The question is how to do so. Right now, the USPS is proposing several dramatic changes. First, to ease the near-term crisis, the Postal Service is asking Congress to let it suspend the $5.5 billion annual payments into a prepaid fund for future retiree health-care costs. Then, the USPS would withdraw from federal pension and retiree health-care plans — the Postal Service claims that it has been overpaying for those programs — and put workers in a new, self-administered program. The USPS would also ask permission to shutter thousands of post offices and cut mail delivery service to five days a week.
Finally, and most controversially, the USPS would ask Congress for permission to break its union contracts so that it could lay off 120,000 employees by 2015. One concern, as Matthew Yglesias points out, is that this is the worst possible time to flood the labor market with freshly unemployed workers.
Are there any other options? Actually, there might be. One thing that doesn’t often get noticed about the U.S. Postal Service is that it has vast — and extremely valuable — real-estate holdings on its books. Many post offices, after all, are in prime positions in the center of town. But no one knows how much the buildings are actually worth. The Postal Service values its properties at their purchase price, rather than their fair market value. The total purchase price value comes to about $27 billion, but since many of these buildings were bought decades ago, their fair market value is presumably much, much higher. (As an illustrative example, the National Postal Museum in Washington, D.C., was purchased for $47 million but now has an assessed tax value of $304 million.)
So, back in July, the USPS Office of the Inspector General came up with a novel idea: “If the Postal Service were to leverage its real property assets at the fair market value, that amount would likely cover the remaining $55 billion of unfunded liability in its retiree benefit funds.”
Here’s how it would work: The Postal Service currently owes the Treasury money that it doesn’t have. What the USPS does have is lots of valuable land. So the Postal Service would essentially hand some of that land over to the Treasury, valued at fair market price, as collateral for its debts, to get through the current cash crisis. Operations would carry on as usual. Now, the inspector general also says it has identified some $142 billion in overpayments that USPS has made to retirement programs over the years. That’s a high-end estimate, but even if the Postal Service could recover some of that money — though that’s not at all assured — the agency might have some room to restructure more gradually. Otherwise, if the USPS later became insolvent, Treasury would start selling off the properties, avoiding the need for taxpayers to chip in. (The inspector general called this scenario “unlikely.”)
Is this idea at all realistic? A USPS manager responded rather noncommittally to the proposal, noting that Treasury has been studying the idea to see whether it would be legal. Either way, there’s going to be a lot of demand in the coming weeks for ideas to get the USPS through its financial mess as painlessly as possible.
*This sentence has been corrected.