US Postal Service running out of cash

A top official says the USPS is in a financial disaster, and may need another rate hike to operations going.

By 247 Wall St. Sep 19, 2013 4:09PM

U.S. Postal Service delivery trucks sit at the Brookland Post Office in Washington, D.C. on May 9, 2013 (© Andrew Harrer/Bloomberg via Getty Images)By Paul Ausick, 24/7 Wall St.

 

The U.S. Postal Service is dangerously close to running out of cash. In testimony on Thursday before the Senate Committee on Homeland Security and Governmental Affairs, Postmaster General Patrick Donahoe made the USPS’s position crystal clear.

 

At the end of June the Postal Service had total assets of $22.5 billion and total liabilities of $61.2 billion. Of those assets only $3.1 billion is available in cash. The USPS has borrowed its mandated limit of $15 billion, and currently has enough cash on hand to fund operations for just 11 days.

 

The USPS will fail to make its $5.6 billion payment to its retirees’ health fund on Sept. 30th, and will add that total to the $11.1 billion it failed to pay last year. If it makes its scheduled $1.4 billion workers’ compensation payment next month, its cash balance will total just five days of operating expenses.


Donahoe noted that is a "razor thin margin," considering that private sector companies typically have enough cash on hand to fund at least two months of operations.

 

For the first nine months of 2013 the USPS posted a net loss of $3.9 billion. In fiscal year 2012 the net loss totaled $15.9 billion -- in addition to the missed $11.1 billion payment for retiree health benefits.

 

The Postal Service’s biggest problem, though Donahoe doesn’t say it directly, is the Congressionally-mandated pre-funding payments to the retirees’ health benefit fund. The USPS has run a deficit of $41 billion in the six years since the pre-funding requirement was passed. Of that total, $32 billion has gone to the pre-funding payments.

 

"To be clear," Donahoe said, "the Postal Service does not have the authority or the tools to managed these massive obligations without comprehensive postal reform legislation."

 

Congress either has not acted on or rejected proposals to eliminate Saturday mail delivery, raise postal rates and close some rural post offices. Eliminating the pre-funding requirement would help ease the cash crunch substantially, but that is not likely to happen. More likely are added calls to privatize the U.S. Postal Service -- as the U.K. is about to do.

 

Also from 24/7 Wall St.

37Comments
Sep 19, 2013 4:30PM
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Government Solution, raise taxes or fees.  The problem is never solved. 
Sep 19, 2013 6:00PM
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AGAIN CONGRESS DOES NOT DO THE JOB THEY WERE ELECITED TO DO

 

TERM LIMITS GET RID OF THEM ALL

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Does anybody do this with their personal finances??????
Sep 19, 2013 5:16PM
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Whatever happened to eliminating Saturday delivery?  Wouldn't it be better that a few people lose their jobs than all of them?

 

Sep 19, 2013 5:49PM
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The USPS is hitting its debt ceiling.  The USA is hitting its debt ceiling.  Detroit can't borrow any more money.  There's something fundamentally wrong with the way these entities operate, and it can't be fixed without cleaning house. 

Fiscal irresponsibility is our #1 problem as a nation and we need to stick people in charge who are willing to implement whatever changes are necessary to balance budgets and pay down the debt.  I'm even willing to consider tax increases and postage rate hikes, AFTER the budget is balanced, AFTER we have a rainy day fund set up equal to 5% of the previous year's expenditures, and AFTER you can prove that the additional proceeds will be used to pay down the debt.  Until then, get your priorities straightened out and start making cuts.

Sep 19, 2013 5:21PM
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Let the Post Office have true freedom to have unfettered negotiations between management and a workforce that is allowed to strike. And let the free market rip.

Sep 19, 2013 6:02PM
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Run the USPS like a business, instead of a Government institution...Problem solved.

First eliminate Saturday deliveries..

Second eliminate 10% of workforce period.

Third eliminate 25% of management, make workers more responsible.

Sep 19, 2013 8:02PM
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Writer does not have his facts right. He writes in 2012 USPS net loss  is 15.9 bil in addition to 11.1 bil of failed  prefunding payment. This is a whopper of misstatement. Not IN ADDITION, actually it is INCLUDING. In other word, if you forgo the payments , net loss is 4.8 bil. What actually happens is that in every quarter they show  1.4 bil payment for that prefunding. But they are supposed to make that payment in 30th sept every year for 4 quarter. Like 2013 for 3 quarter they are saying the net loss of 3.9 bil. But according to the financial statements, as if they already made 3.8 bil of that payment. Absence of that Draconian requirement the net loss is about 100 mil. Actually absence of this unprecedented, unfair draconian requirement USPS is not gonna loose money this year for sure. Everybody thinks this is a retirement prefunding. It is not. Retirement actually funded better than any other govt agency. Actually it is overfunded. Everybody agrees that including CBO, Congress, President, USPS--- everybody. They agree they have to payback 16 bil to USPS. At the same time they are dragging their feet. This is actually a game played to break USPS and give its profitable parts to private sector. Disgusting. Huh? 
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Do you people understand that the government requires that the postal service PRE-fund retirements for people WHO ARE NOT EVEN BORN YET?!?!!?!?!

