Consumers could be spared an increase in the price of stamps until 2006 thanks to a recent discovery that the U.S. Postal
Service has been paying too much into a pension fund, officials said today.
A new financial analysis of payments dating to 1971 has revealed that the Postal Service is on course to amass a balance
of $243.6 billion in the Civil Service Retirement System (CSRS) fund, which covers employees who joined the agency by 1983.
That's far more than the $172.6 billion that actuaries say the Postal Service needs to cover the cost of future employee
retirements. The fund's current balance is $151.1 billion.
"Therefore, under the current legislation, Postal Service contributions would over fund CSRS costs by $71 billion if left
unchanged," Postmaster General John E. Potter said at today's Postal Service Board of Governors meeting. "Clearly, there are
significant potential benefits for our ratepayers."
Legislation is needed to change the payment schedule into the employee retirement plan. If Congress approves such legislation,
both commercial customers and ordinary consumers could be spared a postage rate increase until 2006, two years later than
previously predicted, Potter said.
The most recent increase took effect in June, when the price of a first-class stamp went up 3 cents to 37 cents.
The Postal Service's good fortune is largely due to a higher than expected yield during the past 30 years on its pension
fund investments, which are managed by the U.S. Treasury, official said.
Potter warned that the agency still needs to continue its streamlining measures and efforts to transform itself into a
more competitive operation. The Postal Service, which has 750,000 employees and operates 38,000 post offices and stations
across the country, has been hit hard by a dramatic drop in advertising mail caused by the recent recession, by major disruptions
after the Sept. 11 anthrax attacks and by competition from e-mail.
"No one should be lulled into a sense of complacency that all is right with the nation's postal system," Potter said. "That's
simply not true."
Asked about the political prospects of changing the pension funding formula during a government-wide revenue crunch, Potter
said, "The fair thing to postal rate payers would be to approve the legislation."
Board chairman Robert F. Rider said he and others on the panel "will do everything in our power to assist the administration
in bringing about this legislative change. It is in the best interests of everyone to have this occur and to have it occur
as soon as possible."
Commercial bulk mailers said they, too, would call on Congress "to fix this broken system quickly."
"We are pleased about the possible delay in any future rate increase," said H. Robert Wientzen, chief executive of the
Direct Marketing Association, which represents 4,700 companies in the United States and 53 other nations. "We will work with
the Postal Service and others to effect necessary changes which will ensure that the American mailing public receives the
lowest possible mailing rates."
The anticipated savings -- $2.9 billion for fiscal year 2003 and $2.6 billion every year thereafter -- would push the Postal
Service, which has an annual budget of $70 billion, well beyond the $600 million surplus officials expect for this fiscal
year. And it would increase the amount available for debt reduction from $800 million to more than $3 billion, Potter said.
It would have no effect, however, on the loss of a little less than $1 billion USPS is expected to post for the fiscal
year that ended in September, officials said. The agency has not turned a profit since 1999.
Richard J. Strasser Jr., the service's chief financial officer, said the retirement fund was in better shape than officials
realized because it had earned average interest of 6.75 percent during the past 30 years, more than the 5 percent that actuaries
had built into their forecasts.
The financial analysis of pension payments was undertaken by the Office of Personnel Management at the request of the General
Accounting Office and the Postal Service, Potter said