Got Gold/Silver?
The U.S. Postal Service will begin to default on its financial obligations just over four months from now unless Congress takes action to relieve it of its obligation to pre-fund retiree health care accounts, its leader told lawmakers Tuesday.
USPS expects to post a net loss of $8.3 billion for this fiscal year, nearly as much as it lost last year. And with its $15 billion debt limit due to be reached this year, more borrowing is not an option, Postmaster General Pat Donahoe said in testimony before a subcommittee of the Senate Homeland Security and Government Affairs committee.
"Despite our aggressive cost cutting and revenue generating efforts, we are in serious financial predicaments today," he said. "As things stand, we do not have the cash to make the $5.5 billion prepayment for future retiree health benefits due on September 30. And we may be forced to default on other payments. This could extend to operational expenses."
USPS contends the prepayment for future retirees is a financial obligation that none of its competitors, nor any government agency, has to live with. The requirement came along with a 2006 postal reform bill that was passed when mail volume was at its peak.
Officials say the payments were also based on what was then a much larger employee base. USPS has cut its workforce by 113,000 since then. Donahoe said in written testimony to the subcommittee on federal financial management that not only can USPS not afford the future retiree health bill this year, but that without Congressional action, it’s inevitable that the organization will eventually default on payments to employees and suppliers as well.
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