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USPS default on Aug. 1 appears likely

Jul. 12, 2012 - 01:51PM   |  
By SEAN REILLY   |   Comments
A U.S. Postal Service sign is sseen in San Francisco. The USPS is within weeks of defaulting on a $5.5 billion payment for future retirees.
A U.S. Postal Service sign is sseen in San Francisco. The USPS is within weeks of defaulting on a $5.5 billion payment for future retirees. (ustin Sullivan / Getty Images)

The cash-strapped U.S. Postal Service is within weeks of defaulting on a legally required $5.5 billion payment into a heath benefits fund for future retirees.

So far, it appears House leaders have no intention of preventing that from happening — they have postponed any action on relief measures until at least fall.

While a Senate-passed bill would significantly reduce the amount of the payment, the House has not acted on that legislation. House leaders also have reversed plans to take up a rival measure that would cut the payment to $1 billion, according to a spokesman for one of the measure’s sponsors, Rep. Dennis Ross, R-Fla.

“It appears, although we have the votes, leadership does not intend for postal reform to come to the floor before [the] August recess,” the spokesman, Fred Piccolo, said in an email late Wednesday.

Under a schedule laid out in the 2006 Postal Accountability and Enhancement Act, the Postal Service is also supposed to make a $5.6 billion payment into the retiree health fund at the end of September. “Without congressional action, we will default on both payments,” USPS spokesman Dave Partenheimer said in an email Thursday.

Lawmakers appear likely to let USPS default, representatives of mailing industry groups said Thursday.

“They’ll let them default,” said Gene Del Polito, president of the Association for Postal Commerce. “What time is there left to do anything?”

While a default would be embarrassing for the Postal Service, the practical consequences, if any, are unclear. “We will continue to pay employees and suppliers to keep the mail moving,” Partenheimer said. Benefits to current retirees would not be affected.

But the continuing cash-flow problems could also worsen the Postal Service’s financial crisis by spooking customers into exploring “other delivery and communications options,” Partenheimer added.

Both the House and Senate will be on break from Aug. 6 through Sept. 7; after that, the House is scheduled to be in session for only three weeks in September and October, according to a schedule posted on its website.

Tony Conway, executive director of the Alliance of Nonprofit Mailers, sees little chance of an intervention from Congress before next month’s deadline. Lawmakers have “got all this stuff on their plate, and they’re running out of time and there’s no vehicle, so it doesn’t appear it’s something they’re going to get to,” he said.

The healthcare payment was originally due last September, but Congress deferred it until Aug. 1.

In requiring the Postal Service to build up the health benefits fund, lawmakers’ stated purpose was to ensure coverage for future retirees without resorting to taxpayer assistance. But USPS executives and unions have objected that no other business or government agency faces a similar mandate. Although the agency has struggled to make the payments in recent years, Congress has twice stepped in, either to reduce the legally required amount or to push back the deadline.

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