USPS Says It Definitely Isn’t Going To Scrounge Up $5.5 Billion To Make Payment By Tomorrow

Remember when we reported that the U.S. Postal Service was thisclose to defaulting for the first time in its history? That deadline for paying the $5.5 billion it owes to the U.S Treasury is due tomorrow, and the agency says it’s just not going to find enough change in the couch cushions to pay it.

It’s not like this is a surprise, points out BusinessWeek — the USPS has been warning the government that it didn’t have the means to pay the $5.5 billion payment, which was due last September, or another one for $5.6 billion by Sept. 30 this year. The payments are required and go toward future retirees’ health care. The USPS says those payments are causing it to be financially unstable and that it needs help from Congress.

So what’s the hold-up in Congress? Legislation passed by the Senate in April that would return $10.9 billion that was overpaid into health-fund benefit accounts for those retirees who have yet to retire might help, but the House has yet to act on a different bit of legislation. And if it hasn’t yet, it’s doubtful it will by tomorrow.

The USPS has more employees than any other U.S.-based public company other than Walmart, and lost $3.2 billion in the first quarter of 2012. It’s going to run out of cash in October unless that required payment toward health care, which went into effect in 2006,  goes away as well as big services changes like the end of Saturday mail delivery.

A statement on the USPS site reads:

“The Postal Service continues to implement its strategic plan. However, comprehensive postal legislation is needed to return the Postal Service to long-term financial stability. We remain hopeful that such legislation can be enacted during the current Congress.”

Included in the strategic plan would be a cut of around 220,000 jobs and the closing of various mail-processing plants to cut down on costs. The USPS was going to totally shut down some of its post offices in an earlier plan to avoid default, until opposition in Congress put a stop tot hat plan. Instead, it’ll cut operating hours at many locations in a bid to save $500 million per year.

Proponents of the plan to stop paying into the retiree fund say there’s plenty of cash to go around for decades to come — $45 billion.

If we thought our retired members were in danger of losing their health care, we’d be screaming bloody murder about it,” said the president of the National Association of Letter Carriers union in a statement.

Postal Service to Miss $5.5 Billion Payment to U.S. Treasury [Business Week]

 

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  1. Loias supports harsher punishments against corporations says:

    Let it go bankrupt. As much as I hate to say it, the general populace (let alone Congress) rarely move until somthing hits home for them personally, and never with as much zeal and when it does. Let the mail not longer function, and mark my words you will see quick and sweeping reforms. Also, sadly, a lot of mud slinging, blame-games, and denials. Just remember, whatever happens, Congress failed to act appropriately. All of them.

    • Chuft-Captain says:

      And an economic collapse which will put millions of businesses out of business due to an inability to ship their merchandise at a cost the consumer is willing to pay.

      Including me.

      • dolemite says:

        Me too. No PO = no job for me.

      • 180CS says:

        I don’t like the bankruptcy idea, but come on, I’m just a single guy who sometimes sells on eBay, and I ALWAYS ship FedEx because they actually cost less most of the time, and I have never had them screw something up (unlike USPS, who used to break/loose about 1 in 20 packages).

    • MaytagRepairman is stealing socks while fixing your dryer. says:

      I had to double check who posted that. I was thinking it might be Romney. Not taking a political stance here. Just noting the similarity. Try re-reading with Romney’s stump-speech voice in your head.

    • leprofie says:

      Remember, USPS management doesn’t have the authority to take action without Congress’ approval. Congress is at fault, not management of USPS.

  2. GearheadGeek says:

    Congress is either stupid or corrupt, take your pick (all of the above is an acceptable cop-out.)

    Yes, it’s a good idea to have a well-funded pension plan. No, it’s not a good idea to force the USPS into insolvency because some crybaby congressman got in a fight with their letter carrier or some other “ideological” problem they have with the concept of a government-provided service. This is a manufactured crisis and should be fixed by the same Mob of Morons who created it. Tell your congressCritter it may not get to go back to Washington if it interferes with your ability to receive your bank statements, Netflix DVDs and christmas cards.

    • scoutermac says:

      Yes. Many people will not be able to pay their bills if this happens.

    • Press1forDialTone says:

      Congress is stupid -and- very corrupt because it is controlled by
      RepubliThugs(tm) who would LOVE to see the USPS completely
      privatized and run by Bain Capital. You can take it from here….

      • TuxthePenguin says:

        Actually, Bain Capital would be a good company to come in and restructure and restore it to profitability. That’s what private equity does… and makes money on.

