The Truth-O-Meter Says:
Hightower

Says the U.S. Postal Service has taken no taxpayer aid since 1971, funds operations entirely from the sale of stamps and related products and makes an "operational profit year after year."

Jim Hightower on Wednesday, May 1st, 2013 in a fundraising letter.

Postal service, which operates on sales of stamps, last had profit in 2006 and took last taxpayer aid in 1982

Jim Hightower, the populist commentator and former Texas agriculture commissioner, questions whether the U.S. Postal Service is financially imperiled.

This came to our attention after an Austin resident asked whether Hightower was right that Congress in 2006 required the service to set aside billions of dollars to cover the health benefits of postal retirees for 75 years--all of it to be stashed in one decade.

Such a mandate indeed passed into law. But we were stirred by another part of Hightower’s spring 2013 fundraising letter for the Hightower Lowdown newsletter.

Suggesting the service isn't broke, Hightower declared: "Since 1971, the postal service has not taken a dime from taxpayers. All of its operations...are paid for by sales of stamps and related products. The Postal Service makes an operational profit year after year."

We traipsed through that trio of claims, finding two flawed.

By telephone, Hightower aide Laura Ehrlich told us Hightower’s letter echoed the March 2012 Hightower Lowdown, which noted that President Richard Nixon and Congress in 1970 replaced the Cabinet-level Post Office with the postal service, to be governed by a board and funded by postage sales. And contrary to reports, Hightower wrote then, the service had enjoyed "operational" profits, though the mandate to pre-pay retiree health benefits was costing $5.5 billion a year in "money taken right out of postage revenue that could be going to services."

In 2011, PolitiFact rated as Half True a claim that the 2006 law "drains $5 billion a year from post office revenue, while the Postal Service is forced to overpay billions more into federal accounts." The law required payments of approximately that amount, and the payments greatly hurt the post office's bottom line. However, those additional overpayments were also subject to debate and the law was hardly the only challenge faced by the service.

Not a dime of tax aid since '71?

The 1970 act launching the service called for it to be weaned from federal aid, a postal spokesman, Sam Bolen of San Marcos, told us by email.

Still, from 1971 into the 1980s, nearly $9.2 billion in taxpayer money subsidized operations, according to a chart Bolen sent by email. Precisely, 10 percent to 11 percent of the service’s operating expenses from 1972 through 1974 were covered by congressional appropriations, according to the chart, with smaller shares funded through 1982. That year, $12 million in federal aid accounted for 0.1 percent of the service’s nearly $23 billion in operating expenses, the chart indicates.

So, the service has not taken taxpayer dimes since 1982.

By email, Ehrlich put us in touch with Steve Hutkins of New York, who oversees Save the Post Office, a website that presents information on post office closures and how citizens can object. Hutkins suggested we discount the taxpayer aid that went to the service after its inception, saying by email that that funding "was not because the postal service was running deficits... It was about making the transition to a self-sustaining footing."

Operations funded from stamp sales

Next, does the service rely solely on the sale of stamps and the like to fund operations?

By email, Ehrlich pointed us to the Postal Service’s "Postal Facts" web page which states in part that the service "relies on the sale of postage, products and services to fund its operations." That’s correct, Bolen and another Postal Service spokesman, David Partenheimer, told us by telephone.

Loans also help the service meet obligations and postal spokesman Stephen Seewoester of Dallas told us, "We are currently at our statutory borrowing limit of $15 billion."

Then again, Partenheimer said, such loans are repaid, though he also said it would it would be inaccurate to say the service is financially thriving.

"Operational profits" year after year?

That brings us to Hightower's claim that the service has an "operational profit" year after year.

To our inquiries, Ehrlich suggested by email that if not for the 2006 pre-funding law, the service would not have had recent cash-flow difficulties. She pointed out a Sept. 30, 2010, order from the U.S. Postal Regulatory Commission, which oversees postal-rate regulations, stating that if the mandate to pre-fund retiree benefits had not been imposed, the service "would maintain substantial end-of-year cash balances without any need to resort to borrowing."

We looked for financial details.

