Friday, August 5, 2011

Post Office Faces $9 Billion Loss, Wants Debt Raise

The U.S. Postal Service, which predicts a $9 billion loss this year, may ask Congress to raise its $15 billion debt limit as a mandatory health-cost payment exhausts its cash, Postmaster General Patrick Donahoe said.

Even if Congress allows the Postal Service to delay a required $5.5 billion payment next month for future retiree health-benefit costs, the agency will “barely” have the cash flow to continue operations when its fiscal year starts in October, James Miller, chairman of the postal board’s audit committee, said today.

“One of the things we’d have to look at is talking to people about looking at getting some breathing room with our debt limit since we’ve hit our limit of $15 billion,” Donahoe told reporters after a board meeting in in Washington.

The agency, which had $911 million of cash and cash equivalents as of March 31, has a $3 billion annual borrowing limit. The Postal Service has asked Congress for permission to close post offices and eliminate Saturday delivery to stem losses as more people use the Internet to correspond, receive publications and pay bills.

The service said in July it could save $200 million a year by closing about 12 percent of its almost 32,000 post offices.

The net loss narrowed to $3.1 billion in the third quarter ended June 30 from a $3.5 billion net loss a year earlier, Chief Financial Officer Joseph Corbett said today.

The service cut work hours 3.1 percent, or 9.2 million hours, in the quarter, including through the retirement of 1,850 administrative employees.

The volume of first-class mail, the most profitable mail category, fell 6.4 percent.

“Within the past year, the Postal Service’s financial situation has gone from bad to worse to worst,” Art Sackler, coordinator of the Coalition for a 21st Century Postal Service, said in an e-mail. “If Congress does not enact bold reforms soon, the tailspin the Postal Service is in will pass the point of recovery.” The group’s members include Bank of America Corp. and Verizon Communications Inc.

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