Statement of The National League of Postmasters

Before the Committee on Homeland Security and Governmental Affairs Of the United States Senate.

September 6, 2011

Statement of the National League of Postmasters September 6, 2011

Chairman Lieberman, Ranking Member Collins, thank you for allowing the National League of Postmasters to submit this Statement for the Record to your committee in conjunction with your September 6, 2011 Hearing, U.S. Postal Service in Crisis: Proposals to Prevent a Postal Shutdown. The National League of Postmasters has been representing postmasters and working with Congress on postal issues since the later part of the 19th century. We represent tens of thousands of active and retired postmasters throughout the country. There are times in every countrys history where conditions combine to form very dangerous and very difficult circumstances, the type of times that try mens souls, as Thomas Paine once said. We are clearly in the midst of such times, and the fate of our country and our economy rests on Congress doing the right thing, at the right time, on a variety of issues. For legislators, these times present unique, unusual, and demanding challenges. Conquering these challenges require vision, fortitude, and courage. It requires making the right decisions at the right time, and making those decisions despite unpopular political consequences. Not making the right decision in such times can be extremely dangerous and the unintended consequences that follow bad decisions disastrous. During such turbulent periods, one commonly finds great institutions caught up in the winds and currents of the times, often through no fault of their own. Subject to great stresses, some of these institutions emerge from the turmoil strengthened and revitalized, while others emerge crippled and depleted. The Postal Service is one of those institutions. Whether it will emerge from this turmoil strengthened and revitalized, or crippled and depleted will depend upon the decisions that this

Congress, and in the first instance this Committee, make in the near future. Make the wrong decisions and the Postal Service will never recover. The problems the Postal Service faces are well known and well documented. They need not be reiterated in detail here, except to say that they hinge upon the pension and retiree health benefits payments that the Postal Service must pay each year, in the context of 1) the recent recession-caused decrease in volumes, and 2) the fact that the Postal Service has overpaid into its pension funds by up to $75 billion. The fact that these payments must continue to be made, despite the recession, despite the pension overpayments in the past, and the accumulated pension overpayments of up to $75 billion is difficult for the laymen and our members to comprehend. But for these payments, the Postal Service would be facing challenging times during this recession, but no critical emergency. It surely would be trimming and adjusting its system and product offering for the future, with the post recession recovery in mind. Instead it is panicking as it runs out of cash, and creates a postal crisis. This postal crisis will in turn negatively affect the overall economy, thus further slowing the recovery. It is important to reiterate that all this is happening not because the Postal Services recessionary income doesnt cover its operating expenses. Rather it is happening because the Postal Services recessionary income doesnt cover its operating expenses, plus the multi-billion dollar stamp tax that the Congress has effectively levied on the Postal Service by its inability to deal with the pension overfunding issue. Congress should be relieving the economic tensions in the country, not increasing them. It is time for Congress to do the right thing and the right thing to do is twofold. First, define the amount by which the Postal Services pension fund is over-funded, and allow those funds to be used to prefund its retiree health benefits. Second, relieve the Postal Service of its

annual pension and retiree health benefit payments. Allowing the Postal Service to do this will alleviate the Services short-term stress and allow the Postal Service to make the intelligent, nonpanic ridden decisions that it needs to make to tailor its system and offerings to the future. It will also help the countrys overall economic position, in as much as postal markets and postalrelated jobs are an important part of the overall economy. There are a variety of bills in both the House and Senate that do this, including bills by Senators Collins and Carper, and provisions from those bills on this issue should be passed, and passed before the end of the month. The League does understand that although this transfer would be a simple intragovernmental transfer, and involve only Postal Service monies, not tax dollars, the action would nevertheless create a significant budgetary score, according to the Congressional Budget Office (CBO). This score would be caused by the on/off budget status of the Postal Service and its pension and health benefit plans. Clearly, this score makes this decision a difficult political decision, because to the uninformed, it might look as if the government is spending billions on the Postal Service, instead of just allowing the Postal Service to transfer its own funds from one account to another. But this decision is one that this Committee and Congress must make if the Postal Service is to survive. The economics of the postal markets are such that those markets cannot support a multi-billion dollar annual stamp tax without crumbling. Indeed, we would suggest that there are no markets in the country, and no institution in the countryprivate or public that could bear such a burden Just consider the consequences. The Postal Service has already proposed eliminating six day delivery, which would have a significant and negative impact on thousands of businesses, and consequently on the American economy. The Postal Service has already proposed closing

half its post offices, which would have a devastating impact on tens of thousands of small communities, mostly in rural areas. That must stop. The League has submitted testimony for years about the negative impact that closing small rural post offices would have on rural America. Indeed, coalitions of local towns and communities are being formed, as we speak, all over America to stop these closures. If one monetized the negative publicity and the damage to the Postal Services image and reputation that these closing are creating, the amount would surely be in the hundreds of millions of dollars, if not more. Additionally, the Postal Service just recently floated the idea of pulling out of the Federal Health Benefit Plan and out of the federal retirement system. These actions, were they to be allowed, would devastate those federal plans and cost the federal government staggering sums of money. The Postal Service is already a key member of one of the best and most efficient health benefits plans in the world. Going it alone would only result in less efficient and more expensive plans, less coverage, and unnecessary higher costs for the government, the Postal Service and for us. Moreover, pulling out of the federal retirement plan would create the same problem of a score that exists today with the proposal to transfer the pension overpayment to the retirement health benefit plan, and it simply makes no sense to create such a score in order to simply allow the Postal Service to go it alone, and perhaps create another Enron situation at some point in the future. There are millions of current and retired postal employees and their families that are looking to Congress to protect the retirement benefits that they have already earned and that are already paid for. We have attached the text of a letter to the majority leader from a retired Officer of the Postal Service who was a Senior Operations Executive. This letter expresses that persons concern and is one of thousands that we are seeing.