        But of all things to bash the Congress on, this isn’t one of them. They are requiring the USPS to actually fund the promises it makes/made to their workers and retirees. Do you not support honoring promises made to workers?

        • GearheadGeek says:

          Not exactly. They’re requiring the post office to PRE fund the promises decades before that money will actually be used. Something between “wait until an employee retires to pay into their pension” and “pay so far ahead into the pension that you can’t actually afford to continue operations” is probably the right move. Congress chose the latter, and I don’t think it was done for the good of the members of the postal workers’ union.

          • TuxthePenguin says:

            Why can no one understand what is actually going on? Rather than paying as-you-go, they are being forced to calculate and fund their liabilities based on actuarial calculations. So the pension fund will have this nice chunk of change that will be there for the workers and retirees to have.

            Its how we should force all companies too behave. If the USPS doesn’t like it, simply cancel the pension plan, tell the workers they will no longer have it and fund what they had already promised and move on. But that would never, ever fly.

            • Difdi says:

              And when all companies are bankrupt, we can have a depression that makes the most recent recession look like a momentary wobble.

            • soj4life says:

              And by doing so, would end one of the largest unions on the earth. Lets not kid of ourselves, the law of 2006 and issa bill have only one purpose. What the 2006 act did was force the usps pay for all retiree benefits for 75 years, over a 10 year span. No other company can almost quadruple their retiree benefit payments without going out of business. The way for the usps to stay solvent, which they have since nixon, is to scrap the 06 act and also charge their competitors the market going rate when handling their freight.

        • bishophicks says:

          The requirement was that the USPS pre-fund 75 years worth of retiree expenses and were given only 10 years to do it. No other government agency or private company is required to do that. It’s like suddenly telling a 35 year old employee that they have to come up with all of their retirement money in the next 10 years.

          This is standard Republican BS: throw sand in the gears, obstruct, cut and defund, and then point and say, “See? Government doesn’t work!”

          If Bain took over the USPS (god forbid), the first thing they would do is get Congress to lift those rules requiring the pre-funding. Then they would point to the money that had already been set aside and say, “Under the new rules the pension is now OVER-funded.” And then they’ll pay themselves $10 billion in bonuses, which will never be taxed because they’ll move it offshore. Then some other stuff will happen and we’ll end up with no mail system, $100 billion in new debt, and Republicans will say, “See, government messed up the Post Office so bad that even Bain couldn’t save it.”

          Seriously. It’s 2012. We are the richest, most powerful country in the world yet we have municipalities removing street lighting, other places are tearing up paved roads and replacing them with gravel because it’s cheaper, and now people are saying we can’t afford to deliver the MAIL!? Are you kidding me?

  3. do-it-myself says:

    Close the Post Office on the least busiest day of the week. TUESDAYS. Sure, it’s only a band-aid to the real problem, but it would at least be of SOME assistance right now.

  4. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    To be fair, not many companies could fund retirement packages for their workers for the next 75 years and still be solvent. It’s time to make some changes, like raise the price of first class mail and cut a delivery day or two.

    Loias is right – unless something really drastic happens, like the mail comes to a screeching halt and people start to scream, nothing will be done.

  5. scoosdad says:

    Isn’t there a form online somewhere on the USPS website where they can get their payment held for a couple of weeks?

    I just came back from a business trip and remembered the night before I hadn’t arranged to have my mail held while I was away. The online form was badly broken from any browser I tried and I was about to give up, but I gave them a phone call anyway to see if there was anything they could do for me. I was shocked and pleased that the guy on the phone was easily accessible late at night, and arranged to have my mail held, and it was. Not sure if the form is still broken, though.

  6. Invader Zim says:

    What I need is a grouchy usps clerk thanks for providing that for me.

  7. Kestris says:

    May it will take going into default and bankrupt for Congress to get off their collective asses and see that this so called future retiree health care fund is actually hurting the USPS, not helping it.

    Or not getting their mail on Saturday will.

    • TuxthePenguin says:

      Do you want to help the USPS or help the workers that the USPS has made promises to? This whole debate is actually funny because we’re forcing the USPS to fully fund its promises (as companies should do) and now they’re complaining that they cannot underfund like most everyone else.

      Why anyone runs a pension is just insane. Put any new workers into a 401k and freeze all existing workers in the pension.

      • dush says:

        To fully fund its promises? By paying right now for 75 years in the future? The employees that would use that are not even born yet. That’s ridiculous. Congress just wanted some extra cash so they are bankrupting the Post Office to fund their pet projects and decades of war.

