The U.S. Postal Service, which lost $1.3 billion in the first quarter, will be $45 billion in debt by 2017 unless legislative action is taken to alter its business model, Postmaster General Patrick Donahoe warned members of Congress on Wednesday, adding that USPS is currently losing $25 million a day and has to close a $20 billion budget gap.
During a hearing before the Senate Homeland Security and Government Affairs Committee, Donahoe urged that lawmakers pass legislation authorizing his agency to withdraw from a federal health insurance plan and create its own insurance system. That move alone would save an estimated $7 billion through 2016, according to postal officials.
“The financial problems of the Postal Service are getting bigger every year," Donahoe said. "Congress can avoid a future scenario in which the Postal Service requires a taxpayer bailout - which could be in excess of $45 billion dollars by 2017 if we don't change our business model."
Echoing the postmaster general’s warnings, a report released Wednesday by the Government Accountability Office says “urgent” action by Congress is needed in order for USPS to achieve financial sustainability. The report said the agency has reached the $15 billion borrowing limit and defaulted last year on two payments worth more than $11 billion for future retiree health benefit costs. “USPS has been able to operate within these constraints, but now faces a critical shortage of liquidity that threatens its financial solvency and ability to finance needed capital,” the report said.
According to Donahoe’s testimony, the agency spends 20 percent of its annual revenue on health-care costs, including $5.6 billion for future retiree costs, $4.8 billion for premiums and $2.7 billion for retiree premiums. The report suggests Congress “needs to act to modify USPS’s retiree health benefit payments in a “fiscally responsible manner.”
USPS, which lost $15.9 billion last year, has already announced other cost-saving measures it plans to take, including eliminating Saturday deliveries, reducing post office hours and delivery routes and consolidating 200 mail centers. But the GAO report said more actions will be needed.
“If Congress does not act soon, USPS could be forced to take more drastic actions that could have disruptive, negative effects on its employees, customers, and the
availability of postal services,” the report said.
The Postal Service has repeatedly begged Congress for assistance, but it’s unclear if or when lawmakers plan to act on any kind of legislation. Last year, the Senate passed a bill to reform USPS’ business model, but a House bill never made it out of committee.