USPS head Patrick R. Donahoe yesterday told US Congress members that the country’s postaloperator cannot afford to make an obligatory $5.5 billion payment in September without urgently
needed legal changes.The organisation will not be able to make statutorily mandated payments to the government bySeptember unless the Congress refunds overpayments of pensions or modifies the mandate to prefundretiree health benefits, he declared.
The Postmaster General admitted before the Federal Financial Management Subcommittee of theSenate Committee on Homeland Security and Governmental Affairs that USPS finds itself in adifficult financial state. “As things stand, we do not have the cash to make a $5.5 billionprepayment for future retiree health benefits due Sept. 30,” he said.
For three years, the US postal operator has been asking the Congress to change the paymentschedule of a mandate in a 2006 law that, unlike any other federal agency, requires the PostalService to prefund retiree health benefits amounting around $5.5 billion. In addition, the PostalService has asked to gain access to $50-$75 billion in overpayments it has made to the CivilService Retirement System (CSRS) and a $6.9 billion it has overpaid to the Federal EmployeesRetirement System (FERS).
Since the inception of the law in 2006, the Postal Service has paid some $20.9 billion into theRetiree Health Benefit Trust Fund. Under the current law, the company is scheduled to continue tomake $5.5 to $5.8 billion in payments up to and including 2016. With the right legislation,however, the Postal Service could return to profitability, Donahoe claimed.
Donahoe stressed that the continued burden of the retiree health benefit prefunding continues tohave a negative impact on the business.
He pointed out to subcommittee members that the cash shortfall could extend to operationalexpenses. “Despite our significant role in the American economy and our aggressive cost cutting andrevenue generating efforts, I regret to say we are in a serious financial predicament today.”
The subcommittee chairman, Senator Tom Carper, introduced legislation yesterday that addressesthe financial issues confronting USPS and, among other things, allows a transition to a five-daydelivery schedule which could generate annual savings of $3.1 billion.
