Budget would provide short-term relief from USPS financial woes

President Obama's fiscal 2012 budget grants the U.S. Postal Service some of the short-term financial relief it has requested.

The Postal Service recently has posted significant losses, including $329 million in the first quarter of fiscal 2011 because of a $1.4 billion prefunding obligation to retiree health benefits and a $700 million workers' compensation liability. Also, the agency has overpaid its Civil Service Retirement System account by $75 billion and contributed nearly $7 billion in excess of its Federal Employees Retirement System obligations.

The president's budget proposal would return about $6.9 billion in FERS overpayments to the Postal Service over 30 years, including $550 million in fiscal 2011. USPS also would receive short-term relief from a 2006 requirement to prefund its retiree health benefits at about $5 billion annually. It is the only federal agency with that obligation.

According to the proposal, USPS still would be required to prefund the account, but the payments would be based on shifts in workforce size and demand rather than on a mandated fixed amount. The agency also would receive $4 billion in temporary relief in fiscal 2011, though it would be required to make up the difference with larger payments in future years.

USPS officials last week reported that the agency does not expect to meet its cash obligations this year, including the $5.5 billion prepayment due Sept. 30.

"I welcome the administration's engagement in the effort to stabilize the Postal Service's precarious financial situation," said Sen. Tom Carper, D-Del., an advocate for postal reform. "However, more clearly needs to be done in order to address the Postal Service's long term fiscal problems. We need to address the Postal Service's massive overpayments to the older Civil Service Retirement System. We also need to make sure that the Postal Service has the resources it needs to meet its future retiree health care obligations."

The Postal Service has been pushing for changes outlined in its 10-year strategic plan such as relief from its prefunding requirements, as well as the flexibility to close post offices for economic reasons and reduce the number of weekly mail delivery days from six to five.

The administration and Congress, the budget proposal says, will work together to give the Postal Service the flexibility it needs, build an adaptive workforce and realign its infrastructure and delivery systems.