For the third straight year, the U.S. Postal Service will default on a legally required payment for future retiree health care, Postmaster General Pat Donahoe reiterated Thursday.
The $5.6 billion payment is due Sept. 30, but Donahoe and other USPS officials have long said that the agency lacks the money to cover it. While the Postal Service will be able to make a separate $1.4 billion payment for workers’ compensation claims due in mid-October, it will then have only about five days worth of operating cash on hand, Donahoe told members of the Senate Homeland Security and Governmental Affairs Committee. By contrast, most private sector firms “usually have available liquidity of at least two months of operating expenses,’ he added in prepared testimony.
The retiree health care payments are mandated under the 2006 Postal Accountability and Enhancement Act, which requires the Postal Service to invest almost $52 billion in the fund from 2007 through 2016. With this month’s looming default, the agency will be $16.7 billion behind schedule after missing similar payments in 2011 and 2012.
“We have sat around for too long, watching as the financial challenges facing the Postal Service grow more difficult and the potential solutions become more expensive.” Sen. Tom Carper, D-Del., the Governmental Affairs Committee’s chairman, said in a statement before Thursday’s hearing. Under legislation that Carper is sponsoring with the panel’s top Republican, Sen. Tom Coburn of Oklahoma, payments would be suspended until 2016 when a new 40-year schedule would take effect.
The Postal Service would get similar relief under a House measure sponsored by Rep. Darrell Issa, R-Calif., that would eliminate payments due this year and next followed by a revamped timetable stretching to 2056. The bill is awaiting House action after the House Oversight and Government Reform Committee, which Issa chairs, approved it in July. The Senate committee has not scheduled a vote on Carper’s bill, which was introduced last month.