POSTAL SERVICE SET TO DEFAULT ON BILLIONS IN HEALTH FUND PAYMENTS|
Posted On: August 1st, 2012
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The Postal Service, faced with continuing financial losses because of a drop in mail volume, expects to default for the first time on its annual payment for future retiree health benefits.
The $5.5 billion payment, which was deferred from the 2011 fiscal year, is due Aug. 1. The Postal Service is also scheduled to make a $5.6 billion payment for 2012 in September. A spokesman for the agency said that barring intervention from Congress, it would default on both payments.
“We are simply not capable of making either of these payments to the U.S. Treasury, in part or in full, while continuing to meet our other legal obligations, including our obligation to provide universal service to the American people,” said the spokesman, Dave Partenheimer.
Missing the health care payment will not cause immediate disaster, nor will it affect current retiree benefits. The Postal Service will still be able to pay its employees and buy fuel for its trucks to deliver mail on time, postal officials said.
The Senate approved a bill in April that would, among other things, stretch out payments that the agency has to make into its health care fund for future retirees over 40 years, lowering the annual payment to about $2.5 billion. The Senate bill would also return $11 billion that the Postal Service overpaid into one of its pension funds.
But the House has not taken up its version of the measure, and it is not likely to come up for a vote before lawmakers break for the August recess. That means that any changes in the agency could be delayed until a lame-duck session of Congress after the November elections or even until next year.
The lack of House action has been harshly criticized by senators and mailing industry representatives. “The longer the House delays consideration of the bill, the longer the uncertainty about the Postal Service’s financial future remains,” said Senator Scott Brown, Republican of Massachusetts, one of the co-sponsors of the Senate postal bill. “This is irresponsible and unfair.”
The delay comes as the House has also stopped work on its version of the farm bill, another piece of legislation that the Senate has passed but that House leaders have shown no interest in bringing to a vote. The current farm bill expires on Sept. 30.
Both pieces of legislation have drawn considerable opposition from conservative lawmakers, who want deeper cuts in government spending and who could derail any vote. Democrats in the House also oppose the Postal Service bill because they believe it would worsen the agency’s condition.
Conservative House members oppose the provision in the Senate postal bill that would stretch out health payments over 40 years. Many House Republicans have criticized the idea as a multibillion-dollar taxpayer bailout of the Postal Service.
The postal bill was listed on the legislative calendar issued in May by the House majority leader, Eric Cantor, Republican of Virginia. Before the Independence Day recess, the bill’s sponsors said work would begin on July 11, but in recent weeks House leaders have said that no decision has been made about whether the bill will be voted on.
A spokesman for Representative Dennis A. Ross, a Florida Republican who is one of the sponsors of the bill, said Mr. Ross hoped to get a bill passed so the House and the Senate could began negotiations.
“Mr. Ross believes the votes are there, but a decision on timing is up to the House leadership,” said Fredrick J. Piccolo Jr., Mr. Ross’s chief of staff.
Short of taking up the bill, Congress could intervene strictly to defer the health care payment again or address Postal Service problems in an unrelated spending bill. The House and the Senate have both attached language to pending spending bills that would restrict the Postal Service from closing post offices. The Senate language would also keep the agency from closing mail processing plants.
But mailing industry representatives said that deferring the payment or attaching postal changes to other bills was a stopgap measure.
Art Sackler, a spokesman for the Coalition for a 21st Century Postal Service, a group that represents the mailing industry, including companies like FedEx, said inaction by Congress could make consumers lose confidence in the Postal Service.
“We’re already starting to see the lack of confidence in some sectors,” Mr. Sackler said. “J. P. Morgan recently put out a memo to its clients urging them to use more electronic transactions because of the uncertainty and changes at the Postal Service. Ultimately, more industries are going to go that route, and that’s going to take more mail out of the system and cause greater financial problems for the Postal Service. Congress needs to act.”
Postal unions, which have opposed both the House and the Senate overhaul bills, said Congress should simply relieve the Postal Service of its obligations to pay into its future retiree health fund, which they say is already well funded.
“This is an artificial crisis created by the Congressional mandate that the U.S.P.S., alone among all agencies or companies, pre-fund its future retiree health benefits for the next 75 years,” said Fredric Rolando, president of the National Association of Letter Carriers. “This unaffordable burden accounts for 85 percent of all the Postal Service’s red ink. If lawmakers fix the problem they created, the sharp cuts in service they want to impose on Americans and small businesses would not be necessary.”
This article has been revised to reflect the following correction:
Correction: July 18, 2012
A previous version stated incorrectly that the Postal Service would also default on a $1.5 billion payment to the Labor Department for workers’ compensation costs.