Credit maxed out, USPS waits cautiously for festive volumes
The US Postal Service has reached its legal borrowing limits, it has confirmed to US media, and now has no safety net to draw on until festive mail volumes start coming in. USPS spokesman Dave Partenheimer told reporters that the world’s largest postal service was in a “serious situation”, with little operating flexibility now available.
The Postal Service has a $15bn limit on the amount it can borrow from the US Treasury, but has been losing billions in the last few years, and in the first 11 months of its fiscal year 2012 surpassed expectations of a $14bn loss for the whole of this year.
This year alone, it has had to refuse $11bn in mandated healthcare liability payments to the federal government to avoid losing more than $14bn, and is now hitting its credit limit nevertheless.
USPS hit its borrowing limit late in September, and must now negotiate an uncomfortable few weeks until mail volumes and revenues begin to swell as the festive season gets underway in the United States.
With the holiday season driving mail volumes including greetings cards, gift shipping and online shopping – not to mention the flood of product returns after Christmas – once USPS gets through October it should have sufficient cash coming in to get through the winter.
USPS closed 48 mail processing plants this summer, and is to shutter 92 more plants early in 2013 to save money and respond to the 25% cut in mail volumes in the last six years. It is also set to raise mail and shipping prices in January to help cover the costs of loss-making services.
But, the Postal Service will still need legislative change to rebalance its books before next summer.
However, Congress is currently suspended ahead of next month’s elections. The best hope is that legislation is pushed through Capitol Hill during the “lame duck” period, between the elections and the official start of the next Congressional session in January.
“Walking a tight rope”
The US mailing industry today called on Congress to get back to work and pass much-needed postal reform in order to help USPS.
“With its borrowing limit reached, the Postal Service is now walking a tight rope with no net,” said Art Sackler, who co-ordinates the mailing industry lobby group Coalition for a 21st Century Postal Service.
“There are 8m private sector jobs that depend on the mail, and there would be catastrophic economic consequences if the Postal Service shuts down. The longer Congress waits to enact postal reform, the more difficult and more expensive the solutions become.”
Back in April, the US Senate passed postal reforms to make changes to USPS healthcare and pension payment arrangements, but the US House of Representatives has not passed equivalent legislation this year, which is needed before a compromise bill can be adopted.
If proposals are not passed through Congress by the end of this year, the US Senate will need to pass an entirely new postal bill, as well as the House.