Mail Delivery May Stop in 2012 Unless Congress Frees Up Cash

USPS, With $10B Loss, Needs Help, CEO Says
A patron uses a mobile U.S. Postal Service truck outside the James A. Farley Post Office in New York. Photographer: Jin Lee/Bloomberg

The U.S. Postal Service said it may not have the cash to carry the mail beyond next August if Congress doesn’t let it take steps like ending Saturday delivery and withdrawing from a government health-care plan.

“I’m operating right now with a week’s worth of cash in a business that’s a $65 billion business,” Postmaster General Patrick Donahoe said yesterday at a Senate committee hearing. The Washington-based service needs about $1 billion in cash a week, said David Partenheimer, a spokesman.

President Barack Obama’s administration is proposing to move the Postal Service’s Sept. 30 deadline for a $5.5 billion payment toward future retirees’ health benefits, which it says it can’t afford, back by 90 days.

That would give the administration, Congress and the service time to reach an agreement on the service’s finances, said John Berry, head of the White House Office of Personnel Management. The service forecast a loss of $10 billion in the year ending Sept. 30, as mail volume drops for the fifth year.

“There’s a clock ticking,” Senator Joseph Lieberman, a Connecticut independent and chairman of the Homeland Security and Governmental Affairs Committee, said at the hearing. “By next summer you’re effectively not going to be able to deliver the mail. That should get us all working.”

Squeezing Workers, Suppliers

The Postal Service, which expects to reach its $15 billion government-mandated borrowing limit this month, has also proposed cutting more than a third of its jobs and squeezing suppliers to reduce costs. The mailing industry accounts for 7 percent of U.S. gross domestic product, the Postal Service says.

Senators Thomas Carper, a Delaware Democrat, and Susan Collins, a Maine Republican; and Representative Darrell Issa, a California Republican, each have proposed legislation that would allow the service to make some of its requested changes.

Obama in February proposed delaying $4 billion of the congressionally mandated $5.5 billion payment and refunding some surplus pension payments made by the service.

“Between the House, the Senate and the administration, we can all sit down and work something out for the Postal Service and the industry,” Donahoe told reporters.

Mail volume will decrease 2 percent this fiscal year, for a drop of 22 percent since 2006, Donahoe said. The service widened its loss forecast from $9 billion previously.

The Postal Service last month said it wants to eliminate 220,000 jobs, or 39 percent of its full-time workforce, by 2015. That would include firing about 120,000 people, breaking its tradition of cutting employment mainly through retirement and voluntary departures.

Union Talks

The service is negotiating new contracts with two of its largest unions, the National Association of Letter Carriers and the National Postal Mail Handlers Union. The groups’ current contracts expire Nov. 20.

“If nothing is done, the Postal Service will run out of money and be forced to slash service and employees,” Lieberman said. “That’s the last thing our struggling economy and our country need right now.”

The U.S. unemployment rate in August was 9.1 percent and as been above 8 percent since February 2009.

Cliff Guffey, president of the American Postal Workers Union, the largest postal union based on current employees, said in his testimony that the proposed firings would be “outrageous, illegal and despicable.”

The 250,000-member union, which represents mail clerks, drivers, mechanics and custodians, signed a contract with the Postal Service this year that extends through 2015 and prohibits firing most employees.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE