The debt crisis grows deeper for the U.S. Postal Service (USPS). Soon after announcing aggressive cost cutting measures, the USPS said it might still default on loan payments it owes to the federal government due at the end of September 2011.
Reporting a net loss of $3.1 billion for the third quarter of its 2011 fiscal year, the mail service projects a total loss of $8.3 by year’s end. While the USPS has reported several billions in losses for previous years, it has reached its borrowing limit as set by Congress, and can no longer extend the time to repay its debts.
“The U.S. Postal Service is incurring record declines in mail volume and revenues not seen since the Great Depression,” said Cornell University policy expert Richard Geddes in a statement. “This is due in part to increased use of electronic mail. The worst declines are in its most profitable services, such as first-class mail.”
Declines in total mail volume have been significant and steady. The USPS reports a total mail volume drop of 39.8 billion pieces for its third quarter 2011, compared to a drop of 40.9 billion pieces for the same quarter in 2010.
Geddes recommends that the mail service continue to reform its organization, but also adds that Congress needs to allow the USPS to make cost cutting decisions without political interference.
“In the longer term, the Postal Service should be made more like a typical business, which includes reforms such as de-monopolization and privatization,” said Geddes.
While the Postal Service is quick to point out that it receives no tax dollars for operating expenses, and relies on the sale of postage, products, and services to fund its operations, it remains at the mercy of government intervention. Congress not only prevents the mail service from raising its rates, but has also saddled the USPS with a retiree health benefit payment schedule that the organization remains unable to meet.
“Since the passage of the Postal Accountability and Enhancement Act of 2006 (PAEA), the Postal Service has contributed more than $37 billion to a trust fund for future retiree health benefits,” said USPS CFO and Executive Vice President Joseph Corbett in a statement. “We are experiencing a severe cash crisis and are unable to continue to maintain the aggressive prepayment schedule that was mandated in the PAEA. Without changes in the law, the Postal Service will be unable to make the $5.5 billion mandated prepayment due in September.”
The Post Office plans on cutting more work hours, closing unused branches, and restructuring its organization, but the mail service says it needs more support from lawmakers to emerge from its crisis.
Reporting a net loss of $3.1 billion for the third quarter of its 2011 fiscal year, the mail service projects a total loss of $8.3 by year’s end. While the USPS has reported several billions in losses for previous years, it has reached its borrowing limit as set by Congress, and can no longer extend the time to repay its debts.
“The U.S. Postal Service is incurring record declines in mail volume and revenues not seen since the Great Depression,” said Cornell University policy expert Richard Geddes in a statement. “This is due in part to increased use of electronic mail. The worst declines are in its most profitable services, such as first-class mail.”
Declines in total mail volume have been significant and steady. The USPS reports a total mail volume drop of 39.8 billion pieces for its third quarter 2011, compared to a drop of 40.9 billion pieces for the same quarter in 2010.
Geddes recommends that the mail service continue to reform its organization, but also adds that Congress needs to allow the USPS to make cost cutting decisions without political interference.
“In the longer term, the Postal Service should be made more like a typical business, which includes reforms such as de-monopolization and privatization,” said Geddes.
While the Postal Service is quick to point out that it receives no tax dollars for operating expenses, and relies on the sale of postage, products, and services to fund its operations, it remains at the mercy of government intervention. Congress not only prevents the mail service from raising its rates, but has also saddled the USPS with a retiree health benefit payment schedule that the organization remains unable to meet.
“Since the passage of the Postal Accountability and Enhancement Act of 2006 (PAEA), the Postal Service has contributed more than $37 billion to a trust fund for future retiree health benefits,” said USPS CFO and Executive Vice President Joseph Corbett in a statement. “We are experiencing a severe cash crisis and are unable to continue to maintain the aggressive prepayment schedule that was mandated in the PAEA. Without changes in the law, the Postal Service will be unable to make the $5.5 billion mandated prepayment due in September.”
The Post Office plans on cutting more work hours, closing unused branches, and restructuring its organization, but the mail service says it needs more support from lawmakers to emerge from its crisis.
