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Post office in the red…again

November 12, 2010

Ahhh, the post-office.  Is there anything good to be said about this government corporation?  Not really.  They are the poster boy for why the government has no idea how to influence business in the positive.  But that is secondary to this post.  Let me quote an article to get the ball rolling: [from MSNBC.com by way of the AP]

For the year that ended Sept. 30, the post office had income of $67.1 billion, down $1 billion from the previous year. Expenses totaled $70 billion, a decline of about $400 million. It also was required to make a $5.5 billion payment for future retiree health benefits.

The last sentence, about the $5.5 billion for “future retiree health benefits” is what caught my eye.  What’s all this about?  The post-office is posting a total loss of $8.5 billion, wouldn’t a single payment making up 65% of that loss require more than a blushing slip-in at the end of the article?  If you work for the AP, I guess not, but lets see what I found out.

This is a fund to help pay for the medical expenses of retired post office employees.  It is destined to be quite large, as evidenced by the $5.5 billion payment this year, the total goal by 2016 being $108 billion.  Obviously, the government being the government, having to fund this “fund” is becoming problematic – it’s almost like they didn’t think about this before hand.  According to the Chairman for the Postal Regulatory Commission, Ruth Goldway, she wants to the government to use a different calculation to come up with the annual funding payment:

Based on changes in how to calculate long-term medical inflation rates and the declining postal workforce, we found that a recalculation could greatly reduce the Postal Service’s liability and lower the required annual payments while meeting the original funding goals of the law.

A study commissioned by the Postal Regulatory Commission, found 2 alternative ways to pay for this fund, each with a lower yearly cost, either $1.7 or $3.4 billion.  Nothing like a little cooking the books is there?  Well, as it sits right now, they are sticking with the original method of funding, with I propose a guaranteed loss for the Postal Service every year until 2016.  The saddest and most moronic part of this fiasco?

Over the past three years, the Postal Service has paid $15.4 billion to Treasury to prefund future retiree health benefits. During that same time, the Postal Service borrowed more than $8 billion from Treasury so that it could make those payments. This arrangement does not protect the Federal government in the event of a Postal Service default. And it burdens the Postal Service with increasing debt service costs, which could exceed $150 million this year.

So the post office borrowed $8 billion from the treasury to pay that same treasury $15.4 billion?  Anyone else see that as completely insane?  This is like getting a second mortgage to pay for your first mortgage.  Who pays for the second one?  So because they had to borrow the money, they have added $150 million in interest payments to their liabilities, is it any wonder they are losing gobs of money every year?

Even the democrats understand this is ridiculous, wanting to defer $4 billion of this payment for this year, apparently they didn’t get their way.

So the post-office is in the red again.  Not like this is news, it seems to happen every year.  Wonder when Obama will give them a bailout?

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3 Comments leave one →
  1. Chuck permalink
    November 13, 2010 9:21 am

    Actually, I recently read that the USPS has developed a solid plan to resolve their pension problem. Later this year they will increase postage stamp prices from 42 cents to $50,000.

    • November 13, 2010 11:08 am

      Hahaha, that should cover it. Brings a new meaning to the word “first-class” mail.

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