USPS Broke: Postal Service Near Collapse

Is the USPS about to go the way of the dinosaur and the dodo bird?

The financially strapped U.S. Postal Service reported an $8.5 billion loss in the fiscal year that ended in September and now says it will run out of money in 2012 if Congress doesn’t step in.

The Postal Service will, at best, stay solvent only until next August, Deputy Postmaster General Ron Stroman said in an interview last week.

“We’re really up against the wall here,” he said.

U.S. Postal Service leaders are planning to forgo legal obligations in October by skipping a $5.5 billion payment for retiree health care, but even that remarkable step won’t buy the struggling mail carrier much time.

Overall, the U.S. Postal Service has to fill a $20 billion budget gap between now and the end of 2014 to regain profitability, Postmaster General Patrick Donahoe said last week.

Earlier this month, the USPS announced it wants congressional approval to pull out of the Federal Employees Health Benefits Program in favor of offering its own health coverage, as well as to break away from the two main federal retirement programs. Talks are in progress in both the House and Senate, Stroman said, although nothing will happen before lawmakers return after Labor Day.

The USPS also wants lawmakers to free it from long-standing labor agreements that shield unionized workers from layoffs. Its four unions are fiercely opposed, but can’t stop the agency’s plans to close more than 300 of its 508 mail processing plants by the end of next year. That closings will save up to $3 billion annually while eliminating over 30,000 jobs, said Dave Williams, vice president of network operations.

The planned downsizing is part of a larger revamp of the postal processing network aimed at handling declining mail volume, Williams said at a mailing industry conference last week.

Should the USPS default on this month’s retiree prepayment (and as of today, it looks like it will), the impact is unknown. The agency has already told the Office of Management and Budget and the Office of Personnel Management that it can’t pay it.

In an email, OMB spokeswoman Meg Reilly said the Obama administration is working on a legislative solution to provide the Postal Service “with the flexibility it needs to modernize and meet requirements in the future.”

It’s a scary time to be a postal worker, that much is certain.