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Posted at 6:00 AM ET, 02/15/2011

Postal Service on tap for $11B break in 2012 budget

By Ed O'Keefe

Eye Opener

President Obama's proposed 2012 budget doesn't say anything about raising stamp prices, ending Saturday mail deliveries or closing post offices, but it does attempt to remedy the perilous financial condition of the U.S. Postal Service by recommending about $11 billion in relief.

With mail volume and revenues plummeting, the Postal Service is on course to lose about $7 billion in the fiscal year that ends in September. The losses are due in part to hefty personnel costs not borne by other federal agencies. One is a requirement, imposed by a 2006 law, that it set aside money each year to cover the costs of future health insurance benefits for its retired workers.

In the Obama administration's first substantive attempt to address the mail agency's woes, the budget would allow it to pay $4 billion less in those costs in 2011 than what is required by the law. If enacted, the mail agency would have to pay about $1.5 billion of those costs in fiscal 2012 and make up the difference in future years.

The budget proposal also adjusts the size of those annual payments by taking into account the size of the current workforce, which has shrunk to about 583,000 full-time employees since the law passed in 2006.

The Postal Service also pays into the federal retirement fund to pay the future annuity costs for its retirees. Estimates by the Office of Personnel Management suggest USPS has overpaid the fund by about $6.9 billion. Obama's budget would refund that amount over 30 years, beginning with a $550 million payment in fiscal 2012.

Combined, the steps outlined would "provide USPS with the breathing room necessary to continue restructuring its operations without severe disruptions" as it faces pressures including decreased volume and customer demands for better service, according to the budget.

Cliff Guffey, president of the American Postal Workers Union, said the unique costs imposed by the 2006 law have brought USPS "to the brink of insolvency."

"We're pleased that the Obama administration seems to recognize the seriousness of the Postal Service's financial condition and is proposing beginning steps to address it," Guffey said.

The administration's budget proposals also called on the Postal Service to curtail infrastructure costs and to make its workforce more "adaptive," statements that amount to an endorsement of plans introduced by Postmaster General Patrick R. Donahoe that would eventually shutter thousands of post offices and dozens of regional offices and distribution centers and cut thousands of more jobs. Postal officials, who thanked Obama Monday for his budget proposals, are also seeking legislation giving them the flexibility to end Saturday mail deliveries and raise postage rates as necessary.

The budget would also end $29 million in annual payments to the Postal Service that reimburse it for legislatively mandated reduced postage rates for non-profit mailers. The payments amount to a mere fraction of total postal revenues.

Sen. Thomas R. Carper (D-Del.), who chairs a Senate subcommittee on the Postal Service, said the administration also needs to work with Congress to address the Postal Service's overpayments to the Civil Service Retirement System, which some estimates suggest could top $50 billion over the last three decades.

Carper's Republican counterpart, Sen. Susan Collins (Maine), called on the president to endorse "top-to-bottom reform" that she said was lacking in his budget proposals. Collins plans to re-introduce a new postal reform bill as early as today.

Staff writer Eric Yoder contributed to this report.

Leave your thoughts in the comments section below

Live budget chat: Join The Post and GovLoop, the social network for feds, for a live chat at 11 a.m. today about Obama's proposed budget and its impact on federal employees.

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By Ed O'Keefe  | February 15, 2011; 6:00 AM ET
Categories:  Budget, Eye Opener, Postal Service  
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Posted by: jamezbelly | February 15, 2011 6:27 AM | Report abuse

Okay so here is how it works.... Congress OVERCHARGES the USPS 6.9 billion for FERS, and 50-75 Billion for Civil Service. Then they charges them 5.5 Billion a year on top of that for health benies for FUTURE retired workers (a 75 year obligation, which by law must be paid in less than 10 years. And the USPS is the ONLY COMPANY IN THE WORLD REQUIRED TO DO SO) Then when they relize the money THEY HAVE BEEN BORROWING from the USPS is running out they decide to do something. Whats funny is the fact that they gave themselves 30 years to pay back the 6.9 they OWE the USPS. they take a 75 year liability and make the PO pay it in less than 10. Then give themselves 30 years to pay back the 6.9 Bill they stole. They have not even discussed the other 50-75 Billion they stole.. Why? Because I bet they gave it to AIG or Gm or everyone else.. And people wonder why the USPS has to take out a loan every year to keep 500 thousand american working

Posted by: Brian417 | February 15, 2011 8:34 AM | Report abuse

Do people understand that the money Congress is taking each year from the Post Office is used to offest the Federal Deficit? All USPS retirements both FERS and Civil Service are fully funded and have been OVERCHARGE 6.9 Billion (FERS) and 50-75 Bill (Civil Service)Do people understand that the USPS is the only Federal Agencies that has fully funded these requirements. All other Federal Agencies are underfunded ( reports say by 700 Billion)Don't forget this postal money not taxpayer. By comparrison here is a breakdown of what the Amercan TAXPAYER pays for congressioanl aides. CONGRESSIONAL AIDES STRUCTURE

