Opinion: Columnists

Sean Higgins: Going postal over reform

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Photo - LOS ANGELES, CA - FEBRUARY 06:  U.S. Postal Service employee Netza Suastegui delivers the mail on February 6, 2013 in Los Angeles, California. The U.S. Postal Service plans to end Saturday delivery of first-class mail by August, which could save the service $2 billion annually after losing nearly $16 billion last fiscal year.  (Photo by Kevork Djansezian/Getty Images)
LOS ANGELES, CA - FEBRUARY 06: U.S. Postal Service employee Netza Suastegui delivers the mail on February 6, 2013 in Los Angeles, California. The U.S. Postal Service plans to end Saturday delivery of first-class mail by August, which could save the service $2 billion annually after losing nearly $16 billion last fiscal year. (Photo by Kevork Djansezian/Getty Images)

When the U.S. Postal Service announced last week that it was ending Saturday mail delivery, the general public response was to shrug. Well, yeah, people thought: The Internet is usurping the mailman's role. Cutting back delivery is just a sign of the times.

But the announcement has provoked outrage among Democratic lawmakers and the Postal Service employee unions. They're pushing a counternarrative: Everything is fine with the Postal Service. The real problem is that Congress has -- perhaps intentionally -- screwed up its finances.

This story is more complicated than the media's drive-by coverage made it seem, but the bottom line is that the Postal Service has serious financial problems. It needs to cut costs. What Congress did is make the issue impossible to ignore any longer.

Postmaster General Patrick Donahoe said Wednesday that dropping Saturday delivery will save $2 billion annually. Two days later, the service announced it had lost $1.3 billion in the first quarter.

The two main postal employee unions went, well, postal over losing Saturday delivery. The National Association of Letter Carriers and the National Rural Letter Carriers Association both called for Donahoe's resignation. Democratic lawmakers charged that Donahoe was flouting the will of Congress. Lawmakers traditionally add riders requiring Saturday delivery to continue, but Donahoe is counting on the omission of such riders when the next funding bill is adopted next month.

Though the post office is meant to be self-sustaining, its workers are still federal employees. If its retirement funds aren't paid up, the taxpayer is on the hook. With its own crushing budget problems to deal with, Congress didn't want to let it add more debt. So Congress required the service to pour revenue into its pension and retiree health benefit funds to ensure their future solvency.

Prior to that, the benefits were being done on a pay-as-you-go basis without any prefunding. You might think mailmen would be happy somebody is looking out for their retirement, but the unions don't see it that way. "[L]awmakers set a highly aggressive level -- prefunding [the health benefits] for the next 75 years, paid within a decade. The mandate accounts for 80 percent of all USPS red ink," Fredric Rolando, president of the National Association of Letter Carriers, wrote in a November op-ed for The Examiner, which blamed the 2006 Postal Accountability and Enhancement Act for the entire problem.

The Postal Service retiree health benefit liabilities are indeed enormous. The federal Office of Personnel Management, or OPM, reported last year it was underfunded by $48 billion. The 2006 law was supposed to remedy that by requiring the service to contribute an additional $33.9 billion to the fund by 2017. The service has instead defaulted on making payments totaling $11.1 billion over the last two years.

The NALC argues that if it weren't for the prefunding requirement, all would be well. A union official argued strenuously to me that if it weren't for having to pay $1.4 billion into the fund, the service would have actually had a modest $100 million profit in the first quarter.

But there are a few problems here. First, the union's oft-repeated "75 years" claim is bogus. So is another claim that the law requires funding of future employees who haven't been born yet. The 2006 law required liabilities be funded through 2056, a much more reasonable 50-year time frame.

More to the point, these are actual liabilities the Postal Service has to its current employees. The preferred option of the unions and their allies -- adopting actuarial standards that would reduce the payments -- was called financially risky in a 2011 OPM study and a December Government Accountability Office study. Reducing payments now "would increase its unfunded liability, sometimes substantially, and require larger annual payments later," the GAO determined.

It's an admittedly tough place for the Postal Service to be. But it has a lot company. The Wall Street Journal reported recently that the 400 largest private companies with defined benefit pension plans have a combined deficit of $418 billion. Social Security's and Medicare's future liabilities over the next 75 years are a staggering $63 trillion, according to those programs' trustees.

The Postal Service just has to deal with its problem now. The rest of us will be there soon enough, and our trade-offs will be a lot tougher than whether we still get mail on Saturdays.

Sean Higgins (shiggins@washingtonexaminer.com) is a senior editorial writer for The Washington Examiner. Follow him on Twitter at @seanghiggins.

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