The masquerade continues: Playing politics with the Postal Service's unfunded liabilities

March 17, 2014


The House subcommittee on Federal Workforce, US Postal Service, & the Census held a hearing on Thursday, March 13to receive testimony on the Postal Service’s $100 billion “unfunded liability.”  Initially the hearing was billed as another Darrell Issa special.  Issa is chairman of the Oversight and Government Reform Committee, under which this subcommittee serves, and the hearings he has scheduled to look into controversies and scandal  — real, imagined, or manufactured — have become notorious for showcasing Issa’s brand of political theater and for their pure entertainment value.

Thursday’s hearing was not chaired by Issa, though, and he was nowhere to be seen.  The subcommittee is chaired by Blake Farenthold, a Tea Party favorite from Texas, and his hearing turned out to be rather anticlimactic.  (The video is here.)

Billed as an inquiry into the Postal Service's large and troubling unfunded liabilities, the hearing featured Frank Todisco, the chief actuary from GAO and a regular at postal related hearings.  Jeffrey Williamson, the Chief Human Resources Officer and Executive Vice-President of the Postal Service, was also on hand, as were two actuaries from the Department of Defense (don’t ask why).  Their written statements can be found here.

The centerpiece of the Postal Service’s ongoing financial crisis has been the idea that the agency has accumulated large unfunded liabilities that threaten its very existence.  We are given to believe that the ratepayers, postal employees and retirees, and, God forbid, the taxpayers may be on the hook for billions of dollars of liabilities.  In order to justify their agenda, the downsizers and dismantlers make these liabilities sound as dangerous and threatening as possible, even though the obligations represent decades of costs – in some cases as much as 75 years.

The fact is that the Postal Service is in the situation it’s in today largely because Congress created funding schedules and funding levels for pension and retiree healthcare obligations that exceeded standard accounting practice.  Only the most naïve or ideologically predisposed observer would believe that the way these obligations have been presented and accounted for represents anything other than an attempt to put the Postal Service in the most damaging financial straits possible.

The history of these obligations is long and well known.  We’ve discussed the nature of these liabilities here at STPO many times, including in this recent post that detailed the latest attempts to gin up hysteria through the use of emotionally charged words like “bailout”, “bankruptcy,” and “default.” Rather than repeat the same story again, perhaps it would be useful to take a step back and look at what these obligations represent and what dangers they really present.

Bailout Baloney: Issa holds a hearing on the "Postal Service's $100 billion in unfunded liabilities"

March 10, 2014

On March 13, the House Committee on Oversight and Reform, chaired by Congressman Darrell Issa, will hold a hearing called “the Postal Service’s $100 Billion in Unfunded Liabilities.”  Don’t be shocked if you hear the phrase “taxpayer bailout” a few hundred times.

Issa’s hearing is designed to do one thing: show that unless there’s more downsizing of the infrastructure and cutbacks to service, the Postal Service's large pension and health care obligations will inevitably lead to a taxpayer bailout.  

The witness list isn’t out yet, but Issa will probably bring over someone from the GAO or the OPM to testify about the magnitude of the obligations.  Between questions for the witnesses, Issa will speechify about how mail volumes are falling due to the Internet, how the unions and their Democratic allies in Congress refuse to face realities, and how government doesn’t work so things are best left to the private sector.

But there's a lot more to the story of "unfunded liabilities" that's not likely to come up at this week's hearings, so here’s a preview of the numbers Issa and his witnesses will be talking about along with a more reasonable assessment of the situation.

Sale of the Bronx General Post Office moves forward: Final offers due March 12

March 7, 2014

Next Wednesday is the deadline for submitting bids to purchase the historic Bronx General Post Office.  The Postal Service is apparently proceeding with its plan to sell the building even though Congress has recommended a moratorium on the disposal of historic post offices. 

