USPS falters on prefunding retiree health benefits
Budget shortfalls will make it difficult for the U.S. Postal Service to meet its retiree benefits prefunding obligations in the short term, and the USPS will struggle to fund the remaining $48 billion unfunded liability, says the Government Accountability Office.
In a report (.pdf) dated Dec. 4 but not published until Dec. 27, GAO says that USPS covered only 49 percent of its $94 billion Postal Service Retiree Health Benefits Fund by the end of fiscal 2012, and notes it has defaulted on payments of $11.1 billion over the past two years. The Postal Service is required to prefund the PSRHBF by between $5.4 billion and $5.8 billion each year.
In fiscal 2012, USPS had a net loss of almost $16 billion, which includes the $11.1 billion in PSRHBF prefunding, and reached its borrowing limit of $15 billion.
The prefunding schedule was established in the 2006 Postal Accountability and Enhancement Act, which says the Postal Service must invest an additional $33.9 billion by the end fiscal 2017, but the report suggests it will have significant trouble meeting this requirement.
"Furthermore, USPS's future financial outlook is bleak as it projects further declines in mail volume and revenue," writes GAO. Its First-Class Mail service, which generated 44 percent of its revenue in fiscal 2012, is projected to decline in volume by 42 percent by fiscal 2020, according to the report.
The report looks into proposed budget fixes from President Obama's fiscal 2012 budget request, a bill from the House (H.R. 2309) and a bill from the Senate (S. 1789). These proposals either ease current cash constraints while increasing the unfunded liability and future annual payments, or reduce unfunded liabilities aggressively but will likely result in higher financial losses in the near future, says the GAO.
It makes no specific recommendations or endorsements beyond saying that Congress must act to aid USPS in meeting its prefunding requirements, reduce its liability over time and pass legislation that would improve its chances for long-term financial viability.
- download the report, GAO-13-112 (.pdf)