What you said about the public pension crisis, 'pre-funding' and the U.S. Mail

A few of you wrote to weigh in on my recent column about proposed US Postal Service cuts, including Saturday mail and door-to-door delivery, and about a unique requirement to "pre-fund" most retiree health benefits that is driving the bulk of the postal service's debt. Most of this post will be about pre-funding, but I also wanted to include a point one Cedar Rapids reader made about door-to-door delivery:

To many of us, it may seem a matter of convenience, but for some, it is about accessibility, he wrote. He said he and his wife would never live in a neighborhood with cluster mailboxes, if they can help it. They had hoped to find a house with door-to-door delivery but, failing that, chose a place with a mailbox at the curb:

"Our driveway is steep," he wrote. "In snow and ice, we DRIVE down the driveway to get the mail, after having slipped - a few years ago - and endured six months of physical therapy. Two doors down, a woman fell and broke her hip."

A very good point.

Now, on to pre-funding. Some of you wrote to say the unique mandate unfairly burdens the postal service:

"This has been going on for 6 years now, and Congress needs to fix it. ... No other entity is required to pre-fund retiree benefits in such a short time period. ... Congress has acted improperly and is causing the huge losses sustained by the USPS. By the way, I have no connection to the Postal Service and no one I know works there. But this is an excellent example of how misguided our Congress has been over the past decade."

Others disagreed:

"Whether you fund it today or fund it in 10 years it remains a liability. This is one place where Congress actually did the right thing (probably didn't really understand what they were doing) unlike our State and Municipal governments who haven't yet had the guts to "put it on the books" so to speak. ... Any way you slice this pie, either pay for it as you go or fund it up front, the bottom line for USPS is that services have to be cut and brought into the new world of email, texting, etc. You could go for a pay as you go system and supposedly save the $5 billion up front, but unfortunately the liability still remains - which can't be funded with the current business model. ... Glad you brought this to people's attention as many municipalities and State governments haven't been transparent with this issue. When they do we'll all realize the mess is much bigger than we thought."

That reader is right -- the public pension crisis is a biggie. According to this source, the federal government's unfunded pension system liabilities reached $761.5 billion in FY11 -- a $139 billion increase from the previous fiscal year.

This slow-motion car crash has been developing for years, and at all levels of government. Especially with Detroit in the news, we're hearing much more about it at the state and municipal level right now (this explainer from The Economist gives a good overview).

Recently released data from Moody's shows that as of 2011, 10 states had pension liabilities equal to or greater than their total annual revenues. Iowa is doing better than nearly every other state (according to Moody's, our adjusted net pension liability is equal to only about 1.6 percent of the state's GDP, compared to Illinois' nearly 20 percent, for example), but that doesn't mean we're in the black.

What it does mean is that we've got plenty of time and wiggle room to take a moderate, long-term approach to the shortfall, rather than making drastic and potentially damaging moves.

The Des Moines Register editorial board has called for a special study group to help resolve pension issues in this piece. Branstad has said he wants to make pension reform a legislative priority during the next session, although he hasn't laid out any specific proposals.