ABM Postal Counsel: "Congress may wait until 11th hour to take action"

Jack Widener

August 15, 2012 - Last week, the United States Postal Service released yet another dismal report. USPS announced a $5.2 billion net loss for the third quarter of the fiscal year after facing a continuous volume decline of First-Class Mail. It also disclosed that it defaulted on a $5.5 billion prefunding payment for retiree health benefits earlier this month due to lack of cash. The mail agency believes it will be forced to default on a second payment of $5.6 billion, which is due by Sept. 30.

"Though discouraging it is not a surprise at all," says Jack Widener, ABM's postal counsel. "The Postal Business model has been changing over the past five years with significant losses of revenue and volume. The Q3 loss is just a continuation of the change, and USPS doesn’t expect those volume and revenue trends to reverse for a number of years. What is very disappointing is the lack of courage of Congress to take legitimate and corrective action that would put the USPS on the road to a much more stable financial position."

The news wasn't all bad. Despite the multi-billion dollar loss, revenue from shipping services and package delivery for the quarter was up 9 percent, totaling $3.3 billion. But this increase is not enough. In addition to the decline of First-Class Mail, USPS blames mandated prefunding payments for its cash problems. As part of the Postal Accountablity and Enhancement Act of 2006, USPS is required to make payments that cover future retiree healthcare premiums; payments are $5.5 billion a year for 10 years, totaling $55 billion. No other government agency is required to prefund those benefits, notes Widener.

With such low levels of revenue, USPS warns that it might not be able to borrow through October. The agency is urging Congress to approve its Postal Service Business Plan, which Widener says most ABM members support. The plan includes the transition to a five-day weekly mail delivery schedule and the elimination of prefunding for retiree health benefits, among other initiatives.

It is estimated that approximately 80 percent of postal costs are related to labor and associated benefits. The Postal Service is currently working to reduce processing facilities, its labor force and work hours, but maintains that eliminating its prefunding requirement is key. Widener agrees and believes Congress should also refund the overpayment of FERSA (Federal Employment Retirement System Act), which totals $11 billion, and then adjust the annual payment.

Tom Carpenter, ABM's legislative lobbyist, says grievances aren't one-sided. "Congress has been pretty frustrated with USPS offering all these drop-dead dates that are not actually drop-dead dates," he says. "It is a little bit of 'the boy who cried wolf' at this point, and I think there are some in Congress who wanted this default to happen so they could call the USPS bluff."

Reform is needed but both Carpenter and Widener doubt it will happen in the coming months.

"The Postal Service will continue to operate but Congress may well wait until the 11th hour to take action to make necessary changes," says Widener. "This will only continue to make business customers nervous about the future of the Postal Service."

By Elizabeth A. Reid