After Months of Negotiations, Postal Service Reaches Agreement for $10B Loan From Treasury
Congress authorized the loan in March, and USPS has since said additional relief is necessary.
The U.S. Postal Service has reached terms with the Treasury Department to access a $10 billion line of credit authorized by Congress in March, ending months of negotiations between the Trump administration and the cash-strapped mailing agency.
Lawmakers authorized the loan as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act to assist USPS after the pandemic led to a drastic downturn in the agency’s business. Congress included language allowing Treasury Secretary Steve Mnuchin to negotiate terms of the loan with postal management, leading to a delay in sending the funds and criticism the Trump administration was placing onerous conditions on the Postal Service.
The talks appeared to have accelerated after Louis DeJoy was sworn in as postmaster general last month. DeJoy announced the agreement on Wednesday, saying the postal board of governors had approved it on Tuesday. The two sides have yet to formally sign off on the terms, but expect to do so “over the coming weeks.” A USPS spokesman declined to elaborate on the terms of the loan.
DeJoy made clear the loan was only a small step on the path toward solving the Postal Service’s financial woes.
“Access to an additional $10 billion in borrowing authority will delay the approaching liquidity crisis,” he said. “The Postal Service, however, remains on an unsustainable path and we will continue to focus on improving operational efficiency and pursuing other reforms in order to put the Postal Service on a trajectory for long-term financial stability.”
The postal board in April voted to request $75 billion in financial assistance from Congress, saying the $10 billion loan was insufficient due to both the pandemic and its longstanding fiscal crunch. While postal management said earlier this year it would likely run out of cash by the end of September, the agency said in a financial document in May that by accessing a $10 billion loan from Treasury and prioritizing some payments over others "it expects that it will have sufficient liquidity to continue operating through at least May 2021." USPS has also experienced a significant surge in package business since the outset of the pandemic, but management has said repeatedly it does not expect the uptick to continue nor does it make up for the downturns in the other parts of its business.
House Democrats passed a coronavirus relief package in May that included $25 billion for USPS. A package unveiled this week by Senate Republicans did not include any such funding, which followed President Trump railing against the agency and suggesting on multiple occasions he would not support any financial relief for it.
The Postal Service’s agreement with Treasury for the $10 billion loan comes after significant shake ups in the agency’s leadership. After the board announced its selection of DeJoy to replace Megan Brennan, Deputy Postmaster General Ronald Stroman and board member David Williams both stepped down. Williams resigned specifically over the Trump administration’s heavy-handed role in the agency’s business decisions. He was seen by many stakeholders as a valuable member of the board due to his experience as a former inspector general for USPS and several other agencies.
DeJoy has promised to shake up the Postal Service’s business model to squeeze out additional operational savings and in recent weeks has announced new strategies to cut costs by reducing overtime and late deliveries.