Thanks to the efforts of Representatives Barbara Lee of California and José Serrano of the Bronx, Congress included two provisions concerning the sale of historic properties in the Appropriations Bill passed earlier this year.  

The first said that the Postal Service “should refrain” from selling historic buildings until the Office of Inspector General (OIG) completes its audit investigation on the disposal and preservation of historic post offices (p. 75). 

The second directed the Advisory Council on Historic Preservation (ACHP) “to report on the action plan for ensuring USPS compliance with Section 106 responsibilities during the divestment of historically significant properties”(p. 89

The OIG report may come out this month; the ACHP report is due out on April 17.  The Postal Service, however, is not waiting for these two reports to be completed.  

According to the USPS-CBRE Properties for Sale website, the Postal Service has set March 12, 2014, as the deadline to submit “best and final offers” for the purchase of the Bronx GPO.  (The initial deadline was January 15, but for reasons unknown the deadline was extended.)

The call for best offers requests that interested parties submit offers that respond to two possible scenarios — an outright purchase of the property and a purchase that includes a long-term USPS lease for a portion of the building so that it can continue retail operations in the building.  Prospective buyers are also asked to describe their development plans for the property under both scenarios.

Postal Service publishes Final Rule on service changes for Standard Mail

March 5, 2014

Today the Postal Service published the Final Rule on the Load Leveling plan in the Federal Register.  As the Rule states, "The Postal Service is revising the service standards for Standard Mail that is eligible for Destination Sectional Center Facility (DSCF) rates. These changes will allow a more balanced distribution of DSCF Standard Mail across delivery days."  The effective date is April 10, 2014.  

Apparently the Postal Service is not going to wait to hear what the Postal Regulatory Commission has to say about Load Leveling in its Advisory Opinion, which is due out around March 27.

It’s been clear for a while now that the Postal Service was going to implement the plan regardless of what the PRC or anyone else had to say about it.  We made that point in a previous post, and last week, the PRC’s Public Representative discussed the matter in her Reply Brief

As the PR notes, in comments filed with the Commission, Quad/Graphics stated that during a January 10, 2014 webinar with mailers, the Postmaster General said that he planned to go ahead with the Load Leveling Plan regardless of the Commission’s opinion.  Many of the mailers have said that they felt “railroaded” and “manipulated” by the Postal Service and that they believed the Postal Service decided to move forward with these changes “with limited regard to the views of its customers.”

The Public Representative reviews these comments from the mailers and then goes on to state the following:

The Postal Service’s predetermination that the Load Leveling Plan will be implemented regardless of mailer views and the Commission’s opinion does not represent “best practices of honest, efficient, and economical management.” While the Commission’s opinion is an advisory one and non-binding in nature, the whole purpose of the 39 U.S.C. § 3661 proceeding is for the Commission to provide its expert advice to the Postal Service. To predetermine that the advice is irrelevant to the Postal Service’s decision, particularly in light of the fact it is required by statute, does not reflect best management practices. Best practices should include consideration of both customer concerns and available advice, even if the final determination differs from the weight of the feedback received.

The Public Representative provides a detailed analysis showing that in two of the three operations tests the Load Leveling plan failed to level mail volumes and that carrier street time productivity actually decreased.  The PR also argues that “the Postal Service has not provided evidence of the burden that the Load Leveling plan is intended to reduce and misstates the extent of carriers out past 1700 problem.”  She also notes that the Postal Service did not do any cost-savings analysis or any market research on how much volume and revenue might be lost as a result of slowing down Standard Mail.

The Postal Service has provided a detailed Reply Brief of its own, responding to the arguments presented by the Public Representative and the mailers.

But the back-and-forth arguments before the PRC don’t seem to be of much consequence.  As indicated by the Final Rule published today in the Federal Register, the Postal Service is going ahead with the plan.  The fact that there’s an Advisory Opinion under way is relegated to a mere footnote in the Final Rule.

(Photo credit: SCF in Kearny, New Jersey)

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