At a time when the US Postal Service is seen as a key factor in the upcoming US election, a CNN report says the service actually generates positive cash flow. The agency is hampered by arcane accounting rules that distort its profitability.
The USPS booked positive cash flow of nearly $2 billion in the nine months ending June 30, up from $1.3 billion in the same period a year ago. It had positive average annual cash flow of $3 billion over the previous three fiscal years.
That positive cash flow came despite a large reported net losses — $7.5 billion the most recent nine months, up from a net loss of $5.9 billion in the year earlier period.
The biggest drag on its finances is a unique rule that requires the USPS to prepay for workers’ retirement benefits for decades into the future. In 2006, Congress passed a law to require the the agency to pre-fund 75 years worth of retiree health care benefits in the span of about 10 years.
Even though the USPS hasn’t been making those payments, it continues to book the theoretical cost as an expense — $16.8 billion since the start of the 2017 fiscal year. That accounts for most of the agency’s reported losses.
The cost of retiree health care coverage is further inflated by the fact that only 74% of the nearly 500,000 retirees and their family members covered by those policies are fully enrolled in Medicare. Instead they use the USPS health care policies as their primary insurance, rather an as supplemental insurance.
Nearly all private sector and government employers that provide retiree health benefits require full participation in Medicare, said Megan Brennan, a former postmaster general, before a House committee last year.