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Saturday, August 6, 2011

Pending financial default might impact the US Postal Service ability to deliver, come rain or shine

USPS service delivery truck in a residential a...                                 Image via Wikipedia
Remember the statement the postman or postwoman comes rather rain, sleet, snow or shine? That could quick change, just like the U.S. Credit Rating receiving a downgrade from S&P for the first time in history.

The US Postal Service (USPS) warned on Friday that it could for the first time, default on payments owe the Federal government, days after the governmental officials “compromised” their way out of a default on their creditworthiness and treasury dollars.

The government operated mail service lost $3.1 billion in the period from April to June this year, blaming "the anemic state of the economy" and Americans preference of using email communications over old-fashioned letters. With escalating losses, the US Postal Service stated it the agency wouldn’t to make a legally required $5.5 billion payment in September 2011 into a health-benefits trust fund for its’ future retirees.
"Absent substantial legislative change, the Postal Service will be forced to default on payments to the federal government," USPS said in earlier a statement.
USPS has been asking Congress for years to alter the payment schedule contained in the Postal Accountability and Enhancement Act of 2006. The act mandates USPS to make payments each year to prefund retiree health benefits. Since the bill took effect, USPS said it has put $20.9 billion into the Retiree Health Benefit Trust Fund.

Postmaster General Patrick Donahoe has requested for Congress to give USPS access to billions in over-payments to federal retirement systems in an effort to avoid a default. Cliff Guffey, president of the American Postal Workers Union, testified before the Senate Financial Management Subcommittee on May 17th in support of the moves.
“It bears emphasis that this is not a request for a subsidy or bailout of the Postal Service. The Postal Service is very capable of dealing with the challenges it is facing because of declining mail volume and a shift to electronic transmissions,” Guffey stated.  
"What it cannot sustain is the burden of the unique and unreasonable retirement that it prefund its retiree health benefits over a 10-year period without access to the billions of dollars by which it already has overfunded CSRS and FERS retirement benefits,” he cited.
Dating back to 1775, the US Postal Service was once a crucial branch of the federal government, but in recent years it has come under increasing fire from critics who consider it bureaucratic and inefficient. In July, USPS unveiled plans to identify nearly 3,700 under-used post offices around the United States for possible closure. 

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