Postal Service Warns of Default
The USPS took a $329 million loss this quarter and warns that it might default on some financial obligations later this year:
The USPS, a self-supporting government agency that receives no tax dollars, said it suffered a loss of $329 million in the first quarter of federal fiscal year 2011. That compared with a loss of $297 million a year earlier.
Declining mail volume is partially to blame, but the real culprit, of course, is pension costs:
Excluding costs related to retiree benefits and adjustments to workers’ compensation liability, the Postal Service said it had net income was $226 million in the first quarter, which ended Dec. 31.
Despite ongoing cost-cutting efforts, the USPS said it expects to have a cash shortfall this year and to hit its federally mandated borrowing limit by September, when the government’s fiscal year ends.
The agency said it will be forced to default on some of its financial obligations this year unless Congress changes a 2006 law requiring it to pay between $5.4 and $5.8 billion into its prepaid retiree health benefits each year.