(CNSNews.com) – The U.S. Postal Service (USPS) currently owes $99.8 billion in benefit payments to its current and retired workers but does not have the money, and if Congress does not act to fix the problem, the Postal Service may have to “implement contingency plans to ensure that mail delivery continues,” according to a new report by the Government Accountability Office (GAO).
“At the end of fiscal year 2013,” said the GAO, “USPS had about $100 billion in unfunded liabilities: $85 billion in unfunded liabilities for benefits, including retiree-health, pension, and workers’ compensation liabilities, and $15 billion in outstanding debt to the U.S. Treasury—the statutory limit.”
“USPS continues to be in a serious financial crisis, with insufficient revenue to cover its expenses and financial obligations, a continuing decline in profitable First-Class Mail volume, increasing unfunded benefit liabilities, and borrowing limitations due to having reached its $15 billion statutory debt [borrowing] limit,” said Frank Todisco, a GAO chief actuary, in prepared testimony before the House Subcommittee on Federal Workforce, U.S. Postal Service and the Census on Mar. 13. (See USPS Action Needed.pdf)
“Attention to USPS’s unfunded benefit liabilities is important, as they represent scheduled future benefit payments to current and retired employees for which USPS has not set aside sufficient money to pay,” said Todisco.
Those “unfunded benefit liabilities” refer to money owed for postal workers’ pensions, retirees’ health care and workers’ compensation. It also includes some outstanding debt.
According to the GAO report, the USPS at the end of 2013 had about $100 billion ($99.8 billion) in unfunded liabilities. These scheduled payments to current and retired workers included the following:
$48.3 billion, retiree health care
$17.2 billion, workers’ compensation
$19.8 billion, federal pension plan for workers hired before 1984
$500 million, federal pension plan for workers hired after 1984
$15 billion, outstanding debt
According to the GAO, “these unfunded liabilities have increased by 62 percent since fiscal year 2007.”
In 2007, the unfunded liabilities were $61.6 billion, and at the end of 2013 they had grown to $99.8 billion.
The GAO said it returned the USPS to its “high-risk list” a few years ago because it was projected to lose $7 billion but actually lost $8.5 billion in fiscal year 2010. Also, the USPS did not make $16.7 billion in prefunded retiree health benefits in fiscal 2011 and 2013, said Todisco.
Furthermore, the “USPS’s outstanding debt to the U.S. Treasury increased from $2.1 billion at fiscal year-end 2006 to its current statutory borrowing limit of $15 billion,” he testified.
That means that under current law, the USPS cannot borrow any more money from the Treasury to help cover its liabilities.
At the same time, the GAO reported that “the USPS’s debt and unfunded liabilities have become a large and growing burden – increasing from 83 percent of USPS’s revenues in fiscal 2007 to 148 percent of revenues in fiscal year 2013.”
In other words, the USPS spent and owed (unfunded) 48 percent more than the total it took in from revenue in 2013. (See Figure 1 in report.) (See USPS Action Needed.pdf)
The GAO further reported that at the end of fiscal year 2013, the “USPS held unrestricted cash of $2.3 billion” but this “represents approximately 9 days of average daily expenses.”
On another point, Todisco testified that the USPS’ most profitable product, First-Class Mail, had declined 37 percent in volume since it peaked in 2001. That volume is expected to continue to decline 5-to-6 percent every year going forward, said the GAO.
In the short run, the USPS can defer making some payments to its pension, health care and worker’s compensation programs but that could make costs, the unfunded liabilities, even harder to fix in the future.
The Postal Service “should work to reduce its unfunded liabilities to the maximum extent that its finances permit,” said Todisco in his testimony. “Ultimately, however, the viability of funding promised benefits depends on the financial viability of USPS’s underlying business model.”
“We continue to recommend that Congress adopt a comprehensive package of actions,” he said, “that will facilitate USPS’s ability to align costs with revenues based on changes in the workload and the use of mail.”