Postal Service Faces Pension Fund Default
The Postal Service continues to lose money and is in danger of default
08/05/2011 | By Mark Huffman
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ConsumerAffairs.com
| Business Services
Last week the burning question was whether the U.S. Government default on its debt. Today, a perhaps more pressing question is “Will the U.S. Postal Service (USPS) default on its debt to the U.S. Govrnment?
USPS announced today its losses for the latest quarter total $3.1 billion, raising the possibility of default if the red ink continues.
The quarterly loss of $3.1 billion compares to a net loss of $3.5 billion for the same period in FY 2010, as losses pile on top of one another. Total mail volume for the period declined to 39.8 billion pieces for the quarter, compared to 40.9 billion pieces in the third quarter of FY 2010.
USPS said the third quarter revenue “reflects the anemic state of the economy during the past three months.” Additionally, it says the growth in electronic communications continues to erode core first-class mail volume. Net losses for the nine months ended June 30 amount to $5.7 billion in 2011 compared to $5.4 billion in 2010.
Post office closings
The mail service recently announced plans to cut its budget by targeting 3,700 postal facilities for closing. But it apparently needs to do a lot more cutting.
The more immediate problem is a scheduled $5.5 billion payment to the postal employee pension fund that is due next month. The postal service doesn't have the money. Unless Congress does something to postpone the payment, or relieve it of its responsibility, USPS says it will be in default.
“We continue to take aggressive actions to reduce costs and bring the size of our infrastructure into alignment with reduced customer demand,” said Postmaster General and CEO Patrick Donahoe.
Some of those steps were outlined last month with USPS announced the targeting of branches for closing. It plans to expand its “village concept,” whereby post office functions are farmed out to local businesses, where consumers are already doing business.
Village concept
Instead of a post office, consumers would buy their stamps and drop off mail at an area retail establishment.
“By working with third-party retailers, we’re creating easier, more convenient access to our products and services when and where our customers want them,” Donahoe said. “The Village Post Office will offer another way for us to meet our customers’ needs.”
UPSP says it seek a “smaller, leaner and more competitive” postal system – and one, presumably, that can be operated with present revenue.
But just as many other large businesses discovered years ago, pension liabilities can be a crushing expense. Promises were made in labor negotiations that the present management is finding almost impossible to fulfill, giving the transition to electronic mail and private delivery services.
Until modern times, USPS was the U.S. Post Office Department, part of the executive branch of government. That changed in 1971 with passage of the Postal Reorganization Act, in which it was designated as an independent organization.
Mark Jenschke (Mon, 08 Aug 2011 00:04:48 +0000): In other words; it take a village to runs us further into the ground and blame it on Mom and Pop.
Stephanie Teague (Mon, 08 Aug 2011 00:11:14 +0000): their pension is bigger than mine.
Greg Williams (Mon, 08 Aug 2011 15:26:19 +0000): jealous?
Terry Kauffman (Mon, 08 Aug 2011 01:30:53 +0000): There should be no bail for this incompetence. The USPS continues to run $ Billions in the red year after year without taking any responsibility or make corrective actions to balance their budget and now they are looking to the taxpayer to bail them out. This is terribly wrong, deceptive and underhanded.
Enough already this 11th hour notification is a huge con and typical of the actions of our incompetent government leaders.
Here are some viable solutions;.
1 - Fund the pensions and stop paying the executives at the USPS until they resolve the crises that they have gotten themselves into. Once they have fixed their problem, they can start collecting a paycheck at half their previous salary.
2 - If they don't fix their problems, fire them and take away their pension and any other benefits they have delegated to themselves. They don't deserve them.
3 - Cancel all USPS bonuses and other perks permanently.
4 - Close all duplicate buildings in all towns & cities. Far too many cities have duplicate services and duplicate management.
5 - Close all post offices on Saturday and Sunday. No Service period. No overtime and no transporting. If this doesn’t work, close them on Monday’s or Friday’s or both until the USPS becomes profitable on its own.
6 - Stop wasting money on multiple services. The USPS delivers mail period! It’s not a boutique shop.
7 - Put a mailbox outside the grocery store. If your package doesn't fit use UPS or Fed Ex.
8 - Sell stamps at the sole post office building in town and inside the grocery store.
9 - Stop wasting money on various designs for stamps. One design only and it should never ever change. Who cares if Elvis is fat or thin....no one!
10 - Make each USPS facility a profit center. If it is not profitable on its own, close it down. We don't want to support loss centers. If it’s a loss center then people don't believe that it is necessary or they would use it.