 

They are prefunding retirements, 75 years in advance!

 

SEVENTY-FIVE YEARS!  NO ONE ELSE DOES THAT!  No other government agency is required to do that, the private sector does not do that, so why this stupid pre-funding requirement?  It allows the Fed to look like it 'saved' money.

 

Seriously this is a problem brought on by craptastic governmental accounting requirements, and as mentioned before, I would not be surprised if there's a government official or two getting bribed to ensure the postal service fails so that the money making portions of the business can be sold to UPS/FEDEX at pennies on the dollar.

 

Too bad our news services no longer function as an independent body, I bet a semi-decent reporter could 'follow the money' and break one hell of a conspiracy/corruption story on this.

Oct 8, 2013 2:49AM
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People are being forced into electronic transactions. Just consider the effect madatory direct deposit of social security, military pensions and military pay are having on the USPS revenues. Add to this the volume of junk mail sent by businesses and political campaign material that is delivered for reduced prices. Businesses receive reduced rates to send tons of unwanted junk mail every year while the average citizen is encouraged to reduce paper use and 'go green'. Why? Is there a paper shortage? Are the major corporations worried there won't be enough paper to print their advertisements on?

As long as congress is allowed to divert revenues from the USPS the situation will continue to deteriorate. If the USPS doubled rates congress would use past excuses to divert revenues even less private mail would be carried and junk mail and political campaign materials would account for an ever increasing percentage of mail carried.

Why are the members of congress so willing to waste money on programs like the over-budget F-35 that is still under development sixteen years after the contract was awarded with a per-unit price that has nearly tripled and willing to allow corporations like GE and Apple avoid taxes but so obsessed with crippling the postal service?

They push to privatize social security, medicare, and the postal service. Corporations are profit driven, and time after time have shown they are willing to sacrifice service and demand more work for less pay and benefits from their employees. Competition with the USPS is helping keep the prices of the other services down and without it the prices of UPS and FedEx would increase rapidly driven by the demand for profit.
Sep 19, 2013 5:40PM
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When the government runs anything It always cost more. And when there is a problem Throw more money at it do not try to solve the problem. Look UPS and FedEx make money (Lots) and do not have the problems. I remember when the Mailman (or mailperson) Walked door to door(old days) and They still do it Lets Modernize The Postal Service or privatize it . There are so many ways that money could be saved.  
Sep 20, 2013 9:32AM
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GOOD, LET THEM BANKRUPT THEN MAYBE ALL THESE HIGH UNION PENSIONS WILL GO AWAY
Sep 20, 2013 7:10PM
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IT was a DEMOCRAT controlled House and Senate that passed this legislation to payoff its union pals. Screw the average American, so long as they protect their buddies.

 

Democrat=Socialist=Corrupt=Crony Capitalism=Democrat

 

No matter which way you look at it, the LEFT is the EXTREMIST PARTY.

Sep 20, 2013 9:00AM
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Why isn't the postal service making money; everyone else in the industry is.  what do you do with a business that does not make money?
Sep 20, 2013 10:01PM
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Cut postal employee wages as they all make way more than most over jobs in the market. Make all postal employees part time with 28 hours a week. Or sub contract the work of route drivers out to people and save a lot there. Why should postal employees make so much more than the rest of the job market ???? They are not skilled labor, so why should they make the rates of skilled trade workers ???? The rest of the countries businesses have cut back on employees and employee wages so why should the usps not do the same ???? Do people actually realize how much the average usps employee makes ???? Investigate it, tell the usps to make cut backs and start with employees and wages, why should they be safe from wage cuts, as 90 some percent of the nations workforce is not safe from wage cuts so why should they be ???? When was the last time usps employees ever took a pay cut ???? Answer is never. I say make them make cuts like any other business has to and raising rates is not an answer... 
Sep 20, 2013 7:22AM
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The slackers are Obozo and the Pukes in Congress.

 

Let's all hop in the Limo and take another grand vacation!

Sep 19, 2013 5:41PM
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How about we privatize it, like England is doing with the Royal Postal Service.
Sep 19, 2013 7:21PM
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this is the must shipper service that the US government offer, however if someone try to send anything on FedEx, UPS or DHL it will cost 100 time more, therefore in my opinion every letter should be $1.00 and the postmaster should stop recommending low increasing of 4 cent or 2 cent increase to this domestic prices, take it from 45 cent to $1.00 and problem solve. 
Sep 19, 2013 6:33PM
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Freeze postal retirements, put them all on 401K's. All new hires get 40qK's with a company match.

Get rid of the employee dead wood, I consistently get someone else's mail.

Pay the employees what they are worth not what they demand.  Get rid of the union.

Close little used post offices.

 Let each carrier have two routes.  Deliver one route one day and the other the next. Need 50% less carriers and half of the deliver vehicles.

Problem solved.

Sep 20, 2013 8:47AM
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