Postal Service set to default on payment

July 31, 2012

The U.S. Postal Service, facing a $14.1 billion loss this fiscal year amid plummeting mail volume, will default for the first time Wednesday, on a congressionally mandated $5.5 billion payment to the U.S. Treasury.

Postal officials said Monday that without close to that sum in the bank, they can’t make the payment, which is part of a 10-year plan to set aside health benefits for retired postal workers. Another bill for roughly the same amount is due in September, but it will likely meet the same fate.

The agency assured customers this week that the default will not affect mail delivery or employee paychecks. Benefits for current retirees are funded. There is no legal penalty for missing the payment: It originally was due last year, but Congress moved the deadline.

But as Congress prepares to head home for its August recess, the Postal Service’s latest financial hurdle is another sign that there seems to be no easy path to fixing its problems.

The Senate passed a bipartisan bill in April that would relax the health-fund payments and give relief from another debt — $11 billion in pension payments congressional watchdogs say were unnecessary. But a more aggressive House plan approved by a Republican-led committee last year has not come to the floor. Some observers say legislation may not pass before the 112th Congress adjourns at year’s end.

“All of us in the postal community were hopeful that once the Senate bill passed, you could move the legislation through the House,” said Ruth Goldway, chairman of the Postal Regulatory Commission, which reviews and makes recommendations on many postal proposals. “The Postal Service is facing a mailing community that’s concerned about the future of this network they really depend on.”

Congress’s failure to find a fix after more than two years of debate is partly election-year politics. But the logjam is compounded by home-state and ideological concerns, observers say. Every district has hundreds of post offices and mail-sorting hubs and constituents who depend on them for mail and jobs. Rural lawmakers have more to lose from service cuts the Postal Service says it needs, since their constituents often depend on the mail more than those in urban areas.

And while union-friendly Democrats hesitate to require the agency to squeeze its labor contracts too tightly, many conservative Republicans oppose what they see as a taxpayer bailout of the Postal Service.

“Congress must reject calls for a taxpayer-funded bailout and instead focus on the need to enact comprehensive reform that mandates cuts to operating expenses in order to restore long-term solvency,” Rep. Dennis Ross (R-Fla.), one of the House bill sponsors, said in a statement.

The House bill would allow the agency to access the pension overpayment, as well as to close thousands of facilities, renegotiate labor contracts, eliminate Saturday service and establish a financial control board to overhaul the system’s finances. Aides to House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.), the lead sponsor, have said for months they have the votes needed to pass it.

But it has not come to the floor, in part because of opposition from rural Republicans concerned about closures, aides said. The Senate legislation delays post office closures and five-day service.

Sen. Thomas R. Carper (D-Del.), a chief sponsor of the Senate bill, said the lack of meaningful legislation “introduces uncertainty in the minds of mailers . . . It’s one more blow against the Postal Service’s credibility.”

“Some of our Republican friends who assert their devotion to a stronger economy need to keep in mind this is not the kind of uncertainty and unpredictability that fuels an economy,” he said.

The Postal Service has not used taxpayer money to fund its operations since the 1970s, but it is regulated by Congress, which controls many of its strategies to prop up its finances.

Postal unions oppose the overhauls proposed by the House and Senate. They say that if Congress would relieve the Postal Service of its payments to the retiree health fund, deep cuts to jobs and service are unnecessary.

“The pending ‘default’ is not primarily the result of a bad market or even bad operations, but of bad legislating by Congress,” Fredric Rolando, president of the National Association of Letter Carriers, said in a statement. Congress approved the health-fund pre-payment in 2006.

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