By email, postal spokesman Bolen told us the service last had an operational profit, of $900 million, in the fiscal year that ran through September 2006, while Hutkins of Save the Post Office said by email that the service’s financial statements show it’s been "close to breaking even" for years despite the pre-funding mandate.

The service’s financial reports issued before Hightower sent his letter show consistent slight losses.

In the first six months of fiscal 2013, through March 2013, the service reported $34 billion in revenues and $37 billion in expenses, Hutkins said. Its loss of $3 billion took into account $2.8 billion needed to pre-pay retiree health benefits, he said, leaving an "adjusted loss" of $245 million. A May 2013 update, covering eight months, shows $3.8 billion in losses counting $3.7 billion in pre-paid retiree health benefits.

Hutkins wrote that since the annual pre-payments began in 2007, the Postal Service has lost $40 billion, counting $32 billion in the pre-payments. He said another $8 billion "involves adjustments to workers compensation that the Postal Service considers problematic (due to the way they're calculated). Over this period of time, the Postal Service has lost $34 million (a microscopic loss in the context of annual revenues averaging around $68 billion)."

Hutkins said that over the decades, the service "has had years when it shows a profit, years when it shows a deficit. It hovers around breaking even. If the profits get too big, the mailers say rates are too high; if the deficit gets too big, Congress presses for cuts; when the cuts get too big and service goes down, customers and citizens complain, and Congress tells the postal service to find a middle ground. It's always about rates vs. service."

By phone, postal spokesman Partenheimer said it’s incorrect that service has had an operational profit year after year. Partenheimer emailed us part of a Nov. 15, 2012 postal service presentation indicating that the service had an operational loss of $2.4 billion in the fiscal year through September 2012--without counting expenses including the required pre-payments.

In his email, Partenheimer said the service previously defaulted on $11.1 billion of the health pre-payments and expects to default on $5.6 billion more this year. Broadly, he said, the service’s financial burdens will grow without changes such as elimination of Saturday mail delivery, an expansion in permitted products and services and financial adjustments related to workers’ compensation and how retiree health plans are supported.

Our ruling

Hightower said the postal service has taken no taxpayer aid since 1971, funds operations entirely from the sale of stamps and the like and makes an "operational profit year after year."

The service funds operations from the sale of stamps and the like.

Also, Congress in 1970 set a course for ending federal subsidies. But the last subsidies flowed in 1982, not 1971. Contrary to this claim, too, the service last enjoyed an operational profit in 2006, the year it was handed a costly mandate to quickly pre-fund decades of retiree health benefits.

While the post office may be doing better than people think, we rate this claim as Mostly False.

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About this statement:

Published: Friday, August 9th, 2013 at 2:11 p.m.

Subjects: Federal Budget, Financial Regulation, Government regulation

Sources:

Truth-O-Meter articles, "Ad from Save America's Postal Service claims rule from Congress is causing USPS's financial problems," PolitiFact, Sept. 29, 2011; "Postal Service claim not fully on target," July 24, 2013

Emails (excerpted), Laura Ehrlich, executive director, Hightower and Associates, July 31, 2013 through Aug. 9, 2013

Emails (excerpted), Steve Hutkins, blogger, Save the Post Office, Aug. 5-8, 2013

Report, "Form 10Q, First Quarter, Fiscal 2013," U.S. Postal Regulatory Commission, May 10, 2013

Emails (excerpted) and document, "U.S. Postal Service, Government Appropriations Received 1972 - 1982; Impact of Retiree Health Benefits Prefunding," Stephen Seewoester and Sam Bolen, communications programs specialists, Southern Area Corporate Communications, U.S. Postal Service, Aug. 2-7, 2013

Email (excerpted); document, "FY 2012  Financial Results," USPS, Nov. 15, 2012; and telephone interview, David Partenheimer, manager of media relations, USPS, Washington, D.C., Aug. 9, 2013

Order, "ORDER DENYING REQUEST FOR EXIGENT RATE ADJUSTMENT," U.S. Postal Regulatory Commission, Sept. 30, 2010

Written by: W. Gardner Selby
Researched by: W. Gardner Selby
Edited by: John Bridges

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