The government-run United States Postal Service (USPS) announced Thursday that it lost $5.2 billion in the third quarter, its 11th consecutive quarter of losses.
“We will continue to take actions under our control to improve operational efficiency and generate revenue by offering new products and services to meet our customers changing needs,” said Postmaster General and CEO Patrick Donahoe in a press release. The release noted the 9 percent growth in revenues from parcel volumes as a positive.
The agency, which employed 546,000 people in 2011, states in the press release that operational difficulties such as a declining paper-mailing market—total volumes decreased by 3.6 percent compared to Q3 2011—are only one part of the problem.
Congress Urged to Change Postal Law So Agency Can Reform
“We remain confident that Congress will do its part to help put the Postal Service on a path to financial stability,” said Donahoe in the press release.
The agency is stifled by a need to prefund future retiree health benefits—$3.1 billion in the third quarter alone—paying the required amount to the United States Treasury, as USPS retirees participate in the U.S. government health care program.
According to postal service spokesman David Partenheimer, this is something that no other government agency or company USPS knows of has to do. Due to cash constraints, the postal service could not make the $3.1 billion payment, but nonetheless keeps being liable for the sum and has to account for it in its profit and loss statement.
According to Partenheimer, USPS could solve the problem by setting up their own health care scheme for retirees that would provide “the same or even better coverage” while reducing costs, mostly because a competitive bidding process would induce private insurance companies to bid for the contract given the large number of USPS employees.
In his interview with The Epoch Times, Partenheimer further noted that USPS has a business plan to become profitable by 2016 through further reducing costs. Part of the cost cutting exercise is a measure that would discontinue delivery on Saturday to street addresses, while post office box and express customers could still get their mail on Saturday. Unfortunately, this plan cannot be implemented without congressional approval: “Congress needs to act so that we can fully implement our plan to return to financial stability,” says Partenheimer.
Post Office In Need of Cash and Little Time Left
Given the legislative constraints and high liquidity-drain, the USPS will run out of cash in mid-October this year. “Employees and suppliers will continue to get paid, that’s our main priority. … We did not pay the government and defaulted on the Treasury and there are other actions that we could take [to preserve cash],” says Partenheimer. He expects to make it through 2013, however, as Christmas mailing will pick up at the end of October and the presidential election will boost revenues.
Should there be no solution by 2013, the USPS still has a $2 billion credit line from the Treasury, which according to Partenheimer is not the same as receiving tax dollars from the taxpayer but more like borrowing from a financial institution.
The Senate already passed a bill sponsored by Delaware Democrat Tom Carper, which now needs urgent House approval: “Clearly, the Postal Service’s financial crisis is growing worse, not better. I’m not sure how much more evidence leaders in the House of Representatives need before they realize that the Postal Service is in dire straits and that the need for them to act on comprehensive postal reform legislation is urgent,” says Carper in a press release.
Timing will be crucial, as the House does not reconvene before Sept. 10 and both the Senate and House have only 13 legislative days left in 2012.