Postal Service can't deliver payments

As Congress bickers over the future of the system, the USPS faces its first default ever.

By Kim Peterson Jul 23, 2012 11:38AM
The Postal Service has two massive payments this year that it simply doesn't have the money for, and it's expecting to default for the first time.

The service owes a $5.5 billion payment due Aug. 1 that was deferred from fiscal 2011, The New York Times reports. Then it has $5.6 billion payment due at the end of September.

Post continues below.
The payments are for future retiree health benefits, part of the Congressional requirement that the Postal Service pre-fund the benefits for future retirees. The mandate has become too expensive for the Postal Service to meet while fulfilling all of its other obligations.

The Postal Service isn't declaring bankruptcy, nor will it stop functioning on Aug. 1. But this is an issue that lawmakers must take action on, because it isn't going away.

The U.S. Senate passed a bill in April that returns $11 billion the service has overpaid into one of its pension funds, the Times reports. The bill also gives the service more years -- about 40 -- in which to make its payments, thus dropping the annual total to $2.5 billion. It also delays for two years the inevitable move to five-day delivery.

But House republicans hate the bill, which is one reason they have put off a vote on it indefinitely. Rep. Darrell Issa, R-Calif., has offered another proposal that breaks union contracts and gives the service a fast deadline by which it must make drastic cuts to Saturday service and its plants and locations.

Labor unions hate both bills, but they especially hate Issa's proposal. They say the fix here is to end the mandate to pre-fund retiree benefits.

Without any sort of legislative solution, Congress can keep putting short-term bandages on the Postal Service. And an eventual bankruptcy keeps getting closer.

The Postal Service, meanwhile, has told FedEx (FDX) that it will seek bids for new partners after its longtime contract with the company ends next year. FedEx has provided service for the USPS since 2001 and received an estimated $1.5 billion in revenue last year in the contract.

Instead of renewing with FedEx, the Postal Service will make the company compete for a new contract. Rival UPS (UPS) is already preparing to bid, Reuters reports.

173Comments
Jul 23, 2012 12:47PM
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our congress has made another blunder,requiring P.O. to pay upfront 100 % for pensions in the future. there is no need to do that. the congress needs to cancel the requirements now.
Jul 23, 2012 4:31PM
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I have done a lot of contract workfor the post officeand every complaint I hear is they are management heavy.  I mean 1 manage for every 4 workers, which is more than double, triple in some cases, the management ratio of most government agencies..cut management and cut their costs.  I have traveled out of this country 36 times and will tell you that we have the best postal system in the world (as far as fast, secure delievery is concerned).
Jul 23, 2012 4:27PM
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Stop the "news grabbing" headlines and please put out he true story of just why the PO is in bad financial shape..Truth- congress has the PO paying retirement benefits ahead 50 years to cover employees it has not yet hired.  No company or agency in America is required to do this but the PO. Congress is doing that so they can use the money to say they are balancing the budget.  In reality, the PO had an excess or profit as they call it in business, ths yar and last.  Cngress wants the PO to look bad so it can "privatize" it and get a lot more politicl donations.  Congress is made up of  criminals and ruining America..if you don' like whats going on don't blame residents, they don't make laws or pass budget authoriatons, only congress does, then it the blames presidents for their spending..
Jul 23, 2012 4:27PM
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Maybe Rep Issa should look at his own government job before going after the only government agency that makes money. Issa makes more in retirement after just 5 years than a Postal employee makes with 30 years of service! They keep screwing up, then they give themselves raises. IDIOTS.
Jul 23, 2012 6:12PM
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This mandate was given by the Bush Congress.  The post office cannot do anything unless approved by Congress.  They have never been allowed to run as a business.  The post office is NOT funded by the government. Their sole source of revenue is the fees they get from sales.  Were it not for the mandate they would be in the black.  Please see earlier post on retirement benefits.  I receive $900 per month for 23 years of service.  I pay part of my life insurance but could not afford to pay for the medical.  I retired at 62 because I could no longer stand in one spot all day due to arthritis in my knees.  I loaded and unloaded mail trucks in addition to my retail position until the day I retired.  Not all postal employees are lazy.  There are many of us who worked for our paycheck.
Jul 23, 2012 4:29PM
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I would like to make something clear to everyone because most people don't know the real facts.  Our wonderful government required the Post Office to OVEPAY (???)  into their retirement fund (as you read in paragraph 3 above) and the Post Office has been demanding it back from the government so they can stay in the black.  The government is dragging their feet and still has not paid the money back.  It's not a matter of the Post Office mismanaging, etc. it's our government having their hands in where they don't  belong again!!!  Don't yell at the Post Office, yell at Obama.  Hmmm could it be they don't have the money to give back???
Jul 23, 2012 5:01PM
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Cannot believe the mis-informed people on this post.

 

It is not Obama that wants the Post Office to Pre-Fund (yes, look at the word - PRE-FUND) Health Insurance for the next 75 years (yes, that is correct - 75 YEARS).  That means they are funding Health Insurance for two generations of Postal Carriers/Workers that have not even been born.  Anybody, and I mean seriously anybody tell me a Private Company that is or would be compelled to do this much Pre-Funding.  The Post Office can be operating in the BLACK and doing just fine if the Rules of Government Agencies (such as Congress) were applied to them.  Notice I say "Rules of Government Agencies" and not "Rules of Other Government Agencies", and that is because US Post Office is not a Government Funded Agency.  So Tell Rep Issa to quit his whining and to leave the Post Office alone.  All he can see is there is money to be made by privatizing this Service even more, and he want his kickback.

