U.S. Postal Service Set to Default on Its Federal Debts
Mar 2nd 2011 6:30PM
Updated Mar 2nd 2011 6:46PM
The U.S. Postal Service has warned that it will fall $6.8 billion short on payments it owes the federal government this fiscal year. In a presentation to a House of Representatives subcommittee on Wednesday, Postmaster General Patrick Donahoe said the postal service won't be able to pay its retirement and workers' compensation obligations unless the government steps in.
The Postal Service is set to miss its expected September payment of $5.5 billion to fund medical benefits for future retirees, as well as a $1.3 billion payment -- due in November -- for workers' compensation costs, Donahue said.
The service will continue to deliver the mail, but won't have the cash to fund these obligations, he added. The Postal Service last month said that it may close as many as 2,000 post offices this year after an oversight board in September unanimously rejected its request to raise the price of a first-class stamp to 46 cents from 44 cents.
The board said the Postal Service had failed to sufficiently quantify either the effect of the recent recession on operations or how much mail shipments would decline if rates were increased.
Denied the option of raising stamp prices, the Postal Service has requested other allowances, such as reducing the frequency of mail delivery, closing unprofitable post offices and restructuring its $5.5 billion retiree obligation.
In November, the Postal Service posted a fiscal 2010 loss that more than doubled from a year earlier on lower revenue and higher interest costs for debt related to workers' compensation.