USPS Falls Behind on Payments, Owes U.S. Treasury $5.5B

Magazine industry keeps watchful eye as distribution system falls deeper in debt.

By T.J. Raphael
Wednesday, August 1, 2012

The United States Postal Service (USPS) is making headlines again, this time because the mail agency is unable to make $5.5 billion in mandated pre-funding retiree health benefit payments to the U.S. Treasury by its Aug. 1 deadline.

Without action from Congress, the USPS will also miss its $5.6 billion payment due Sept. 30. The USPS must pay the U.S. Treasury due to a Congressional mandate to pre-fund the retiree health benefit system—it contributes about $5.5 billion a year to this trust fund. The USPS health benefit system accounts for about 33 percent of total labor costs. To date, the USPS has overpaid the system by between $50 and $75 billion.

According to James I. Campbell Jr., a Washington-based postal attorney and postal policy consultant, and recent MPA Postal Summit panelist, the USPS’ ability to pay the U.S. Treasury will not—yet—affect mail delivery.

“The government now owes the government $5.5 billion,” says Campbell Jr. “It’s a payment missed, and as long as nobody in the government cares about people abiding by the law, which seems to be the situation, it’s not really a problem. It is a problem, however, that the postal service can’t pay its bills.”

Campbell Jr. says more serious than not baying the $5.5 billion it owes to the U.S. Treasury department is the USPS depleting its funds, rendering it unable to pay its employees.  

“According to a recent report and claims by the postal service it seems like they’re in danger of running out of money as early as October,” says Campbell Jr. “If they get to the point where they don’t have enough money in the bank to pay people and run the thing, I don’t know what they’ll do. What’s going on with the postal service is very serious in terms of the viability of the postal service. Congress has come up with a bunch of plans that don’t make much sense instead of looking at this intelligently, that’s serious. There’s no question in my mind that Congress isn’t doing its job.”

While there is legislation circulating through Congress it is unlikely, in an election year, that meaningful reform will take place. The legislation currently in Congress, says Campbell Jr., does not solve long-standing problems within the mail agency.

“Right now, there’s no penalties for not paying this, there’s no shutting down of any postal facilities—this is business as usual,” says Howard Schwartz, executive director of distribution sourcing and postal affairs for Condé Nast. “It is unfortunate and I think it is an embarrassment to the country that a branch of the government, even though it’s an independent operation, has defaulted on a great deal of money. I guess this doesn’t mean too much to the Congress. There will be this second default on September 30 if, presumably, nothing else happens.”

Schwartz adds that if there were a chance of reform it would like come after the November presidential election during Congress’ “lame duck” session, as he puts it.

“I can’t see them coming back—I think they only have seven working days in the House before the end of Congress’ normal session,” he says. “I guess there are a lot more problematic things pending on Capital Hill. As long as the USPS has cash on hand to pay employee salaries there’s no affect on mail delivery.”

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