Congress declines to bail out Postal Service

The agency has been cutting employee work hours to reduce labor costs. The agency has been cutting employee work hours to reduce labor costs. Fred Blocher/Newscom

The U.S. Postal Service has one day to meet a $5.5 billion obligation to its retiree health fund, and Congress' temporary spending bill provides the agency no relief.

In legislation introduced on Tuesday to fund government operations through Dec. 3, lawmakers decided not to grant the Postal Service a $4 billion bailout. Required by a 2006 provision to prefund its retiree health benefits at approximately $5 billion annually, USPS is the only federal agency with that obligation. Congress granted relief from the prefunding requirement for fiscal 2009, and postal officials asked for similar assistance for the fiscal 2010 budget cycle.

With one day left in the fiscal year, the Postal Service is trying to decide how to proceed.

"We're considering our options," said Gerald McKiernan, a USPS spokesman. "The matter is being discussed, and I'm not aware of any resolutions."

According to financial information submitted to the Postal Regulatory Commission in August, USPS has lost $7.7 billion this year. The agency has been cutting employee work hours to reduce labor costs and said in August it was on track to eliminate $3.5 billion in costs by the end of fiscal 2010 due to process improvements. Officials, however, warned that the Postal Service could find itself strapped for cash.

"Given current trends, we will not be able to pay all 2011 obligations," said USPS Chief Financial Officer Joe Corbett in August. "We can't continue to just keep losses where they are. We have to be profitable."

The Postal Service has attributed its troubles in part to declining mail volume. While the agency delivered 213 billion pieces of mail in 2006, as of August it had processed just 156 billion pieces of mail for 2010. According to an inspector general report released on Wednesday, USPS will be financially sustainable until volume dips below 100 billion pieces of mail. The agency can adapt to this decline by correcting overpayments to its pension funds and implementing its 10-year strategic plan, which includes initiatives such as reducing delivery days and increasing workforce flexibility, the report said.

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