Post office: $18B loss without cuts, rate increase
WASHINGTON -- Mired in red ink, the U.S. Postal Service is warning it will lose as much as $18.2 billion a year by 2015 unless Congress grants it new leeway to eliminate Saturday delivery, slow first-class mail by one day and raise the price of a postage stamp by as much as 5 cents.
In a letter to Congress, Postmaster General Patrick Donahoe described an updated five-year cost-cutting plan put together in coordination with Wall Street adviser Evercore Partners Inc. It reiterates many of the mail agency's proposals to switch to a five-day delivery schedule, raise stamp prices and up to 252 mail-processing centers and 3,700 local post offices.
The Postal Service has already asked Congress for permission to make service cuts and reduce annual payments of about $5.5 billion to prefund retiree health benefits. But in recent weeks, the Senate and House have stalled as lawmakers differ widely on costs, the level of financial oversight and the prospect of widespread postal closures.
On Thursday, Donahoe said the mail agency's proposals would enable it to save $20 billion a year by 2015, repay its $12.9 billion debt to the Treasury and return to profitability. The plan, for instance, notes that if the post office could raise current stamp prices from 45 cents to 50 cents, either in a single year or over a multiyear period, it could bring in new revenue of roughly $1 billion.
In contrast, congressional inaction would result in significant annual losses and a "long-term burden to the American taxpayer."
"Such an outcome is highly undesirable and entirely avoidable," Donahoe said.
In a news briefing, chief financial officer Joe Corbett said no formal proposals have been made to increase the price of a first-class stamp. He said the plan notes the additional revenue the mail agency could bring in over a single or multiyear period if it could increase stamp prices above the rate of inflation.
Since 2006, the Postal Service has increased the price of the stamp four times, from 39 cents to 45 cents.
"Clearly, we're underpriced in that area," Corbett said. "We would like the ability to move that price up."
About half of the Postal Service's cost-cutting proposals require legislative approval. Some congressional proposals have focused on providing short-term relief via a cash infusion to prevent the mail agency's bankruptcy but also postpone major decisions on cuts until later.
At stake are more than 100,000 jobs, part of a postal cost-cutting plan to save some $6.5 billion a year by closing up to 252 mail-processing centers and 3,700 post offices. At the request of Congress, the cash-strapped agency agreed to wait until mid-May to begin closures so lawmakers would have time to stabilize its finances first.
Last week, the Postal Service said its quarterly loss ballooned to $3.3 billion amid declining mail volume and said it could run out of money by October.
The agency has been rocked by declining mail volume as people and businesses continue switching to the Internet in place of letters and paper bills. It also must make yearly advance payments of roughly $5.5 billion to a future retiree health-benefit fund, something not required of other government agencies. Without those annual payments, the post office would have posted a profit in most recent years.
The agency forecasts a record $14.1 billion loss by the end of this year.
The Postal Service, an independent agency of government, is subject to congressional control on major aspects of its operations.