Beware of false assumptions: The OIG looks at the Postal Service's "unfunded liabilities"

February 17, 2015

The USPS Office of Inspector General has just released a new report about the Postal Service’s unfunded liabilities for its pension and retiree health benefit funds.  It's entitled "Considerations in Structuring Estimated Liabilities."  As with previous OIG reports on the topic, the Inspector General suggests that concerns about unfunded liabilities are way overblown.  

The OIG’s report provides a refreshing reminder that the Postal Service is actually in very good long-term financial condition and certainly not in the dismal shape that critics claim — or, for that matter, as maintained by the new Postmaster General, Megan Brennan, who said recently, "“Our current financial situation is untenable when you consider that we have 35 cents in assets for every dollar of liability."  

The OIG shows that the estimates of the liabilities, which are done by the Office of Personnel Management, are based on highly uncertain assumptions that have inflated what the Postal Service owes.  In addition, Congressional mandates that the obligations be funded at 100 percent are unreasonable and unique to the Postal Service.  Plus, the Postal Service's assets are considerable — and significantly more than the PMG seems to believe.

The report may be intended to refute one of the points made in a recent GAO report that put the Postal Service on the GAO’s High Risk list.  In addition to the decline in First Class mail volumes and annual deficits, the GAO says the Postal Service is high risk because of $102 billion in unfunded liabilities — $87 billion in liabilities for retiree health benefits, pensions, and workers’ compensation liabilities, plus $15 billion in outstanding debt to the Treasury.

The OIG’s report shows that there’s much more to the liability story than the GAO acknowledges.  The OIG makes three basic points:

1. The current estimate for long-term pension and healthcare liabilities is about $404 billion.  The Postal Service has already set aside $335 — 83 percent of the liabilities.  The pension plans are nearly 100 percent funded, and the retiree healthcare liability is 50 percent funded.  All these funds are doing much better than comparable funds in other parts of the federal government.

2. The three funds are unfunded by about $86.6.  The Postal Service owns real estate assets with a fair market value close to $85 billion, which could be sold to cover the liabilties.  That's not likely to become necessary, but it shows how misleading it is to cite liabilities without mentioning assets.

3. The liabilities are calculated based on estimates that involve variables that can change in ways that would make the liabilities smaller. 

For example, the low interest rates we’ve witnessed over the past few years significantly skew long-term assumptions.  If interest rates were to go up just 1.25 percent, the unfunded liabilities would be reduced by $72 billion and 85 percent of the liability would disappear.

If postal retirees were required to participate in Medicare, the retiree healthcare liability would drop from $98 billion to $55 billion, and the fund, which currently has $49 billion, would be fully funded as is.

If the liabilities were calculated using demographics specific to postal workers — rather than using demographics for all federal employees (which is how the OPM does the estimates) — the liabilities would be reduced by $8.5 billion.

The OIG summarizes these points in the following chart. 

Sale of historic Princeton post office moves forward

February 14, 2015

The sale of the historic Palmer Square post office in Princeton, New Jersey, is moving forward. 

Earlier this week the Princeton Packet revealed that the post office would be relocating a few blocks away to a former West Coast Video building on Nassau Street.  The Postal Service will share the leased property with a 7-Eleven.  The move will take place once the sale is completed and the new location is made ready for business.

As we reported back in December 2013, the sale of the Palmer Square post office has been in the works for a long time, at least since 1997

According to an article in Planet Princeton, the Postal Service completed a study and informed postal workers and elected officials of its plan to sell the building back in September 2011.  Letter carriers and other operations were moved to other locations back that same year.  A public meeting about the relocation was held in December 2011, but it didn’t mean much since a decision to sell the building had been made long before.

The sale was initially blocked by the Historic Preservation Office, a branch of the New Jersey Department of Environmental Protection.  According to an item in the Jersey Journal, the Preservation Office “believed the Postal Service had not taken adequate steps to ensure its history was preserved.”

That obstacle has apparently been overcome, and, as news reports revealed in December 2013, the building is being sold to a company called LCOR Ventures, based in Oakland, California.

When we reported on the story in 2013, we examined the connections between LCOR Ventures in Oakland and LCOR, Inc., a large real estate investment and development company based in Berwyn, Pennsylvania, an hour's drive from Princeton.  It was difficult disentangling the two companies.  

Historic Plant City post office discontinued, headed for sale

February 8, 2015

Earlier this week, the Postal Service announced that the historic post office on Reynolds Street In downtown Plant City, Florida, is being discontinued.  It's the first such discontinuance in over 16 months.

The Plant City post office has been closed since June 2013, when the Postal Service shut down the 1935 facility for an emergency suspension due to deteriorating conditions, including a leaky roof and mold.

The Postal Service then decided it didn't want to spend $1.4 million to repair the building, so it made plans to sell the property.  In October 2013, the Postal Service initiated a discontinuance study to close the post office permanently.  

For some reason it took a long time to complete the study, but this week the Postal Service announced the results — the Plant City post office will be discontinued and closed permanently.

The news report in the Tampa Bay Tribune says that “a postal regulatory commission has until Feb. 27 to file any objections,” but that’s a misunderstanding.  The PRC won’t file any objections itself, but if someone in Plant City files an appeal with the Commission, it’s possible that the Commission would remand the decision back to the Postal Service for further review.

There hasn’t been a post office discontinuance in a long time.  According to its Annual Compliance Report, “The Postal Service closed no Post Offices and no stations or branches in FY 2014” (p. 42). 

According to Postal Bulletin, which announces closures, there's haven't been any discontinuances since FY 2014 ended on Sept. 30, 2014, so it’s been at least 16 months since a post office was discontinued.  

A postmaster has the last word on POStPlan

February 3, 2015

This is the final week of POStPlan implementation.  On February 7, the last of the remaining 13,000 post offices will have their hours reduced, and the last of the remaining postmasters will leave their jobs.  

The Postal Service postponed the Reduction in Force (RIF) separation date for all remaining impacted POStPian postmasters from January 9 to February 6.  That gave some postmasters a little more time to find a new position.

At this point, it's still not clear how many postmasters will be subject to the RIF.  The Postal Service hasn't published a number, nor have the two postmasters' associations, NAPUS and the League of Postmasters.  It could be several hundred.

According to the most recent POStPlan implementation update report published on January 12, there were 1,367 post offices with an implementation date of January 10.  (The list is here and a map here.)  

At many, perhaps most, of these post offices, there's probably a career postmaster still on the job.  They have been watching POStPlan get implemented for two and a half years, hoping that something would happen to allow them to keep their positions.  There have been two extensions of the RIF date, but now the RIF is here.

While we don't know how many postmasters are being RIFed this week, it's likely that many of them will head into retirement.  The Postal Service may consider such retirements voluntary, but for some postmasters, there wasn’t much choice in the matter.  They live in rural areas where postal jobs are scarce, and they couldn’t relocate to take a new position.  After many years of service, they are just plain out of luck.

There are undoubtedly many postmasters out there right now who are very upset and angry about what's happening, especially considering that the Postmaster General just retired with what is probably a very nice package.  One of these postmasters recently wrote this letter to Save the Post Office.

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