The U.S. Postal Service‘s chief human resources officer testified in front of a House of Representatives’ subcommittee to urge the federal government to eliminate its unfunded liabilities.
At the U.S. House of Representatives Subcommittee on Federal Workforce, U.S. Postal Service and the Census hearing called “At a Crossroads: The Postal Service’s $100 Billion in Unfunded Liabilities,” Jeffrey Williamson, Postal Service chief human resources officer and executive vice president, spoke of the organization’s urgency to rid itself of these liabilities.
“We cannot get there by our actions alone,” Williamson said in his testimony last week. “There exists no scenario where the Postal Service returns to financial stability without enactment of postal reform legislation. Now is the time for bold and sweeping action, which will allow us to move forward with solutions that will last for years to come, instead of piecemeal efforts that will only bring the Postal Service back here.”
The Postal Service is asking to fix:
Retiree health benefits by creating full Medicare integration in order to reduce the unfunded liability by almost $44 billion.
Federal Employees Retirement System overfunding by utilizing Postal Service specific demographic and salary growth assumptions in order to return approximately $6 billion in overfunding to the Postal Service.
Long-term pension liabilities by designing a defined retirement contribution plan for future employees in order to better match benefits with long-term employees’ needs while ensuring the system’s financial viability.
Worker’s compensation by requiring recipients who reach retirement age to transition from workers’ compensation to a retirement program in order to make a cost-effective and more equitable system that would also reduce the Postal Service’s unfunded liability.
The Postal Service’s latest fiscal year, which concluded Sept. 30, netted a $5 billion loss, and liabilities of $61 billion—far exceeding its $40 billion in assets. Following the first quarter of 2014, its liabilities increased by about $2 billion when it netted another $354 million in losses. That $63 billion include $18.1 billion earmarked for retiree health benefits, $15.9 billion dedicated to workers’ compensation and another $15 billion in debt.
“Our most recent calculations reveal that, as of Sept. 30, 2013, we had available liquidity of $3.8 billion, representing only 14 days of average daily operating expenses,” Williamson said. “A healthy private sector firm of comparable size would have more than five times the available liquidity.
“Even with the (temporary) exigent price increase implemented on Jan. 26, 2014, we project that our liquidity will remain dangerously low for the foreseeable future. In the event of insufficient cash, the Postal Service would be required to implement contingency plans to ensure that all mail deliveries continue. These measures could require the Postal Service to prioritize payments to employees and suppliers ahead of some payments to the federal government.”
Fiscal Year 2013 saw its first revenue growth since 2008—up slightly to $66 billion from $65.2 the previous year—due to Priority Mail enhancement efforts and a partnership with Amazon to test Sunday delivery in select markets.
“The continued effects of the Great Recession on consumer and business behavior and the impact of digital diversion continues to negatively impact financial results. This is especially true for First-Class Mail, our most profitable product,” Williamson said, noting First-Class Mail revenue dropped $704 million or 2.4 percent in fiscal year 2013.
Last summer the House Oversight and Governmental Reform Committee passed a postal reform act while the Senate Homeland Security and Governmental Affairs Committee passed another version last month, Williamson said, urging Congress to pass comprehensive reform this year.
“We need to act now to implement strategies designed not only for the Postal Service of today, but for the Postal Service of 10, and even 20 years into the future,” Williamson said. “The problems we face are significant, but they are very solvable. With help from Congress, we are confident that the future of the Postal Service can be very bright.”
For more information, visit www.usps.com.
