Postal Service Turns an Operational Profit for 6th Quarter in a Row…but Loses Money Anyway Due to Prefunding of Health Benefits

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Monday, May 11, 2015

Postal Service Turns an Operational Profit for 6th Quarter in a Row…but Loses Money Anyway Due to Prefunding of Health Benefits

Postmaster General Megan Brennan

By most standards, the U.S. Postal Service (USPS) is doing pretty well, making a profit of $313 million in the second quarter of this fiscal year. But a congressional mandate to prefund employees’ health benefits is keeping the post office in the red.

Congress in 2006 adopted the Postal Accountability and Enhancement Act which forced the USPS—which does not receive money from the federal budget—to prefund its health care benefit payments to retirees for the next 75 years. In other words, the Postal Service was ordered to pay for the benefits of workers it hasn’t even hired. No other businesses, certainly not Postal Service competitors FedEx and UPS, are expected to operate that way. That prefunding takes $5.5 billion a year off the Postal Service’s books.

So even though the USPS has made $1.4 billion in controllable income this year, partly due to increased package delivery services and in part thanks to a temporary postage increase that might soon go away, it’s still in the financial weeds because of the benefit prefunding. The Postal Service would like that requirement removed, but it also wants to move its retirees from the USPS benefit system onto Medicare and make other changes to its personnel structure.

“While this doesn’t fully reflect our financial condition it does offer the purest measure of our progress,” Postmaster General Megan Brennan said. “It’s also validation that we are making progress with cost containment and revenue strategies.”

But the head of a postal workers’ union says USPS needs to expand and bring in even more revenue. “This three-year trend in operating profitability makes clear the need to strengthen – not degrade – the now-profitable networks,” said Fredric Rolando, president of the National Association of Letter Carriers. “We hope to work with lawmakers on both sides of the aisle, the administration and the new postmaster general to build on the progress achieved in the last Congress, within the mailing industry and among major stakeholders on consensus postal reform that promotes a strong and vibrant Postal Service.”

-Steve Straehley

To Learn More:

Postal Service Pushes for Reforms as Finances Improve (by Andy Medici, Federal Times)

Postal Revenues Bump Up in 2015 (by Bernie Becker, The Hill)

USPS Continues to Grow Revenue While Losing Money (by Eric Katz, Government Executive)

Manufactured Crisis About to Cripple the Post Office (by Noel Brinkerhoff, AllGov)

Comments

ET - 10 Simmons 9 years ago

@grannybunny... 'It is simply not true that "it's no longer necessary to do so."' I was referring to the fiscal necessity, not the federal/legal obligation. 'Well, of course USPS has to carry the loss on its books; the money is still due and owing.' Yes, but Corporate uses this as an excuse to put on the poor mouth even though we are now BILLIONS in the black operationally, have over $7 BILLION in liquidity and have long since paid back $15 Billion borrowed to cover losses from the recession and the burdensome onus of 2003'S PCSRSFRA and 2006'S PAEA. The USPS has actually lost BILLIONS due to the absolute destruction of service standards created as a result of the 'very aggressive cost-cutting' you mentioned. This includes a permanent loss of nearly 400,000 jobs and counting since 2000. Destruction of 1st class letter service standards was always the goal. Thus the fiction of an artificial fiscal crisis created out of whole cloth by unnecessary/illegal: https://www.law.cornell.edu/uscode/text/39/101 Congressional legislation. Lastly, in reference to your comment on the necessity of prefunding, 'although it never really was...' Agreed.

Mark 9 years ago

This prefunded money is just like the Social Security Trust Fund. It is not set aside to fund employees health care that will not be hired for 50 years, nor retirees, it is spent. Politicians use this money just like the rest of tax payer money, to fund their little schemes and provide porkulous for themselves and their donors. Wake up and see these political schemes for what they are.

grannybunny 9 years ago

Well, of course USPS has to carry the loss on its books; the money is still due and owing. It is simply not true that "it's no longer necessary to do so." The Postal Service had to quit paying because it could no longer afford to do so and still also pay all its necessary operating expenses, despite very aggressive cost-cutting. There has been no formal finding that the prefunding is no longer necessary -- although it never really was -- nor has Congress amended its mandate, even though USPS has been seeking that relief for over 5 years now.

ET - 10 Simmons 9 years ago

The problem with this is that USPS Corporate counts prefunding of the PSRHBP as a loss on the books even though they haven't actually paid into it for the last several years. They aren't paying into it as it's no longer necessary to do so. There is already enough in it, over $30 Billion, for every living retiree and currently employed future retiree. The Federal Government pays-as-they-go for retiree health benefits. This means that they don't prefund them AT ALL. Why should the USPS, which has received NO taxpayer dollars since 1983, have to prefund through the year 2081? Short answer, 'they shouldn't'...

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Postal Service Turns an Operational Profit for 6th Quarter in a Row…but Loses Money Anyway Due to Prefunding of Health Benefits

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