The U.S. Postal Service (USPS) and the Department of Treasury reached a deal this week that gives the service a loan of up to $10 billion, but only if it’s needed.
The loan comes through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2.2 trillion stimulus bill signed by President Donald Trump in late March to provide relief amid harsh restrictions during the COVID-19 pandemic.
The act enabled USPS, an agency operated by the federal government, to borrow up to $10 billion, from the Treasury, but only if the service determines that, due to the COVID-19 emergency, it will not be able to fund operating expenses without borrowing money.
The loan, therefore, is only available if the USPS needs it.
“While the USPS is able to fund its operating expenses without additional borrowing at this time, we are pleased to have reached an agreement on the material terms and conditions of a loan, should the need arise,” Treasury Secretary Steven Mnuchin said in a statement.
Mnuchin said he would keep working with new Postmaster General Louis DeJoy to fulfill Trump’s goal “of establishing a sustainable business model under which USPS can continue to provide necessary mail service for all Americans, without shifting costs to taxpayers.”
The USPS Board of Governors unanimously approved the agreement in principle. The parties plan to formally memorialize the agreement over the coming weeks.
DeJoy in a separate statement said the loan would “delay the approaching liquidity crisis.”
“The Postal Service, however, remains on an unsustainable path and we will continue to focus on improving operational efficiency and pursuing other reforms in order to put the Postal Service on a trajectory for long-term financial stability,” he added.
The sprawling service, which has more than 630,000 employees and delivers nearly half of the world’s mail, has struggled for years to be solvent. It has received regular injections of funding from the federal government.
Then-Postmaster General Megan Brennan warned Congress in April that USPS revenue could decline by some $13 billion because of the lockdowns implemented across the United States to try to curb the CCP (Chinese Communist Party) virus, which causes the disease COVID-19. She said the USPS would run out of money by September.
But revenue actually rose by $330 million during the pandemic, undercutting the warnings.
Even with a slight improvement in its financial position, the USPS needs to be redesigned, according to a recent report (pdf) from the Government Accountability Office.
The service’s “current business model is not financially sustainable due to declining mail volumes, increased compensation and benefits costs, and increased unfunded liabilities and debt,” according to the report.
Trump has pushed USPS to charge higher prices, particularly to Amazon and other Internet-based companies.