The Questionable Financial Basis For The U.S. Postal Service’s Receipt Of $10 Billion From Taxpayers

In March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Regarding the U.S. Postal Service, the CARES Act stated:

…[I]f the Postal Service determines that, due to the COVID–19 emergency, the Postal Service will not be able to fund operating expenses without borrowing money — (1) the Postal Service may borrow money from the Treasury in an amount not to exceed $10,000,000,000… [Emphasis added.]

Following this, the Consolidated Appropriations Act, 2021, another major COVID-19 relief package signed into law on December 27, 2020, stated the Postal Service would not have to repay the funds if it met the criteria to obtain them as specified in the CARES Act. The remainder of this commentary is focused on the determination required of the Postal Service for access to CARES Act (taxpayer) funds, starting with brief coverage of two agreements with the U.S. Treasury, the second of which nullified the first.

In July 2020, Treasury and the Postal Service agreed to a CARES Act term sheet, which required the Postal Service’s cash balance to be $8 billion or less when receiving taxpayer funds. Reaching the $8 billion would have required cash to decline by almost $5 billion.

On January 19, 2021, the Postal Service reached a new CARES Act agreement with Treasury, which apparently did not contain a maximum cash balance for access to funds. Despite an adjusted $1.9 billion of net positive cash flows in-pandemic,[1] and an adjusted Postal Service Fund balance of $11.2 billion at the end of February, the Postal Service requested and received $8.7 billion from Treasury in March, in two transactions. The Postal Service accessed the remaining authorized $1.3 billion in at least two more transactions by the end of July. At the end of September 2021, the adjusted Postal Service Fund balance totaled $22.4 billion.

For each transaction, the law required a Postal Service determination that, “due to the COVID-19 emergency,” it would “not be able to fund operating expenses without borrowing money.” Based on review of two public documents, one pre- and one in-pandemic, the author questions any such determination.

About one month before the March 2020 presidential declaration of the COVID-19 national emergency, the Postal Service released a Five-Year Strategic Plan, in which it stated: “…[W]e expect to run out of liquidity by 2021 if we pay all our financial obligations — and by 2024 even if we continue to default on our year-end, lump sum retiree health-benefit and pension related payments.”

The Postal Service’s use of similar text in Appendix A of its March 23, 2021 Delivering for America 10-year plan, calls into serious question any determination that inability to fund operating expenses would be “due to the COVID-19 emergency,” as required: “Under this status-quo forecast by 2024, we would not have cash to operate even if we were to continue to default on RHB normal cost and RHB, FERS and CSRS amortization payments and fully exhaust our borrowing authority.”[2]

The projection of a 2024 cash shortfall in both the pre- and in-pandemic forecasts prompts the following question: When requesting CARES Act funds on different occasions, how did the Postal Service comply with the required determination that it would be unable to fund operating expenses due to the COVID-19 emergency? As a first step toward answering this question, the Postal Service should release to the public its January 2021 CARES Act agreement with Treasury and the subsequent requests that summed to $10 billion of taxpayer funds.

[1] The Postal Service Fund balance in Treasury at the end of February 2021 minus the balance one year prior, adjusted for deferred Social Security taxes and change in debt. The author applied this adjustment formula to all subsequent Postal Service Fund values.

 [2] When the Five-Year Strategic Plan was released, the Postal Service had statutory authority to increase its debt by $4 billion. When the Delivering for America was released, the same statutory authority was $1 billion. This difference does not alter the author’s analysis, which incorporates adjustments for changes in debt.

About the Author: Robert J. Pedersen retired from federal service in 2021, after a career that included 19 years as a Postal Service finance executive and five years with the Postal Service Office of Inspector General. Viewpoints expressed herein are solely those of the author, and not those of any organization or governmental entity.