11 - Cancel all USPS advertisements. It’s not necessary. Everyone knows what a post office does.
12 - Stop building new post offices until the budget will allow the new structure to be paid for in cash. Stop buying new equipment until the old equipment is paid for.
It is simple logic! The more postage costs, the less people will have a tendency to use the USPS. This consequently makes the PO buildings not cost effective to maintain and should be closed.
"WAKE UP AMERICA". Stop buying into these 11th hour scams. We need to force these people to be responsible.
The suggestions noted above are just a few solutions that will, if followed, result in the savings of millions and millions of dollars and no bailout requirement by taxpayers. It’s a "Win - Win" situation and will result in cost and tax savings. Bailing out the USPS is a "Lose - Lose" situation which will only result in increasing costs /taxes and continued incompetence, fraud, waste and abuse by those that are running the USPS currently.
Barbara Flannery Kauffman (Mon, 08 Aug 2011 02:16:39 +0000): thinking of publishing your ideas? how bout a book, not facebook!
Ryan Kauffman (Fri, 19 Aug 2011 23:46:11 +0000): I don't know that it's necessarily "incompetence" that's causing them to falter. I mean, you didn't take into consideration that the Post Office is a quasi-governmental organization, and as such isn't expected to make a profit. It's like asking why the Marine Corps doesn't make a profit. Government agencies are services that we fund with our tax dollars. (However, one way the Postal Service is different from other government agencies though is that we do pay for stamps, and in that way the attempts to make a profit. On the other side though is that other government agencies don't have to worry about competition like the Postal Service does from FedEx, UPS, etc)
Joseph Kiesznoski (Mon, 08 Aug 2011 12:21:43 +0000): The post office would be ok if congress stopped raiding their coffers like it does social security to pay the lazy you have their hands out and won't won't work, but know were and how to get it free.
Carol Fox-Knoch (Sun, 14 Aug 2011 01:15:53 +0000): The postal service pension was not something that was given as a freebie. It was negotiated in collective bargaining. Postal Employees pensions are actually OVERFUNDED....the federal government has taken 70 BILLION too much and doesn't want to give it back. It would make the deficit look larger. So the postal service faces a shortfall when that money could make all the difference. I work for the Postal Service and its easy to take cheap shots, but we are the ONLY government agency stuck with these special requirements. We get the worst of the public and private sector. We have to get permission to close a post office or close on saturdays or change rates. UPS and FEDEX can do what they want.
Now our management, which just negotiated a 5 year contract with virtually no raises, has decided they can't afford it and want to be able to layoff 120K more people than will already be retiring. They want to take the employees and retirees OUT of what they have worked 30-40 years to earn, a pension and retirement that they paid and negotiated for.
This is a job that is not easy. Carriers are out in that blazing heat of 100 degrees, getting chased by dogs.
Clerks have been all moved to night shifts so they can't see their families. And this all could be avoided if Congress would just give us what we overpaid. We are NOT asking for a bailout. We are talking about not forcing us to pay for retiree medical costs for 75 YEARS IN ADVANCE! Does your company have retiree health benefits set aside for 75 years? Nobody does, that would be crazy. No federal agency does either. Only the Postal Service.
The Postal Service used to be a good middle class job. Something you could afford to buy a small house, raise your family with. Soon it will be low paid, no retirement part time employees. When I started, if they gave a postal exam, thousands would apply.
Small town post offices are going to be closed across the country, which is sad because small towns need them and want them to stay open. But they bring in very little revenue. So if the US government wants that small town to keep vital, they may need to consider a small subsidy for these rural post offices. We spent trillions on projects that did nothing for the economy, a few billion spent on this would keep 3700 small post offices open.
As far as the pension. It depends when you started. The "Old system" was in place till 1984. Then it became a hybrid system with social security and a 401K. Its not a gold plated pension like city and state workers get.
I am on the old system and after 30 years will get about half of my base pay as a pension. That was one of the reason I took a job with the Postal Service, they had good benefits. In the beginning, the pay was not very good.
If you have a negotiated contract-union or nonunion- it should scare you when a company wants to throw the agreement out and change everything-everything from layoff clauses to medical insurance to retirement pay.
I feel sorry for the retirees that now have to wonder if the retirement that they thought they could count on will get cut or that suddenly they will be forced into a more expensive and inferior medical plan. If it can happen to the Postal Service, it can happen to anybody anywhere.
Hopefully, Congress can stop their bickering and refund the overpayment and allow the Postal Service to do its job, with out a bailout. But the Republicans and Democrats can't agree on this issue either, so they may fiddle while rome burns.