Postmaster General Says USPS in Midst of Financial Disaster

usps-delivery-truck-300Postmaster General Patrick R. Donahoe told a U.S. Senate committee today that the U.S. Postal Service is in the midst of a financial disaster and that its cash liquidity remains dangerously low.

Donahoe is seeking legislation that will enable the Postal Service to act with speed and flexibility in the mailing and shipping marketplace and help it close a $20 billion budget gap by 2017.

“The Postal Service plays an incredibly important role in the American economy and in America’s communities,” said Donahoe. “And yet, it is in the midst of a financial disaster.”

Over the past two years, the Postal Service recorded roughly $20 billion in net losses and defaulted on $11.1 billion in retiree health benefits payments to the United States Treasury. Donahoe told the Senate Committee on Homeland Security and Governmental Affairs that the Postal Service will default on another $5.6 billion retiree health benefits payment that is due Sept. 30.

“Our cash liquidity remains dangerously low,” said Donahoe. “The Postal Service, as it exists today, is financially unsustainable….[and] burdened by an outdated and inflexible business model.”

Donahoe added that mail needs to be kept affordable so that it remains competitive and continues to deliver value for America’s businesses.

“Unfortunately, because our financial condition is so precarious, and the legislative process is so uncertain, we’ve reached the point that we have to consider price increases above the rate of inflation,” said Donahoe. “I believe it is important that we discuss this issue today, because the prospects for legislation have a direct bearing on pricing decisions that may impact the health of our business customers.”

Donahoe said that in 2006, Congress gave the Postal Service the flexibility to better compete in the package delivery business. “We made the most of that flexibility. We created effective products and marketing campaigns. And now our package business is growing rapidly. But we need this kind of flexibility across all of our businesses.”

Earlier this year, the Postal Service published a Five-Year Business Plandesigned to restructure the organization and return it to profitability. If fully implemented, the plan will generate $20 billion of savings by 2017, including the repayment of our debt.

Donahoe said that the Postal Service is pursuing elements of the plan “very aggressively” and is “achieving some great results,” especially in consolidation of mail processing facilities, elimination of delivery routes, optimization of the retail network, and generation of new revenue in the package business.

“We agree with the overall approach taken in Senate bill 1486,” said Donahoe. “It provides important pricing and product flexibility, and a strong framework for restructuring the Postal Service.  However, to meet the goal of generating savings of $20 billion by 2017, the legislation must resolve our long-term health care costs.”

These legislative requirements are fully explained in the written testimony, available at:

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