A good portion is the result of Congress playing its usual accounting tricks to hide and shift money on the deficit.
First, it's important to note that the USPS is financially self-sufficient. Since the 1970s, it has been mandated by Congress to operate entirely on its own revenue, with no taxpayer money. It's an enormous agency — with $65 billion in annual revenue, it would be a Fortune 50 company if it were a private entity. As a quasi-government agency, it enjoys privileged fiscal status — its revenue and expenses are "off budget," meaning Congress isn't supposed to be able to toy with them. It shares this privileged state with only one other government entity: the Social Security Trust Fund. But as you know, Congress finds a way to toy with everything.The Postal Service is prepaying pensions for people it is expected to hire in 2050 and 2060 and beyond - all because Congress needs to keep adjusting its house of cards and shift deficits off-budget.
In 2006, Congress passed the "Postal Accountability and Enhancement Act" to modernize the agency's stamp-price-setting tools and a host of other elements of mail delivery. That law set up this seemingly crazy health care prepayment fund.
To bean counters at the U.S. Treasury Department, however, the fund made perfect sense. It was a crazy arrangement to cover for another crazy arrangement the Postal Service escaped in 2006.
When former members of the U.S. military take a government job, their military service counts as annual credits toward pension eligibility. This holds true when service members take postal jobs — but who pays for the value of those credits? In 2006, the Postal Service was shouldering that cost on its balance sheet, even though there was general agreement that the Treasury Department should be responsible for pension credit earned prior to employment with the Postal Service. The 2006 law shifted the burden from the USPS, but that meant an addition burden on the Treasury — that is, it would have added to the federal deficit. So to balance out that negative on Treasury's balance sheet, the Postal Service was ordered to make health care pre-payments equivalent to the cost of the pension cost shift.
The problem of military pension credits itself was a creation of just such a deficit-hiding accounting trick. In 2002, an audit of the USPS budget found it had overpaid into the federal government's pension plan by roughly $80 billion. Postal Service officials lobbied hard have its pension payments readjusted. They were, in 2003, but in order to make the shift revenue neutral, military pension credit costs were shifted from Treasury to the USPS.
The 2006 law passed by Congress was designed to put an end to this fiscal football.
In the middle part of the last decade, the Postal Service was so awash in operating cash that the 10-year tithe to the federal government seemed a small price to pay for a promise that the crazy cost shifting would be over in a decade. In the meantime, the cash played a small but measurable part in reducing the federal deficit.
"But it became very clear that these payments were unaffordable once the economy tanked," Fauber said. In short order, the health care prepayments became “a million-pound weight” on the Postal Service budget.
Fauber and other Postal Service advocates say the Postal Service would have no trouble balancing its own budget if Congress and the Treasury Department stopped adding billions to its annual expenses through fiscal maneuvering.
As with many of the other issues facing the nation, it comes down to Congress failing to do its job of managing the nation's budget in a responsible manner. It sees the Postal Service as a piggy bank it can simultaneously raid, castigate, and blame for its financial mess.
That isn't to say that the Postal Service doesn't have to adjust service to reflect reduced usage for mail. It does need to reduce the number of outlets and improve efficiencies all while improving customer service.
But first and foremost - Congress has to remedy the situation.