August 12, 2014
The NYT reported that the Postal Service lost $2.0 billion in the third quarter of its 2014 fiscal year. While the piece did note that much of this loss was attributable to a requirement imposed by Congress that the system prefund its retiree health benefits, it would have been useful to also point out that a change in the accounting of liabilities in its workers’ compensation fund added $0.6 billion to its losses this quarter. By contrast, in the third quarter of last year the accounting for this fund increased profits by $0.8 billion. Without the charges for workers’ compensation and the prefunding of retiree health benefits, the system would not have shown a loss for the third quarter. Excluding these charges it would have shown a profit of $1.0 billion for the first three quarters of the year.
It is also worth noting that the prefunding requirement has little or no precedence in the private sector. It targets an extraordinarily high level of prefunding (many companies pay benefits as current expenses), to be reached in a short period of time. It also uses assumptions on health care cost growth that are far above recent growth rates.
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