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Postal Service About to Default on Another $5 Billion Payment

WASHINGTON, D.C. – The U.S. Postal Service is on the verge of default on another multibillion-dollar payment and warns its viability now lies solely in the hands of Congress. Postmaster General Patrick Donahoe tells AP that his agency will be forced to miss the $5.6 billion payment due to the Treasury this coming Sunday, its second default in as many months.

For more than a year, the Postal Service has been seeking legislation that would allow it to reduce its $5 billion annual payment for future retiree health benefits and eliminate Saturday mail delivery. But with the House failing to act, the Postal Service says cash levels are running perilously low.

“We’ve done a lot to reduce cost out of our system,” Donahoe said. “The problem now is this: There’s nowhere to go.”

The Postal Service last month failed to pay $5.5 billion, its first default ever on a payment. While it will miss a second payment Sunday, it expects to make a $1.4 billion payment due to the Labor Department on Oct. 15 for workers’ compensation. Cash levels are expected to hit a low after that labor payment before rising again due to increased volume from holiday and election mail, including ballots for early voting.

“The key thing is Congress must act during the lame-duck session and get this whole thing behind us,” said Donahoe, referring to the few weeks lawmakers will be in session after the election before a new Congress takes office in January. “We can’t have a Postal Service where customers are constantly worried about our ability to make payments.”

Congress will have a full agenda of pressing fiscal issues when it returns in November, and some lawmakers have raised the possibility that postal legislation will get pushed over to the next Congress. Rep. Darrell Issa, R-Calif., who chairs the House Oversight and Government Reform Committee and is a sponsor of the House bill, has said he believes some kind of legislation can be passed in the lame-duck session, although it may not be as comprehensive as initially sought.

The Senate passed a postal bill in April that would have provided financial relief in part by reducing the 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 post office closures in their communities.

The Postal Service originally planned to close low-revenue post offices in rural areas to save money, but after public opposition it now is moving forward with a new plan to keep 13,000 of them open with shorter operating hours. The Postal Service also will begin closing more than 200 mail processing centers next year, but the estimated annual savings of $2.1 billion won’t be realized until the full cuts are completed in late 2014.

“Once again, we are watching the days slip away before the U.S. Postal Service faces the second default of its history. Republican leaders in the House of Representatives have now had 11 months to do the right thing and fix the serious, but solvable, financial challenges,” said Sen. Tom Carper, D-Del., a co-sponsor of the Senate bill. “Every day Congress delays fixing this problem, the financial challenge grows more difficult and the potential solutions become more expensive. “The Postal Service is an independent agency of government and does not receive tax dollars for its day-to-day operations but is subject to congressional control.

Art Sackler, co-coordinator of the Coalition for a 21st Century Postal Service, said: “Congress needs to act quickly on comprehensive postal reform. These defaults, mounting debts and declining revenues aren’t just going to hurt the Postal Service; they’re going to hurt the 8 million Americans whose jobs depend on the mail.”

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