not from need but as a measure of loyalty to my former postal colleagues. What most of us yank out of the mailbox is officially called “bulk business mail.” Colloquially, we recognize this stuff as “junk mail.” Today (Monday) I had four pieces of mail. One was a bill, which also arrives electronically, and three were “bulk business mail”—advertisements which, by the way, I also receive online.
Right now, the only people who truly live for the mail are older than I, on Social Security, and technologically incapable of keeping up with the changing paradigm. I feel great empathy for that segment of the population. But even they are being dragged, kicking and screaming, into the digital age. The federal government will stop mailing benefit checks next year, opting instead, to pay directly (and far more cheaply) to direct deposit or debit accounts. The American public is pushing for the federal government to save money—to cut spending. It is a no-brainer that the feds would stop paying irrelevant postage to send out millions of benefit checks. So there goes another reliable segment of Postal revenue.
We have reached a point at which it is only fair to ask, Is the Postal Service an essential part of commerce? Is it relevant? Could its function be combined with another agency or contracted out? My question understandably elicits rage from the NALC. USPS Letter Carriers have a long and proud history of safely delivering crucial and sensitive documents no matter what obstacles came between them and their daily rounds. Snow, sleet, rain, earthquake, flood, tornado, war—we were there for the American citizen. But today, people worry far more about their cell service than their mail service.
The underlying calamity for USPS is that the “sanctity of the mail” is mostly irrelevant or hanging by a thin thread. People my age and younger are already used to receiving important documents electronically. We acknowledge the inherent privacy and safety issues involved in electronic communication. But guess what? The convenience of digitizing and automating payments outweighs the risk factors for most of us. Let’s face it, unless the mail you receive is placed in a locked mailbox, there really is no sanctity to it’s delivery. Your trusty, professional mailman may physically place your mail and only your mail in your mailbox (although not always) but who knows what sneaky little crook is shadowing your mailman, eager to lift the treasured data he just delivered? Or perhaps the crook precedes your mailman and grabs those envelopes with your payment checks enclosed? Yes. Such behavior is a felony. Yes, there is an entire Postal department dedicated to ferreting out and prosecuting such criminals. But explain all that to the guy who’s identity has been stolen from the mailbox, the garbage can, or the Internet. So, if there is no sanctity in our mail, does it ultimately matter who shoves it in the mailbox? Could the paperboy do the same job for a whole lot less money?
Rancorous finger-pointing has hobbled resolution of Postal finances. The USPS administration, seeing the oncoming drought, has slashed and burned services, reduced forces, and tried to squeeze the life-blood out of rank and file employees. As in any huge organization, the changes have been chaotic, illogically thought out, and have succeeded only in antagonizing the workforce and cracking open a chasm of mistrust between management and craft.
USPS administration threatens Congress (and the labor unions) with reduced services:
- The closure of up to 92 mail processing facilities—a strategy that would inevitably slow the mail’s progress from point to point.
- Reducing operational hours of small and rural retail Postal facilities.
- Eliminate Saturday delivery—an effort to both reduce man hours as well as facilities overhead
The NALC argues that cutting service is a death knell for USPS. If the prefunding mandate were lifted, the USPS could put money back into employees, service, and retool for a rosier future.
Congress, does what it does best these days: sits on its ass and twiddles its thumbs, afraid of making any definitive decision.
Meanwhile, 8 million Postal jobs hang in the balance. Large scale mailers, looking to the future, explore ways of disengaging from the Postal Service. And the prefunding? Much as everyone is going to scream at me, I’m not convinced it’s such a bad idea, particularly since this country seems completely unable to reform its medical delivery system. But how about a break on the time frame for prefunding 75 year’s worth of bennies?
The USPS defends its default: The U.S. Postal Service will not make mandated prefunding retiree health benefit payments to the Treasury of $5.5 billion due Aug. 1, 2012 or the $5.6 billion payment due Sept. 30, absent legislation enacted by Congress. This action will have no material effect on the operations of the Postal Service. We will fully fund our operations, including our obligation to provide universal postal services to the American people. We will continue to deliver the mail, pay our employees and suppliers and meet our other financial obligations. Postal Service retirees and employees will also continue to receive their health benefits. Our customers can be confident in the continued regular operations of the Postal Service.” Hmmmm.