The United States Postal Service announced today that it lost $15.9 billion last fiscal year (almost a billion more than projections) and will run out of cash in a year if something isn't done.
The post office has, as we all well know, been losing business for years to technological advancement and competition. Mail volume dropped 5 percent this last year. The post office is also notable in that it is required to fund its retiree health benefits in advance, and those costs are becoming an impossibility. Via Bloomberg:
Next year's loss forecast includes a $5.6 billion payment due to the U.S. Treasury for future retiree health benefits, [Postal Service CFO Joe] Corbett told reporters after the meeting. The 2012 loss includes the $5.6 billion payment to the fund that the service defaulted on Sept. 30, and the previous year's $5.5 billion obligation that was due Aug. 1 and also not paid. Because that year's payment was deferred, the 2011 loss doesn't include any pre- funding amount.
The Postal Service is still trying to get Congress to give them permission to stop Saturday deliveries and make it easier to close down post offices and processing plants. The postal service attempted to close around 3,700 post offices in May, but then backed down in the face of complaints. The Postal Service is also trying to convince Congress to let them spread out retiree health payments over several years rather than paying up front. I wrote about the Postal Service's health payments in May:
Prefunding mandates have been among the few successes in USPS management and could reduce unfunded pension liabilities nearly a third by the end of this decade. But the National Association of Letter Carriers is still hoping to "fully lift the onerous burden to fund decades of future retiree health benefits decades in advance," thus leaving future taxpayers to pick up the shortfall.
And it turns out a significant retirement fund shortfall has just been discovered. Bloomberg reports:
The service's outlook worsened this week, when the U.S. Office of Personnel Management said the service's projected surplus in a government-worker retirement account has fallen to $2.6 billion, less than one-quarter of the previous year's estimate, due to lower interest rates. It found another retirement account now has a $17.8 billion shortfall instead of a previously estimated surplus. The service has proposed tapping the surpluses to help cover its losses.
With such a retirement shortfall already, would the Postal Service be any more likely to keep up with those future health payments if the system were changed?
In June, Reason.tv interviewed postal workers on an (obviously unsuccessful) hunger strike to try to convince Congress to change the Postal Service's health funding rules: