Postal Service edges closer to bankruptcy

Cites high cost of health care for future retirees

Charles Dharapak/associated press/file

WASHINGTON — The nearly bankrupt US Postal ­Service reported losses on Thursday of $57 million per day in the last quarter and warned it will miss another payment it owes the Treasury, just one week after its first-ever default on a payment for ­future retiree health benefits.

From April to June, losses totaled $5.2 billion, up $2.1 billion from the same period last year.

The mail agency said it is being hurt significantly by mounting expenses for future retiree health benefits. Those expenses, mandated by Congress in 2006, made up $3.1 billion of the Postal Service’s quarterly loss, while workers’ compensation tacked on another $1.1 billion in expenses. The agency’s operating loss was $1 billion, mostly due to declines in first-class mail.


‘‘We have simply reached the point that we must conserve cash,’’ Thurgood ­Marshall Jr., chairman of the Postal Service’s board of governors, said in explaining the payment defaults. He cautioned that the agency may ­delay other payments if necessary.

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The Postal Service has been urging Congress for months to pass legislation that would allow it to eliminate Saturday mail delivery and reduce the annual payment of more than $5 billion to the retirees’ health fund. The Postal Service defaulted on that payment last week when the House failed to take action before heading home for a five-week break.

The service says it will miss the second $5.6 billion payment due on Sept. 30, also for future retiree benefits, as cash runs close to zero.

At a news briefing, Postmaster General Patrick Donahoe made clear that day-to-day mail delivery will not be disrupted in any way despite the cash crunch. But Donahoe expressed frustration with the repeated delays by Congress, which he said are contributing to a lot of ‘‘negative talk on finances’’ that could undermine confidence in the agency and its long-term growth. ‘‘Congress needs to act responsibly and move on this legislation,’’ he said. ‘‘This is no way to run any kind of business.’’

The Senate passed a bill in April that would have provided financial relief in part by reducing annual health payments and providing an $11 billion cash infusion, basically a refund of overpayments the Postal Service made to a federal pension fund.


The House, however, remains stalled over a separate bill that would allow for aggres­sive cuts, including an immediate end to Saturday delivery. Rural lawmakers in particular worry about the impact of closures in their communities.

The agency originally sought to close low-revenue post offices in rural areas to save money, but after public opposition, it is now moving forward with a new plan to keep 13,000 open with shorter operating hours.

The Postal Service, an independent agency of government, does not receive tax dollars for its day-to-day operations but is subject to congressional control.

Overall, the Postal Service had operating revenue of $15.6 billion from April through June, the third quarter of its 2012 fiscal year. That was down a fraction from the same period last year.

But quarterly expenses this year climbed to $20.8 billion, up 10 percent, largely driven by the health prepayments. The Postal Service is the only government agency required to make such payments.


The Postal Service also has been hurt by declining mail volume as people and businesses continue switching to the Internet in place of letters and paper bills. The number of items mailed during the last quarter was 38.5 billion pieces, a 4 percent decrease, much of it in first-class mail.

$5.2 billion

On the positive side, the mail agency reported that it continued to lower costs by reducing work hours and boosting employee productivity. The Postal Service’s fast-growing shipping services, which include express and priority mail, had a 9 percent increase in operating revenue to $3.3 billion.

That strong growth in shipping services helped offset roughly three-fourths of the declines in first-class and advertising mail, said Stephen Masse, the Postal Service’s acting chief financial officer.

The numbers bring the Postal Service’s year-to-date net loss to $11.6 billion, compared with $5.7 billion for the same period last year.

Art Sackler, co-coordinator of the Coalition for a 21st ­Century Postal Service, a group representing the private-­sector mailing industry, cautioned that the worst of postal losses may be yet to come.

He noted that the service’s third-quarter numbers may reflect an unusually high volume of mail that typically ­occurs in an election year.