GOP hostility kills prefunding legislation, aided and abetted by misguided USPS priorities

September 29, 2010 — On Tuesday, Senate Republicans unanimously blocked a proposal from Senate Majority Leader Harry Reid to provide a $4 billion reduction in the $5.5 billion retiree health payment due September 30 under the grossly unfair prefunding provision mandated by Congress in 2006. Reid’s proposal would have deferred the $4 billion payment to allow Congress time to reform the flawed prefunding provisions of the law and stabilized the Postal Service’s recession-battered finances. A similar deferral was adopted in 2009.

The USPS now projects a $7 billion loss in 2010—nearly 80 percent of which is caused by a massive prefunding payment for future retiree health benefits that no other company or agency in America is required to make. USPS will needlessly waste its limited borrowing authority to make a prefunding payment that is unnecessary—the USPS already has already set aside more than $35 billion in its future retiree health fund, enough to fund retiree benefits for decades.

"Sadly, postal management must share the blame for this financial fiasco," NALC President Fredric V. Rolando said. "The Postmaster General and his top executives wasted the entire year seeking unpopular measures to eliminate Saturday delivery and stack the deck against employees in collective bargaining rather than focusing on the prefunding reform backed by mailers and the entire postal community." Indeed, the Postal Service waited until mid-September to prepare a request for a deferral. Senate staffers told the NALC that postal management informed Senate leaders that the USPS could make the prefunding payment if relief was not provided. But making the full payment will leave the USPS with a dangerously low cash position.

The $4 billion deferral was stripped out of a continuing resolution (CR) that funds the government through early December, which Congress was expected to adopt today. Not a single Republican senator would agree to a vote on the CR unless a group of provisions, including the prefunding deferral, was dropped from consideration. Under Senate rules, it takes 60 votes to bring a spending bill to the floor for debate. The GOP’s leadership in the House of Representatives took a similar position—adding the postal prefunding issue to a list of items they opposed in any CR passed by the Senate.

The Postal Service has maintained all year that making the full $5.5 billion prefunding payment for retiree health would jeopardize its financial position. But its efforts to eliminate Saturday delivery and tilt the interest arbitration process in management’s favor were given priority over financial reforms.

"Letter carriers should know that we are in the fight of our lives—fixing the Postal Service must begin with the passage of the Lynch bill (H.R. 5746) and a fair allocation of pension costs," Rolando said. "The next Congress should allow the USPS to use its massive $50-$75 billion pension surplus to prefund future retiree health benefits and then let postal employees and postal management do the hard work of creating a 21st century Postal Service."

"Few workers have more riding on the mid-term elections than we do," he said.