October 16, 2012, 3:33
p.m. ET
Postal Service Hits
Borrowing Limit
By ERIC MORATH
The U.S. Postal Service in
September hit its $15 billion borrowing limit from the U.S. Treasury for the
first time in its history, leaving the agency with only the revenue it takes in
from selling stamps, shipping and other services to cover its enormous operating
costs.
The Postal Service has
added $2.4 billion to its debt since June 30, pushing the agency to its
borrowing cap, a spokesman said Tuesday.
"Being at the limit
is a serious situation because our limited liquidity does not give us operating
flexibility," Postal Service spokesman David Partenheimer said.
"Without passage of comprehensive legislation as part of the Postal
Service's business plan to return to financial stability, we continue to
project low levels of cash."
The agency hit the limit
in late September, though it had sufficient cash reserves to make a $1.4
billion workers compensation payment on Monday, Mr. Partenheimer said. The
Postal Service was set to disclose its borrowing situation in an annual
financial filing due out on Nov. 15. The Postal Service is on a fiscal year
that ends Sept. 30.
The Postal Service taps
lines of credit from Treasury to cover its costs when revenues fall short. But
declines in first-class mail volume, growing retiree obligations and other
expenses has caused the agency to regularly rely on government loans to pay for
its operations. The Postal Service reported a $5.2 billion loss for the quarter
ended June 30, the most recent data available.
Postal revenue should be
on the rise in the coming months because the holiday season is typically the
most profitable time of the year, postal officials said in a press call earlier
this year. A high volume of election related mail this month will also aid
postal finances.
The additional revenue
should give the agency breathing room to operate comfortably for the next
several months. In the past, postal officials said they could manage the limit
by timing expenses and skipping mandated payments for future retirees' health
care. Employee paychecks and benefits for current retirees won't be affected.
The $15 billion borrowed
from Treasury doesn't include a combined $11.1 billion in retiree health-care
payments the Postal Service defaulted on in August and September. Those
payments were tied to a separate account at the Treasury.
Postmaster General Patrick
R. Donahoe has called on Congress to pass legislation to fix the agency's
finances. He has said the Postal Service needs more power to cut costs,
including the flexibility to end Saturday delivery.
The Senate this year
passed legislation—though Mr. Donahoe said it didn't go far enough—but the
House didn't take up a proposed bill before going on recess until after the
November elections.
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