Postal Service: Out of cash next month

Monday - 8/8/2011, 6:06am EDT

Emily Kopp, Federal News Radio reporter

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By Emily Kopp
Reporter
Federal News Radio

The Postal Service reported Friday it lost $3.1 billion in the third quarter of the fiscal year. With no end to the financial bleeding in sight, postal officials said they would default on payments to the federal government due next month.

"Our ongoing financial situation has reached the point of becoming a real, now cash crisis," said Lou Giuliano, the chairman of the Board of Governors at Friday's board meeting. "As things stand today, the Postal Service will not have adequate cash to meet all of our financial obligations by the end of the fiscal year, Sept. 30."

Losses for the year come to $5.7 billion, $300 million more than at the same time last year. The Postal Service attributed the losses to a rapid decline in first-class mail that surpassed expectations and the poor economy. It also contends that it has overpaid the Federal Employees Retirement System for future retiree health benefits and will not make a required payment of $5.5 billion due next month.

"The board decided not to make these payments as a way of ensuring the operations of the Postal Service will continue smoothly, that we can continue to make payroll, and continue to get the mail delivered," Giuliano said. "While it's not easy to make the decision to publicly default like that, we're left with no viable alternatives under the law."

While it has no way under current law to regain the money it has already paid to FERS, the Postal Service has asked the Justice Department for a legal opinion on whether it needs to continue paying into the system.

USPS officials say it is constrained by its business model from making wide-sweeping reforms. Its mandate requires it to operate like a private firm, but it has certain public obligations.

"Let us operate like a business," said Postmaster General Pat Donahoe, speaking of attempts to convince Congress to make policy changes. "Give us the flexibility that everybody else has. That's incredibly important for the future of the Postal Service, especially with regard to retiree health benefits mandates."

USPS wants permission to reduce mail delivery to five days a week as part of a series of cost-cutting measures. And it would like a refund for over-payments it says it made to employee retirement accounts.

Art Sackler, coordinator of the Coalition for a 21st Century Postal Service, which represents the private-sector mailing industry, said: "Within the past year, the Postal Service's financial situation has gone from bad to worse to worst. If Congress does not enact bold reforms soon, the tailspin the Postal Service is in will pass the point of recovery, and many of the eight million private sector workers who depend on it will lose their jobs. This would be terrible not only for them and their families, but for our economy."

Lawmakers were not surprised at the latest financial news.

And, in fact, there are several bills designed to change the law governing the post office, an independent government agency, pending in both the House and Senate.

"Our troubled economy — coupled with the continued migration to electronic forms of communication — is putting the future of the Postal Service in jeopardy, and it's happening faster than expected," said Sen. Tom Carper (D-Del.), who is the chairman of the subcommittee that oversees the Postal Service and a sponsor of one of those bills, in a statement.

Rep. Darrell Issa (R.-Calif.), chairman of the committee with jurisdiction over postal operations and sponsor of the leading measure in that chamber, said Friday's announcement underscores the need to enact meaningful reforms.

"The increasing use of electronic, paper-free technology has caused a permanent decline in mail usage and the Postal Service must adapt its outdated brick-and-mortar model to meet current customer needs," Issa said in a statement. "These deficits clearly cannot be closed by bailing out the Postal Service with taxpayer money or allowing the postal service to amass obligations to employees, retirees and taxpayers that are unlikely to be fully met in the future."

Both reform bills are stuck in committee.

The Postal Service, which does not receive tax revenues for its operations, is in the process of reducing its administrative staff by 7,500 people and is reviewing nearly 3,700 underused post offices across the country for closing. Over the last four years, USPS has cut its staff by 110,000 and reduced costs by $12 billion.

In the three months from April through June, USPS handled 39.8 billion pieces of mail. That's 1.1 billion fewer items than in the same period a year ago.

Yet, quoting Mark Twain, Donahoe said reports of the Postal Service's demise had been greatly exaggerated. He said the organization was focusing on building package and shipping services, and both showed gains in the third quarter.

(The Associated Press contributed to this report.)

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