10/13/2011 12:37 pm ET | Updated Dec 13, 2011

Postal Service Hasn't Been Overpaying Retiree Benefits By Tens Of Billions: Auditors

WASHINGTON -- Federal auditors released a report Thursday that found, contrary to other findings, the U.S. Postal Service (USPS) has not been overpaying billions of dollars into retiree benefit accounts. The report comes as a blow to Democrats and labor unions, as both groups are hoping to avoid significant cuts to the agency's services and workforce.

Postal regulators and the USPS inspector general had previously determined that the agency has overpaid as much as $74 billion into workers' retirement accounts since the 1970s. But the report from the Government Accountability Office flatly disputes that finding, saying "we have found no evidence of errors of these types."

The overpayment issue is a major source of contention in the debate over the postal service's finances. Patrick Donahoe, the postmaster general, told Congress last month that the agency is facing an unprecedented fiscal crisis and asked that it be granted the latitude to cut services and lay off workers in an effort to avoid bankruptcy. But labor groups and postal service advocates have said that the agency's troubles are wildly overstated, and they've pointed to benefit overpayments as one of the problems that could easily be rectified.

The GAO report says that returning tens of billions of dollars to the agency would not solve its problems. Transferring the money would only increase the federal government's pension liability, it said.

The National Association of Letter Carriers, one of the main unions representing postal workers, quickly shot back, saying in a statement Thursday that "the GAO is simply wrong in denying the overpayment, and in doing so it differs with the USPS, the Office of Inspector General (of the Postal Service), the Postal Regulatory Commission, two independent actuaries, and legislators from both parties and both chambers of Congress who've addressed the issue in current legislation."

The report will likely fuel the calls from Rep. Darrell Issa (R-Calif.) and other conservatives to allow the postal service to lay off as many as 200,000 workers, as Donahoe has requested. Many postal service workers are currently protected by no-layoff clauses in their union contracts, so any such firings would require legislation.

"There is not now nor has there ever been an overpayment," Issa (R-Calif.) told the Washington Post, which obtained an advance copy of the GAO report. "It has simply been a disingenuous claim used to justify legislative proposals that would use billions of taxpayer dollars to cover-up declining Postal Service revenues."

Issa and others have also signaled that they'd like to permit USPS to cut back its services, including Saturday delivery, and possibly shutter lower-volume post offices. In his deficit-reduction plan, President Obama also suggested he was open to the possibility of dropping Saturday service. Many postal service boosters have warned that such a cut would devastate the $1 trillion mailing industry and greatly diminish the postal service's customer base.

It appears that Sen. Tom Carper (D-Del.), a leader among Democrats on postal service reform, will be setting aside the overpayment issue for the time being to concentrate on other possible solutions, such as letting the agency adjust its postal rates, start selling non-postal products and change the way it pays into its employee health care fund.

The GAO report did agree with the postal service's finding that the agency had overfunded a separate retirement account to the tune of $6.9 billion. Lawmakers have already proposed legislation that would return that money to USPS.