Postal Service To Default On $5.5 Billion Payment As Congress Heads Into Recess

At midnight Wednesday, the U.S. Postal Service is expected to default on a multi-billion dollar payment owed to the Treasury, highlighting financial struggles that could affect not only mail service but hundreds of thousands of jobs.

The agency's failure to make good on a $5.5 billion payment toward retiree health benefits comes as no surprise, and the default won't have any immediate effects on the postal service's day-to-day operations, the agency assured in a statement. But the missed payment -- reportedly the first of its kind in the post office's history -- will no doubt ramp up the debate over how best to address the agency's growing red ink.

On Tuesday, some proponents of reform blamed not the postal service but Congress itself for the default, citing a controversial 2006 law that increased the agency's financial obligations and lawmakers' failure so far to pass legislation this session that would address the agency's problems.

"The word 'default' sounds ominous, but in reality this is a default on the part of Congress," Fredric Rolando, president of the National Association of Letter Carriers union, said in an email to HuffPost.

Under the law passed in 2006, the postal service must pay at least $5.5 billion a year into a retiree health benefit fund, a steep "prefunding" requirement that doesn’t apply to normal corporations. Although the agency has suffered a significant drop in first-class mail over the last five years, the prefunding payments have accounted for most of the postal service's losses in recent quarters.

To help the agency right itself, the postal service's postmaster general, Patrick Donahoe, has asked that Congress lighten the prefunding burden, as well as allow the agency to undergo significant cuts to address the decline in mail due to web transactions. Those cuts include the phasing out of 150,000 jobs, the elimination of Saturday delivery and the closing of roughly half the agency's mail-processing facilities -- measures largely opposed by postal unions.

In a statement issued Monday, the postal service urged Congress to get moving on legislation. "[C]omprehensive postal legislation is needed to return the Postal Service to long-term financial stability," the agency said. "We remain hopeful that such legislation can be enacted during the current Congress."

Earlier this year, the Senate passed a bill that would address the pre-funding burden, free up money for the agency to eliminate roughly 100,000 jobs and limit overnight delivery in some areas. The move to Saturday delivery, meanwhile, would be delayed for at least two years.

The House, however, has not yet produced any legislation. Rep. Darrell Issa (R-Calif.), chairman of the House Oversight and Government Reform Committee, has championed a bill more austere than the Senate's, allowing for the phasing out of around 150,000 jobs and facilitating a faster move to five-day delivery. The bill would also bar no-layoff clauses in union contracts and establish a commission tasked with cost-cutting if the postal service didn't meet its own goals. But nothing has come to the House floor for a vote.

In a statement Tuesday, Issa blamed the default on long-term mismanagement at the agency.

"The default by the Postal Service on its obligation to its own employees and retirees follows decades of mismanagement, and a willful blindness to fundamental changes in America’s use of mail," Issa said. "The Postal Service continues to fail to do all it can under current law to cut costs."

On Tuesday, the office of Sen. Tom Carper (D-Del.), a co-sponsor of the Senate bill, said the House was being "fiscally irresponsible" by dallying and holding up reform. Carper has urged Republican leaders to pass a bill so that the House and Senate can hash out any differences in conference.

"Every day Congress delays fixing this problem, the financial challenge grows more difficult and the potential solutions become more expensive," Carper said in a statement to HuffPost. "If the House has a plan to prevent the Postal Service from defaulting for the first time in its history, I think they should bring it to the floor and pass it. We shouldn’t be waiting around until the 11th hour to do the right thing and fix the serious, but solvable, financial challenges plaguing this American institution."

Congress breaks for August recess at the end of the week, meaning House leaders won't be able to take up the postal issue until September at the earliest.

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