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Prefunding predicament The sense was, “we have a big retiree health care program. There are a lot of people who are going to start retiring, and we don’t want the taxpayer to get stuck,” says Jim Campbell, a former Hill staffer and policy consultant on retainer with FedEx. “It’s Congress that’s liable” if there’s not enough money for retiree health care, he notes. Comptroller General Walker, Sauber recalls, thought it was such a fine idea that he urged all federal agencies to prefund their health care coverage for retirees. “There was a revolt all over the city,” with other agencies lobbying hard to avoid the prefunding requirement, Sauber says. In the 2006 postal reform legislation, the Postal Service was stuck with the requirement, the only concession being that the agency was allowed a one-time rate increase to bring in more revenue, he says. For some, it was about addressing a worry (founded or unfounded) that the Postal Service was in worsening financial trouble, says Ross Eisenbrey, vice president of the Economic Policy Institute. Others saw it as a way to weaken the Postal Service’s bottom line so they could make a stronger case for privatizing it – eliminating public union jobs in the process, says Eisenbrey, a former senior Hill staffer who spent six years working for the House Committee on Post Office and Civil Service. “You had this combination of fiscal do-gooders and people who wanted to privatize, and they were all ganging up.”
Sped-Up Payment Schedule
Then there was the pre-payment schedule, which analysts describe as largely arbitrary. Under the act, the payments to fund the retiree health benefits by 100 percent were put on a 10-year deadline. The plan was that the Postal Service would contribute $5.4 billion in 2007; $5.6 billion in 2008; $5.5 billion in 2010 and in 2011; $5.6 billion in 2012 and in 2013; $5.7 billion in 2014 and in 2015; and $5.8 billion in 2016. Why such an accelerated schedule? Again, it comes down to budget scoring. If the Postal Service was going to be saving money by paying less in pension contributions, Congress wanted that money showing up somewhere,
somehow, in the federal budget. “Some people testified before Congress, saying, ‘let them pay it off over 40 years.’ But they needed to balance out the reduction in the pension contributions, so it would come out as a wash in the budget scoring,” says Steve Hutkins, a New York University professor who monitors Postal Service funding issues. The Bush administration was also adamant about the decade-long paydown, says Sen. Thomas R. Carper, a Delaware Democrat who was one of the cosponsors of the 2006 law. “The White House said, ‘we’re not signing the bill’ ” unless the accelerated payment schedule was included, says Carper, who added that he preferred a much longer period to pay the health care fund. Finally, then-Postmaster General Jack Potter indicated that the funding schedule was “challenging,” but doable. The postal unions argue that the true root of the accelerated funding schedule is ideological, with anti-labor union forces looking for a reason to declare the Postal Service a failure as a public entity. The Republican majority on the House Committee on Oversight and Government Reform, however, argues that it really is about cautious budgeting, explaining on its website that “these catch-up payments will ensure USPS has saved enough money now to meet these obligations later. Within the next few years, the annual costs of paying current benefits will dwarf current costs. Saving now is the only way to make this affordable later and prevent a taxpayer-funded bailout. Though the Postal Service was created to be a self-sustaining entity, taxpayers stand behind this large and growing liability.”
Enter the Great Recession
Even with the unusual prefunding requirement, the Postal Service might have been able to handle the front-loaded contribution burden. But in 2007, the housing market began to implode; and then the recession hit, delivering a particularly hard blow to the USPS. So much of mail is business-related, a downturn in the economy means fewer letters being sent. But w w w. n a r f e . o r g
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