The Quick Fix May Not Be The Best Fix; CAGW has Mixed Reaction to GAO Report on Postal Pension Overpayment Problem

2/6/2003

From: Sean Rushton or Mark Carpenter of Citizens Against Government Waste, 202-467-5300 http://www.cagw.org

WASHINGTON, Feb. 6 -- Citizens Against Government Waste (CAGW) Vice-President Leslie Paige today issued this statement in response to the recent release of GAO's "Review of the Office of Personnel Management's Analysis of the United States Postal Service's Funding of Civil Service Retirement System Costs."

"The U.S. General Accounting Office (GAO) has reviewed the Office of Personnel Management's (OPM) analysis of recent disclosures that the United States Postal Service (USPS) is on track to overfund its civil service retirement obligations by approximately $70 billion. The GAO found that, depending upon how the overfunding number is calculated, the savings could be between $70 billion and $103 billion. (The difference is related to which agency is obligated to pay benefits for postal retirees who also served in the military. Under current law, the U.S. Treasury is obligated for those expenditures. A change in the law could shift those costs to the USPS).

"Either way, the USPS will realize substantial savings when the correction is made and U.S. Postmaster General John Potter has announced that a correction in the funding mechanism would obviate the need for a postal rate hike until at least 2004. However, CAGW is most interested in GAO's assertion that the legislative 'fix' sought by OPM and the USPS is not a simple matter of changing a formula. There are important policy implications associated with this change to the USPS statutes. For example, the USPS has not addressed its unfunded liabilities in the aggregate. According to GAO, the USPS is also facing $40 to $50 billion in unfunded healthcare liabilities for its retirees and owes the U.S. Treasury $11 billion. This does not include commitments to its worker's compensation fund.

"The Congressional Research Service has also implied that it might be prudent to defer changes to the postal statutes until the Presidential Commission on Postal Reform completes its work and presents a body of recommendations to Congress that address postal reform in a more comprehensive way. That process is on a fast track, with results expected by July 31, 2003.

"There is a danger that any piece of postal legislation, regardless of how simple and focused it appears to be at the start, will end up being festooned with extraneous amendments and elements that have nothing to do with the 'simple' recalculation of retirement benefits. In that event, all we'll have done is muddy the waters further, needlessly complicating the already complex task of the presidential commission, or, worse yet, rendered the whole commission exercise moot.

"It makes sense to us that, if Congress must go forward with corrective legislation, it should reject any other attempts to meddle with the postal statutes with non-germane issues, and that the legislation should specify that the savings accrued from a change in the funding formula be put to use paying down the USPS's $11 billion debt to the U.S. Treasury and/or funding its other liabilities, such as healthcare. In so doing, Congress would be contributing to the long-term financial health of this agency and assisting the commission in its reform goals."

Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government.