        • TuxthePenguin says:

          *sigh* No, that’s not how the prefunding works. While they must calculate the future liabilities based on projected future employees (which might include those unborn at the furthest end of the projection), they are only required to fund for actual current employees and retirees.

          The “75 years” commonly quoted is misunderstood too. That is not what they have to pay in cash – that is based entirely on the actuarial evidence for an employee. For example, if an employee is 50 and is estimated to live until 80, they would need to estimate the cost of the next 30 years and fund according to that. However, for the accounting side of things, they must use a timeframe of 75 years (IIRC, its the OPM financial guidelines that is where this comes from).

          Essentially, we’re asking them to fund it properly on valid actuarial assumptions. This also includes getting to decide on their projected rate of return. Again, IIRC, they use a 7.25% annual return in estimating how much cash they need to pay now (I assume you know how time-value of money works) even though actual returns have been averaging less.

          • dush says:

            The liability is based on the 75 years though. That’s including projections for future employees. But I do see what you’re saying about the actual year to year funding not being based on future employees.

            The bottom line is where is this money all going? Supposedly the massive upfront funding is to have the liabilities paid for upon an employee’s retirement but is that money actually being set aside to build the time value??

            This funding model is completely counter to anything that seems reasonable though. I can look ahead to my own future, look at how much money I’ll need to have to live off of and then look at my bank account and current income and say dang! I have unfunded liabilities of 1000%! Oh no!! But that is completely unrealistic way of looking at things. And that is what Congress is doing to the Post Office.

            • TuxthePenguin says:

              That way of looking at things is the way most pensions are run… but very few are funded. This is the way they should all be mandated to be funded.

              Here’s a simplistic way of how it works (I’m not double checking actual details, but a rough guideline with the logic)

              Say that you figure that it will cost $10k a year to cover an employee’s healthcare after he retires. Assume he lives 20 years after he retires. At a 7% return rate, the PV of that payment is $105k. That’s how much the USPS needs in the bank for that guy. That’s their strict liability. To be able to fund those promises, that’s what is needed. So that’s what they need in that account.

              • dush says:

                Well that 20 year period plus their time of employment is the reason those accounts aren’t fully funded up front. There is more than 20 years of time there to pay off those costs into the future.
                It’s like you have a 30 year mortgage and all of a sudden the bank tells you that you need to start paying enough extra so the future debt is fully “funded” (paid off) in only 10 years. Oh you don’t make enough to cover that way higher payment? Too bad. It’s just going to make you go broke and not actually be helpful to you.

                Also, maybe I’m wrong but I highly doubt all that healthcare/pension money is just sitting there in employee accounts drawing interest for future use. The Congress is probably spending that now and then will have to borrow massive amounts of debt to repay it in the future. Screwing the taxpayers even more.

      • Golfer Bob says:

        According to that linked story, they have 45 Billion already funded, allegedly more than enough to meet the demands of medical / health care claims.

        • TuxthePenguin says:

          Last GAO report I saw (2009 IIRC) said that they were 90% funded for both retiree and healthcare combined. Not sure what the individual funds are both at.

  8. dush says:

    If every US citizen bought two books of forever stamps today we could solve this problem.

  9. tz says:

    The USPS is required to do what no other company is required to do – not even Fanny and Freddy, though I’m sure the Oligarchs that made the stupid decisions’ pensions are quite safe.

    They ought to require such funding for all companies or none. I suspect that if the Congress and the Senate had to pay ahead for its pensions and benefits for retired members they would be bankrupt too.

    • TuxthePenguin says:

      Funny thing is, we should be requiring all companies with healthcare and pension obligations to do this very thing. Most are woefully underfunded.

  10. Harry Greek says:

    The banks – OH GOD SAVE THEM NOW!!!!

    The post office – let it burn.

    Well, now you can all ensure that the blood suckers of society are no longer receiving their benefits and welfare checks. Then again,.. how will the banks send out and receive their payments for credit cards,… OH GOD, SAVE THE POST OFFICE NOW!!!

    • dush says:

      On the bright side, with the Post Office dead we hopefully won’t be receiving as much stupid junk mail from the banks

    • dolemite says:

      Congressman: “When the USPS starts writing me campaign checks and giving me insider stock tips, THEN we’ll talk about bailing them out.”

  11. Sathman says:

    I don’t Ben Franklin ever intended this to happen….

  12. Sathman says:

    I don’t think th Ben Franklin ever intended this to happen….

