Refund to Postal Service wouldn’t solve its problems, GAO says

October 13, 2011

Refunding tens of billions of dollars in federal worker retirement accounts back to the U.S. Postal Service would not address its long-term debt problems and would shift unfunded liabilities on to taxpayers, according to a new government report.

The conclusions published Thursday by the Government Accountability Office run counter to the opinions of postal regulators, the postal inspector general and congressional Democrats, who say Congress should refund as much as $75 billion to the Postal Service for overpaying federal retirement accounts since the 1970s.

Soaring labor costs are causing most of the Postal Service’s financial woes, although proposals to close post offices and end Saturday mail deliveries capture most of the attention.

At issue are laws passed in the 1970s that spun off the Postal Service as a self-funding, semi-independent federal agency and required it to start paying billions of dollars into the Civil Service Retirement System (CSRS).

The GAO concluded that “we have not found evidence of error” in payments the Postal Service has made since the 1970s, adding that any refund “would be a significant change from a policy” in place since the 1970s.

Any refund could cause as much as $85 billion in taxpayer losses that “must then be paid by the federal government through tax revenue or borrowing,” the GAO said. And any refund “would not be sufficient to repay all of USPS’s debt and address current and future operating deficits.”

Notably, the GAO report did not challenge proposals by the Office of Personnel Management to refund about $6.9 billion that the Postal Service has paid into the newer Federal Employee Retirement System. A White House proposal would allow the Postal Service to use the refund to offer early retirement or buyouts to workers in lieu of layoffs.

Frederic V. Rolando, president of the National Association of Letter Carriers, disputed the GAO’s conclusions, saying it was “simply wrong” to deny the existence of an overpayment.

“An overpayment needs to be refunded, period,” Rolando said.

But Republican members of the House Oversight and Government Reform Committee, who approved a GOP-backed postal reform bill Thursday night, have said that any refund would amount to a “taxpayer-funded bailout” of the Postal Service.

“Straightening out the facts about this argument the Postal Service has pushed, as its financial situation has deteriorated, should help Congress focus its energy on real solutions to cut costs and reform the Postal Service,” said Rep. Darrell Issa (R-Calif.). He co-sponsored the bill approved Thursday that would establish a financial control board to slash the Postal Service’s expenses and probably force layoffs.

Sen. Thomas R. Carper (D-Del.), a close observer of postal affairs, said lawmakers should table discussions regarding any CSRS refunds and focus instead on areas of bipartisan agreement, including ending Saturday deliveries and permitting postage rate increases.

Congress gave the Postal Service until Nov. 18 to make an annual $5.5 billion payment to prefund the future retirements of postal workers. With the deadline fast approaching, Carper called on his colleagues to “develop a robust reform package that will address the Postal Service’s short- and long-term financial challenges.”

Ed O’Keefe is a congressional reporter with The Washington Post and covered the 2008 and 2012 presidential and congressional elections.
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