USPS said that it has informed federal budget officials of its plan to temporarily halt its employer contributions for the defined benefit portion of the Federal Employees Retirement System (FERS). That same day, the Postal Service also said it filed notice with regulators to raise postage rates, including increasing the price of a First-Class Mail Forever stamp by 4 cents.
Here’s what to know about the Postal Service’s announced changes and its ongoing financial crisis.
“There will not be any immediate detrimental impact to our current or future retirees if normal FERS cost payments are temporarily withheld,” Postal Service Chief Financial Officer Luke Grossmann said in a statement. “The risk to the Postal Service and the American public from insufficient liquidity for postal operations dramatically outweighs any longer-term risk to the pension funds from not making the currently due payments.”
The president of the National Association of Letter Carriers, Brian Renfroe, said in a statement on Thursday that the Postal Service’s decision “is necessitated” by the agency’s financial challenges “and is a direct result of continued inaction by Congress to fix the legislative constraints that inhibit the Postal Service’s ability to invest in its infrastructure and modernize to meet the needs of its employees and the American people.”
What changes is USPS making to postage rates?
The new rates would go into effect on July 12, according to USPS.
“In the midst of the severe financial crisis facing the Postal Service and continued rising operational costs, the Postal Service is using all available tools, including available regulatory pricing authority, to ensure we can continue to fulfill our universal service obligation and serve the American public,” USPS said in a statement.
Steiner previously indicated that USPS was eying an even larger jump in prices, telling lawmakers in a written statement last month that the agency was considering raising the price of a First-Class Forever stamp to as high as 95 cents, a 17-cent increase from the current price. He noted, though, that that price would still be much lower than stamp prices found in many other nations.
Why is USPS in a financial crisis?
“I am not sure that the American public is aware that the Postal Service is at a critical juncture,” he said. “I know that I wasn’t aware of the extent of it before I took on this role, but at our current run rate and if we continue to pay our required obligations in the same manner as we have done in recent years, then we will be out of cash in less than 12 months. So, less than a year from now the Postal Service will be unable to deliver the mail if we maintain the status quo.”
“From the historic peak volume of 213 billion pieces per year in 2006 to 109 billion pieces today, we have lost over 104 billion pieces per year in our system,” he said. “For perspective, if all of that lost volume was paid at the current price of a stamp, which is 78 cents, that’s about 81 billion dollars. No company could weather that much revenue loss. For comparison, if UPS or FedEx lost that much revenue, they could not survive.”
But Steiner said in his statement that the agency is not permitted, under federal law, to borrow any more money.
“In order to ensure our survival beyond next year, we need to increase our borrowing capacity so that we don’t run out of cash,” he said. “The failure to do this could lead to the end of the Postal Service as we know it now.”
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