Allowing the Postal Service to pull monies out of retirement funds to cover operating expenses is not an appropriate solution to the current crisis. Allowing the Postal Service to use its pension overpayments to prefund its retiree health benefits is an appropriate solution. Finally, the Postal Service also has recently proposed laying off hundreds of thousands of workers, because the Postal Services current income cannot fund both its operations AND the current stamp tax and thus it feels it has to radically pare down the system to try to support the tax. Such an effort is self-destructive, because that action will in turn lead to smaller and smaller revenue, as quality and service suffer, and as customers seek electronic alternatives. The net result could be the death spiral of the Postal Service, not because it has become outdated and out-of-fashion, but because Congress effectively has imposed a stamp tax by not dealing with the pension overpayment situation. Chairman Lieberman, Ranking Member Collins, enough is enough. Congress must act. The time to act is now and the action to take is to allow the Postal Services pension overpayments to be transferred to its retiree health benefit fund. Thank you for considering our views.

August 25, 2011

The Honorable Harry Reid Majority Leader, US Senate 522 Hart Senate Office Building Washington, DC 20510 Dear Senator Reid; I am a retired thirty five year USPS employee that served in many high level executive assignments and retired after eight years as an Officer with responsibility for the largest postal operation in the country. As such, I am very familiar with the financial realities facing USPS. The 2006 Postal Accountability and Enhancement Act has crippled the Postal Services ability to manage the extreme challenge of the digital migration of messages, remittances and advertising from the mail stream. A crisis has been created by the unconscionable requirement to pay approximately $5.5 Billion in additional annual payments to the Postal Retiree Health Benefit Fund over and above the approximately $2.5 Billion paid annually to fund current postal retiree health benefits. The Postal Service reported a cumulative deficit for the four years of FY 2007 to FY 2010 of $20.247 Billion which included $19.3 Billion in additional PAEA Act Retiree Health Benefit payments. This resulted in the Postal Service maximizing and exhausting their borrowing authority under the current Statutory Debt Limit. Subsequently, the Postal Service was not allowed an increase in the Statutory Debt Limit nor was it allowed a rate increase to offset any portion of these assessments. Thus, the inevitable crisis in FY 2011 was created. How can any organization, public or private, be expected to survive suffering these incredible levies? How can the Postal Service survive with no recourse to any borrowing or rate increases? The Postal Service is being required to pre fund retiree health benefits by $55.8 Billion in the ten years through 2016. Again, these payments are over and above continuing to make annual health benefit premium contributions for present retirees approximating $2.5 Billion. This combination of circumstances coincident to the accelerating loss of volume and revenues caused by digital migration guarantees the destruction of the Postal Service as we know it. The Postal Service has been left with no options other than to propose unilaterally changing the Collective Bargaining Agreements, closing thousands of post offices, adopting five day mail delivery and reducing service standards. Now, the Postal Service is also capitalizing on this artificial PAEA Act imposed crisis by proposing to take over and create postal retirement and health benefit programs and relieve the federal government of any responsibility for these programs. A cornerstone of this proposal is the return of the over $313 Billion in the Postal Retiree Health Benefit Fund, CSRS Trust and FERS Trust Funds to fund the postal equivalent programs. USPS readily admits any surplus of these funds would be used to address immediate cash needs. That USPS is facing grim financial realities is undeniable. Under the USPS proposal, however, any eventual decision that USPS is financially unsustainable would result in the loss of pension and other benefits for all retirees! This cannot be allowed to happen. There are provisions in Senate Bill S 1010 introduced by Senator Tom Carper and Senate Bill S 353 introduced by Senator Susan Collins that would mitigate the worsening financial crisis. Unfortunately, neither S 1010 or S 353 does anything to reduce or eliminate the crippling prepayment requirement. Yet, both provide a mechanism to allow some of the estimated $55 to $75 Billion in over funding of postal CSRS and FERS pensions to be applied to the future retiree health benefit assessments. This would give USPS much needed relief allowing focus on the core issue of declining volume and revenue.

I urge you to champion these legislative efforts to allow the CSRS and FERS Funds to be recomputed and the overpayments to be credited to the Postal Retiree Health Benefit Fund under funding. Over a million current and retired postal employees and their families are looking to Democratic Leaders such as you to mitigate these unprecedented and unnecessary attacks on the Postal Service which have now precipitated a subsequent attack on the pay and benefits of current and retired postal employees. Sincerely,

Craig G. Wade