The U.S. Postal Service (USPS) is required to make a rather hefty pension benefit payment today -- but won't. It can't. It doesn't have the required $5.5 billion and will thus default.
What does that mean for postal customers? In the short term, very little. USPS says defaulting on the pension deposit will have “no material effect” on the operations of the Postal Service.
Business as usual, sort of
“We will fully fund our operations, including our obligation to provide universal postal services to the American people,” USPS said in a statement. “We will continue to deliver the mail, pay our employees and suppliers and meet our other financial obligations. Postal Service retirees and employees will also continue to receive their health benefits. Our customers can be confident in the continued regular operations of the Postal Service.”
So what's all the fuss about? In short, it's an admission that the mail delivery service, that once was a fully subsidized part of the federal government, can no longer operate as both a government entity and a private business.
The $5.5 billion was supposed to be paid to the U.S. Treasury Department so that the government could pay employees' future retirement benefits. In other words, the money isn't required for that right this very minute.
That's not to say the Postal Service doesn't face mounting financial pressures when it comes to operations. It lost $3.2 billion in the first quarter of this year and warns it will run out of operating cash in October.
Part business, part government
When the Postal Service was removed as a government agency in the 1970s, Congress imagined that it would be run like a private business and become self-supporting. But it has been encumbered with many of the burdens of a government bureaucracy. For example, it only charges 45 cents to send a letter from New York to California.
It consistently loses money on first class mail. Yet consumers would likely revolt if USPS raised the price of a first class stamp to reflect the actual costs.
The Postal Service says something has to give. It says it has a strategic plan to make necessary changes but needs Congress's help.
“Comprehensive postal legislation is needed to return the Postal Service to long-term financial stability,” USPS said in a statement. We remain hopeful that such legislation can be enacted during the current Congress.”
USPS points out that it receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations. Yet unlike other businesses, it requires Congress' permission to make the changes it says it needs to make to ensure survival.