  13. Sathman says:

    I don’t think Ben Franklin ever intended this to happen….

  14. edrooney says:

    It must be such a happy-go-lucky existence as an executive of a company that is literally in orbit and, therefore, can never be run into the ground. If I miss a payment to the Government for my business because of hard times or slow paying customers, I’m padlocked and trying to buy back some of my equipment at the “pennies on the dollar” auction.

  15. Geekybiker says:

    Why does it have to be Saturday. You know the one day that a reasonable working person can make it to the post office or count on being home for a delivery. Close it one of the weekdays. Sheesh.

    • TuxthePenguin says:

      They are doing Saturday because it would impact the most people. Its like how when Congress threatens to cut funding for the Parks department they say that they’ll close down the monuments in DC and Yellowstone.

      Every time that happens, I so wish that Congress would pass that law, but add an amendment that prohibits them from closing/doing what they threatened. Do the same for the USPS. Cut out Tuesdays.

  16. movalca says:

    it may not amount to much, but how about no free mail for congress? they want the usps to be solvent yet they won’t close post offices. I have 3 in my city and they could close 2.

  17. jsibelius says:

    How many times have they proposed cut-spending measures that have never gone anywhere? Close post offices, consolidate operations, only deliver five days a week. For all the UPS and FedEx suck, they’re doing a better job for less money. Contracting services seems like a good course of action about now.

    As for how do we survive if they crash? Well…we survived the UPS strike. We’ll figure it out. And like the previous person said, it will happen swiftly and decisively.

    • ARP3 says:

      1) They can’t raise prices or close offices, or cut hours without Congress. Republicans won’t let them do any of those things (especially not in their district). So they don’t have the power to implement anything they propose because Congress won’t let them. Interesting that the party that wants them to close down, also won’t let them do anything to save money or change the pension funding.

      2) As for doing a better job for less money- Tell me how much it costs to send a three page letter from Tampa to Seattle, or San Diego to Des Moines via UPS. Is it over the $0.5X cents the USPS charges? Thought so. USPS can’t charge different rates for letters, they must all have the same price.

  18. cactus jack says:

    What do you mean the post office is in trouble? You mean paying their employees $75K+ a year to sit on their butt and sort letters isn’t profitable? Bribing employees to take early retirement with thousands of dollars wasn’t a good idea?

    The USPS was a bubble that has needed to burst for ages. It’s a McDonald’s-skill job that should be paying $25-30K a year. Let it fail and rebuild. And before you pull out the rope, I have multiple family members who recently retired from the USPS. The top wage earner was my uncle at 6 figures. It’s absolutely ridiculous.

    • ARP3 says:

      UPS is unionized as well. USPS is cheaper than UPS in many catgories, especially letters. However, USPS can’t close offices, stop delivering, or raise prices without Congress’s approval. So USPS doesn’t have the typical levers that other business has.

    • JJFIII says:

      The post office was just fine and paid people a decent wage ( I know the right wing HATES when a person who actually works makes an income while they have no problem with douchebags who trade dollars (Willard Romney) produce NOTHING other than unemployment. Get educated and learn the facts.

      http://www.huffingtonpost.com/david-morris/usps-budget_b_1545430.html

    • HeadlessCow says:

      So, your solution is to pay employees so little money that they won’t be able to survive without having a second job? How does that possibly make sense?

  19. Ames says:

    The 2006 legislation requires that USPS fund benefits for emoyees fir the next 75 years, which means they are being required to deposit benefit dollars for future employees who haven’t even been born yet. The legislation was not designed to assure that funds were in reserve, the legislation was written with requirements that would cause the USPS to fail o pening an opportunity for private business.
    And that, ladies and gentlemen. Is how politicians “drown government in a bathtub.”

  20. Vegetius says:

    Perhaps it’s time to admit that the whole quasi-governmental “US Postal Service” was a bad idea, and either re-nationalize it or abolish it altogether. There are arguments for and against either option, but leaving things as they are is clearly not working.

  21. JJFIII says:

    The entire ‘post office crisis” is an accounting trick. The PROFIT that the USPS made for years was taken into the general fund to make deficits look better. It is similar to saying SS is losing money. NO, they could pay their bills if they were allowed to keep their own money. it is accounting bullshit that has caused the problem.

    http://www.huffingtonpost.com/david-morris/usps-budget_b_1545430.html

  22. Obtruder says:

    Let it burn.

    It will suck but there has to be a point where the Government doesn’t just bail out their failures with our tax money to perpetuate a broken system.