Postal Service seeks a lifeline from Congress

The Postal Service continues to face long-term financial challenges and despite significant cost reductions will reach its statutory borrowing limit by the end of the fiscal year and default on a number of obligations to the federal government, officials told reporters. USPS has a $5.5 billion payment to its retiree health benefits fund due Sept. 30.

"This is not sustainable," USPS Chief Financial Officer Joseph Corbett said. "We can't continue to lose this amount of money."

USPS has cut 8.7 million work hours so far this fiscal year, a 2.8 percent drop over 2010. Spending on employee compensation and benefits also has declined as the agency continues to downsize its workforce. Labor costs account for about 80 percent of USPS expenses.

The agency is in the process of cutting 7,500 jobs in its administrative, supervisory and postmaster workforces, which officials say will save $750 million annually. And under a recent labor agreement, USPS now has the flexibility to hire noncareer employees to match its changing workload. Officials last month launched an initiative to study nearly 3,700 post offices for closure, which could leave up to 4,000 employees looking for new jobs.

Postal officials have continued to request legislative changes to bring the agency back to financial health, such as the flexibility to cut Saturday delivery, adjust the size of the workforce and end an obligation to prefund retiree health benefits. There are several reform bills currently under consideration, but none have moved forward. With congressional action, USPS still won't have $7 billion in liquidity it aims to reach in 2012, but will be much better off, Corbett said.

According to Postmaster General Patrick Donahoe, USPS will continue to deliver mail and pay its employees and suppliers, but without legislative change the agency will have to consider additional cash conservation measures. Negotiations with the Treasury Department could be necessary when the Postal Service hits its $15 billion debt limit in September.

"We will manage what we can control around cost going forward, but we need congressional action," said Donahoe.