Title Average Annual Salary No. of Staff with this title TAXPAYER COST
CHIEF OF STAFF $120,051.55 399 $47,900,568.45
DISTRICT DIRECTOR $84,346.63 291 $24,544,869.33
DEPUTY CHIEF OF STAFF $84,121.66 85 $7,150,341.10
LEGISLATIVE DIRECTOR $72,137.79 306 $22,074,163.74
DEPUTY DISTRICT DIRECTOR $61,389.93 73 $4,481,464.89
COMMUNICATIONS DIRECTOR $58,359.05 207 $12,080,323.35
SENIOR LEGISLATIVE ASSISTANT $57,133.94 101 $5,770,527.94
LEGISLATIVE COUNSEL $51,814.67 53 $2,746,177.51
EXECUTIVE ASSISTANT $51,339.82 136 $6,982,215.52
PRESS SECRETARY $50,524.05 164 $8,285,944.20
DISTRICT REPRESENTATIVE $45,758.97 142 $6,497,773.74
LEGISLATIVE ASSISTANT $43,189.28 773 $33,385,313.44
SCHEDULER $41,344.56 140 $5,788,238.40
CASEWORKER $40,898.49 307 $12,555,836.43
FIELD REPRESENTATIVE $40,138.49 266 $10,676,838.34
CONGRESSIONAL AIDE $39,906.24 123 $4,908,467.52
CONSTITUENT SERVICES REPRESENT $38,872.48 145 $5,636,509.60
LEGISLATIVE CORRESPONDENT $31,951.03 347 $11,087,007.41
STAFF ASSISTANT $29,890.54 1072 $32,042,658.88

US Post Office receives no taxpayer dollars and is funded by the sale of postage and postage related products.

NOTE: This does not include the yearly salary, benefits, travel, housing, per diem and all the other perks of the actual Senators/Congressmen. If you add them to this figure add an additional 100 Million. You could also add the 1 million dollar bottled water bill the House hit the tax payers with last week!

NOTE: Why are there 164 members of Congress with their own press secretary? Why are there 1072 staff assistant’s when there are only 535 members of Congress?

Posted by: Brian417 | February 15, 2011 8:52 AM | Report abuse

Pretty good article by Mr. O'Keefe. It correctly notes the massive surplus USPS has in its Treasury account for prepayment of FERS pensions. It fails to mention the even more massive surplus of $50 - $75 billion in its Treasury account for prepayment of CSRS pensions (but that isn't relevant to this year's budget because Congress has not yet mustered its courage to face that problem).

I'll nitpick Mr. O'Keefe's numbers a little just for good measure. Since the FERS overpayments of $6.9 billion are being returned to USPS over 30 years, next year's piece of it, when combined with the $4 billion reduction in the payment to prepay retirees health benefits 75 years in advance, leads to a benfit of around $4.2 billion next year. Another way of looking at it is USPS is forced to make an unnecessary payment of $1.5 billion into a retiree health benefit account 75 years in advance, which is offset by the FERS rebate so USPS is only being required to make unnecessary payments of around $1.27 billion next year.

Posted by: mycroftt | February 15, 2011 12:06 PM | Report abuse

The budget DOES say something about Saturday delivery and closing post offices. See Dead Tree Edition: The language is on page 1282 of the budget's appendix.

Posted by: DEadwardTree | February 15, 2011 1:59 PM | Report abuse

The budget DOES say something about Saturday delivery and closing post offices. See Dead Tree Edition: The language is on page 1282 of the budget's appendix.

Posted by: DEadwardTree | February 15, 2011 2:00 PM | Report abuse

Congress has destroyed the finances of the most respected non taxpayer funded government agency, the United States Postal Service with the mandates of the 2006 Act. It ordered the USPS to fork over billions of dollars to prepay future retiree benefits that already was funded. This mandate was not required of any other government agency, WHY? It was OK to give General Motors 60 Billion tax dollars to fund its'retiree pension fund, WHY? Why isn't the government demanding that GM make 5 Billion dollar payments to pay for future retiree benefits before GM gives its' employees bonuses with US taxpayers money! Sure, everyone will say, look at the USPS, it is bleeding red ink, why isn't the truth being told. Without the 5 billion dollars pre payment, the USPS would have been able to break even. I believe the anthrax tainted letters were sent to destroy the USPS and bring on a privatized mail service. The anthrax has cost the USPS billions of dollars of lost revenue.

Posted by: az-heat | February 15, 2011 3:00 PM | Report abuse

Another way that USPS is being screwed by this budget proposal is the ending of Congress paying back USPS the $1.2 bilion it was owed due to Congress' underpayment of Revenue Foregone Subsidies. Congress, required USPS, by statute, to give reduced prices to certain types of nonprofit and political mailers. The statute required Congress to pay USPS back for the revenue foregone by this exercise in using the taxpayers' money to buy votes.

Well, Congress decided to break its own law in the 1980's and not pay its bill to USPS, so it ended up owing USPS $1.2 billion. In 1994 Congress passed a law requiring itself to pay that money to USPS over 42 years in increments of $29 million per year. They haven't done badly in meeting their financial obligation to USPS, having now paid back around $493 million.

Oops - Congress decided to end the payments and ignore their debt to USPS once again beginning with the 2012 fiscal year - and they were doing so well keeping their word for almost 17 years against a 42 year promise, surely a record for that less than august body. I guess there are two sides to this coin: USPS getting raped financially by Congress again(which is the bad side), and Congress not using the taxpayers' money to finance their vote buying "largesse" (which would be not so bad if Congress' failure to meet its obligation didn't have to be covered by USPS' customers).

Posted by: mycroftt | February 16, 2011 1:39 PM | Report abuse

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