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USPS Prepares to Default, Reform Stalls



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That’s the gist of a New York Times report today. While the U.S. Postal Service will continue to operate as before, it will not be able to make a required payment toward future retiree health benefits. This is not the first time these payments, at about $5.5 billion a year, have been a problem. In fact, the payment in question was already deferred from last year, and there’s another one due in September.

Congress required ten years’ worth of these “pre-funding” payments in a 2006 law, largely because USPS’s business was shrinking and future revenues couldn’t be expected to cover benefits. Until that point, USPS had been operating on a “pay as you go” model — i.e., not setting aside money for future benefits. To transition from that system to one that accounted for future obligations, a “catch-up” period was needed to make up for all the saving that hadn’t been done previously.

Meanwhile, a Senate plan to reform USPS has passed, but the House has yet to vote on its bill — and there are huge differences between what the Senate wants (e..g extending the catch-up period to 40 years) and what the House wants (e.g. cuts in services and changes to benefits).

The problem with extending the catch-up period is that USPS’s revenue is still not done shrinking thanks to the Internet — it’s hard to tell what the company will be able to afford decades in the future. And some of us are still holding out hope of privatizing USPS before then.

This will be interesting to watch.

You can read our past coverage of USPS’s problems here.



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