The United States Postal Service has been in trouble for some time, having, for instance, rung up losses in 16 of the last 18 quarters.
But in remarks prepared for Senate testimony today, Postmaster General Patrick Donahoe says his agency is now on the verge of running out of cash to run day-to-day operations:
"By mid-October 2013, the Postal Service projects it will have a cash balance on hand of approximately five days of average daily expenses. For an organization the size of the Postal Service – which has revenues of $65 billion and a total workforce of approximately 490,000 career employees – that is a razor thin margin. By way of comparison, most private sector companies usually have available liquidity of at least two months of operating expenses.
Some background: the United States Postal Service has to make most of its own money, though it also gets a stipend from Congress.
But the advent of e-mail began eating into their historical profit center — first-class mail — and they've been hemorrhaging income ever since.
In 2006, Congress enacted legislation that dug them into a deeper hole.
As Josh Barro has noted, the agency was forced to begin setting aside earnings for retiree benefits, to the tune of $8 billion a year.
Since that time, they've operated a total net loss of $41 billion.
The USPS has been trying to find work-arounds, but have seen their proposals thwarted.
You may recall their proposal from earlier this year to axe Saturday deliveries.
But that was blocked by Congress after a statutory ruling from the General Accountability Office.
In his remarks today, Donahoe basically called out Congress out for hamstringing the agency's own cost-cutting measures:
"To be clear, the Postal Service does not have the authority or the tools to manage these massive obligations without comprehensive postal reform legislation."
Donahoe is now trying to put the agency on Medicare to ease the health benefit payments issue.
He also wants a postal rate increase.
The agency was able to convince 22,800 eligible employees to retire in their fiscal Q2 this year.
Still, as of today, the agency is running at an average of 11-days worth of expenses, and Donahoe says they will definitely miss a $5.6 billion payment into retiree health benefits due Sept. 30.
"Postal reform legislation is urgently needed. In its absence, continued significant net losses are inevitable," he says.
Yikes.
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