The Postal Service's Inspector General has released a study that says the Postal Service has overpaid its Civil Service Retirement System pension fund by $75 billion. That means mailers have paid $75 billion more than necessary and apparently it's been used to pay the retirement costs of federal employees, not postal employees.
Add this to the list of major issues facing the postal community.
To put the magnitude of the overpayment in perspective, the Inspector General says that if "the overcharge was used to prepay the Postal Service's health benefits fund, it would fully meet all of the Postal Service's accrued retiree health care liabilities and eliminate the need for the required annual payments of more than $5 billion. Also, the health benefits fund could immediately start meeting its intended purpose: paying the annual payment for current retirees, which was $2 billion in 2009."
The Inspector General goes on to say that this marks the third time in less than a decade that the Postal Service has been overcharged for it pension obligations. The first came in 2002 when, after years of suggestions by postal officials that it was overpaying, the federal government acknowledged that the Postal Service was on pace to overfund the CSRS by $78 billion. In correcting that overpayment through legislation in 2003, the Postal Service was required to continue making payments, but into an escrow account.
In the 2003 legislation, the Postal Service was hit again, that time with a requirement to pick up the $27 billion cost of CSRS military service credits. That overcharge was subsequently corrected in the Postal Accountability and Enhancement Act of 2006.
This new finding by the Inspector General of a $78 billion overcharge may have some thinking this is the silver bullet that will solve the Postal Service's financial ills. If only it were that easy. So the customers of the Postal Service have been used to subsidize the costs of the federal government?
What else is new?
We're again reminded of former Postmaster General Bob Tisch's constant complaint that the federal government used the Postal Service as a "cash cow."ââÂ Mr. Tisch, a successful businessman before becoming Postmaster General in 1986, was well-respected in Washington, but his requests of Congress and the administration to stop using the Postal Service to pay for other government programs fell on deaf ears.
Why is the Postal Service such a promising target? Mostly it's because the Postal Service's revenue comes from postage, not tax revenues. And not only does it come from an outside source other than tax revenues, but those that see it as a good source of extra revenue also know the Postal Service can raise postage rates if need be. Federal agencies are completely dependent on appropriated funds and don't have such flexibility.
There are at least two major obstacles to a legislative fix to the $78 billion overpayment. First is the agency responsible for federal employees' retirement programs: the Office of Personnel Management (OPM). That agency will likely reject the Inspector General's finding and argue that the established calculation methodologies are fair.
Even if the OPM could be convinced to accept some of the Inspector General's finding, there is still obstacle number two: scoring. If legislation were introduced to correct the overcharge and apply it as suggested by the Inspector General, it would likely score. And at a time the country is becoming more and more concerned about the massive federal deficit, any legislation that adds to the problem will be very difficult to pass.
That said, the Inspector General is highly regarded in Washington, and his report deserves serious consideration. As the Congress and administration explore the structural changes needed to make the Postal Service self-sustaining, a correction of the $78 billion pension overcharge should be part of the mix.
Tony Conway is Executive Director of the Alliance of Nonprofit Mailers (www.nonprofitmailers.org).