USPS defaults a second time as legislation stalls

Thursday - 9/27/2012, 4:33pm EDT

For the second time in as many months, the cash-strapped U.S. Postal Service says it will default on a required payment to fund future postal retirees' health benefits.

The default on the $5.6 billion, due Sept. 30, will not affect mail delivery or current employees' pay and benefits, the postal service said.

The announcement comes after the agency similarly missed a $5.5 billion payment last month, and as longterm legislative solutions languish in Congress.

Nothing short of "comprehensive reform" will allow USPS to "return to long-term financial stability," an agency release stated. In the most recent quarter, USPS lost $5.2 billion and its outlook heading into the new fiscal is similarly grim, with low levels of cash and almost no borrowing capacity.

The agency blames, in part, a 2006 law requiring it to pre-fund retiree health payments along with years of declining mail volume for its financial woes. It has asked Congress to allow it to stop prefunding retiree health benefits, to introduce a separate postal health insurance program and to transition to a five- day delivery week to stanch the losses.

Divergent paths in Congress

But the two chambers of Congress have taken divergent — and incomplete — approaches to postal reform.

A Senate bill passed with bipartisan support in April would refund to USPS the prefunded payments it made to the federal retirement system and opens the door to breaking out a separate postal insurance program. However, the bill stopped short of allowing the agency to cut Saturday delivery and limited its ability to close postal facilities.

The House version, which has not yet seen a vote, would create a commission tasked with shuttering facilities and restructuring the postal service, modeled on a similar method for closing military bases. The bill would also cut mail delivery to five days a week.

New 'window of opportunity?'

Chairman of the House Oversight and Government Reform Committee Darrell Issa (R- Calif.), who sponsored the stalled House bill, unsuccessfully sought to include a few interim measures in the stopgap funding measure approved by Congress earlier this month.

At the time, he suggested the post-election lame duck session of Congress would "provice a much greater window of opportunity" to pass postal reform.

Ali Ahmad, the communications adviser for the committee, told Federal News Radio in an email that Issa plans to advance legislation before the session ends, "and has continued to work with all stakeholders to ensure the legislation the House advances gives USPS the cost-cutting tools it needs to bring expenses in line with declining revenue and its long-term solvency."

Sen. Tom Carper (D-Del.), a co-sponsor of the Senate bill, has criticized the House for the delay.

"It appears that House Republican leaders have decided to punt on passing postal reform legislation for the foreseeable future, pushing this American institution to the brink of default for the first time in its history," he said in a statement before the agency first defaulted last month.

In the interim, the postal service has sought to trim its workforce and operating costs, offering buyouts, consolidating processing facilities and cutting operating hours.

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