Jul 23, 2012 6:58PM
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It's really scary to listen to the extreme points of view in these posts. No wonder this country is in trouble.  Lots of finger pointing, but no understanding of what's going on.

I worked for USPS in my 20s and early 30s, and I currently work for UPS and I'm now in my late 40s.  Everyone is at fault in the USPS fiasco; Republicans, Democrats, Unions, Employees...everyone.

I will say that UPS makes a profit, funds it's pension and keeps union labor fairly happy.  So does FedEx.  It's really not that difficult.

Why can't the USPS do that?  Because it's government, because it's politics, because everyone wants to sh*t on each other.  I mean everyone.

G
Jul 23, 2012 1:41PM
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The USPS is the ONLY company in the world required to prepay benefits.  This was done by congress and will not be changed by them because they have used the money for other things.

  As a postal employee I understand that as the change to electronic communication continues to advance it is only a matter of time before my job is gone. 

As for the statement of us being over paid and entitled I believe that may have been true in the past but I know none of the 750 employees I work with feel that way!  We are proud of where we work and work very hard on a daily basis to make it successful.  There are many single parents that I work with that have at least one other job or work with us parttime just to make ends meet.

Jul 23, 2012 3:07PM
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The post office should go/remain private, it wasnt untill the house/senate started sticking their fingers into the till at the post office that things started going downhill.They screw up evrything they touch, always have.
Jul 23, 2012 3:15PM
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Someone asked can Congress get any more stupid? Oh yes, it's a bottomless pit but many of their seemingly inane actions are really the result of doing the bidding of lobbyists. The majority of senators and particularly representatives, are lobbyist owned.
Jul 23, 2012 1:06PM
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All of those ELECTED MORONS will be on the outside looking in come November!

Jul 23, 2012 1:52PM
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Maybe someon should look at far far out these pre payments are made- they are prefunded for 75 years! Drop the debt, let the USPS come out of the hole and move on!
Jul 23, 2012 3:07PM
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Well, the postal service is growing obsolete, but is still required by the Constitution.  So one (or more) of three things have to happen:

1: Removal of Saturday Mail
2: Removal of little used Postal Centers
3: Stop pre-funding medical benefits

Probably all three should be done at this point, but some in Congress dislike the service reductions because, heaven forbid, it hurts their consituents.
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Overall it seems the Feds are going to continue to force the USPS to prepay retirement to them which will allow the Feds to "abuse their privileges of 'holding' the retirement funds" just like they did with the Social Security funds replaced with I O U's that can now never be covered.  Spoiled rich brats elected into offices mismanaging all the money as they have no clue to how live within a budget, nor how to make a budget, nor how to live 'normally' without all the expensive elite expenditures within their positions. While the working man and woman suffers with stupidity placed on the USPS providing good career positions for many people that the Govt doesn't seem to give a hoot if they screw that up. What next are they going to kill thousands upon hundreds of thousands more jobs?

 

Jul 23, 2012 3:40PM
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Asking the House to get something done?  You got to be kidding!
Jul 23, 2012 3:56PM
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We all know that if a ( insert party affiliation here ) party politician's lips are moving then they are spewing lies. To sit and point fingers at any particular party is STUPID!
They are bought and paid for long before they get to the national level.

Congress ( House and Senate ) is incapable of doing what they were sent there to do.
Profit and Greed will always take priority  over common sense.

So until someone figures out how to make a non-greedy human, then we get what we deserve.


 

Jul 23, 2012 1:49PM
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One of the biggest mistakes of the USPS is poor visionary leadership at the top. Back in the mid 90's we had a fairlly modest post office and they built a huge complex on 5 aces, the former office sat on about 1/2 acre. When I go inside the new office, there are still 2 tellers just like the old office, yet it has 5 booths for service, always empty. It's called over expansion, and poor management, and lack of oversight. Our old office was just fine.
Jul 23, 2012 2:00PM
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Of course it is facing default AGAIN!  The last time the postage was raised (about 6 months ago) it was raised ONE PENNY... duh. did anyone actually think that was going to be good planning??? MAYBE THEY LIKE BEING IN DEFAULT!!!  Everytime I go to the post office it is packed with customers. So not EVERYONE is only working in the digital world...  !
Jul 23, 2012 4:02PM
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This is not a surprise. The Postal Service can (and should) remain public but the public unions there (and not only there) should have their expectations in line with reality.  In private business the unions can be a measure against the greed of corporations (although some fine adjustments there will be welcomed - like the unions should be allowed per company not per type of business). With public services in practice there is nobody on the other side - the taxpayers do not have a say and politicians wouldn't complicate their life and re-election with counter-measures. This allowed the public unions to negotiate pay rises and pensions that the economy simply cannot support. For example my city uses 65% of the tax money for public workers pensions. My company - 14% social security and 3% 401k match. 
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