Taxpayer Alert: The Coming Postal Service Bailout

Experts are warning that the postal service could reach its debt ceiling as early as September, which could push Congress to provide the federal agency with a cash bailout.

MSN reports:

Facing a projected $6.4 billion loss this year, on top of a record shortfall in fiscal 2010, the Postal Service is expected to slam into the $15 billion statutory debt limit established by Congress by the end of the current fiscal year on Sept. 30. At that point, it could be faced with the choice of running out of cash or defaulting on its sizable pension obligations, including a required $5.5 billion annual payment to fund future retiree health costs. This has intensified efforts on Capitol Hill to scrutinize Postal Service management practices, as well as to find ways to provide potential short- and long-term relief to the beleaguered agency.

House Oversight and Government Reform Committee Chairman Darrell Issa, R-CA, convened a hearing this week to take aim at the Postal Service’s recent deal with the American Postal Workers Union, representing more than one-third of the agency’s 572,000 person work force. The deal, which still requires ratification by the union’s membership, calls for a two-year pay freeze followed by a 3.5 percent wage increase over three years. "Eighty percent of the Postal Service's operating expenses are workforce-related. Costs must be reduced to align them with falling mail volume and declining revenue projections,” Issa declared.

But others suggest the major culprit is not current Postal Service management -- which has reduced the size of the agency by 100,000 employees in the past two years -- but rather Congress itself. While demanding that the Postal Service find ways to achieve economic self-sufficiency, members of Congress often have hamstrung the Postal Service with a series of restrictions aimed at averting blowback from their political constituencies.

As the Postal Service adjusts to email, electronic bill paying and faxes replacing so-called snail mail, "it would be irresponsible for Congress, as it does now, to stand in the way and act like a 535-member board of directors," Sen. Thomas Carper, D-Del., said recently. "No real business could ever function under that type of governance and it's unrealistic to think that the Postal Service would be well served by that type of micromanagement."

Read more at Money.MSN.com…

Can the Postal Service be Saved?

Over the weekend, the United States Postal Service announced that it had lost $3.8 billion over the past fiscal year, which ended on September 30^th. Their report claimed that they also delivered about 26 billion less pieces through the mail then they had the prior year, which translates to a nearly 13% drop.

The Postal Service, as it is quick to point out, is legally prohibited from taking tax dollars. But in order to stay afloat, the agency has been actively borrowing from the U.S. Treasury: At last count, according to Postal Service spokeswoman Yvonne Yoerger, it owes the government $10.2 billion.

Federal law dictates that the Postal Service can borrow up to $3 billion per year - but the debt cannot grow beyond $15 billion. That means that while the agency, which had revenues of $68.1 billion last year, could potentially borrow another $3 billion in 2010, it will soon no longer be able to legally borrow billions from the government.

Meanwhile, the Postal Service is estimating that without significant changes, it will lose another $7.8 billion in the coming year - and deliver another 11 billion fewer pieces of mail.

Which raises the question: Could the Postal Service be doomed?

"I don't think the Postal Service is in danger of going away totally," said Yoerger, the Postal Service spokeswoman. "But our current business model needs to be reviewed and revised to come up with a sustainable model so that we can get back to profitability while still continuing to meet our mission of serving all of the country with affordable, universal Postal Service."

Continued at CBS News…