Postal Service posts $8.5 billion loss

By Ed O'Keefe

Updated 2:22 p.m. ET

The cash-strapped U.S. Postal Service delivered more bad news Friday, announcing it lost $8.5 billion in the fiscal year that ended in September. Without congressional action to change its obligations, officials said, the Postal Service likely will go broke at the end of fiscal 2011.

Letter carriers delivered 170.6 billion pieces of mail in fiscal 2010, a drop of 6 billion pieces from the previous year, with a significant drop in first-class mail deliveries, officials said. Financial losses also came from about $5.4 billion in obligations to pre-fund future retiree health benefits and about $2.5 billion paid to the federal government's workers' compensation insurance fund.

Outgoing Postmaster General John E. Potter said last month that he anticipated at least $6 billion in annual losses, but cautioned the number would likely go higher once the mail service tallied its workers' compensation contributions. All federal agencies and the Postal Service, a quasi-federal outfit, have workers' compensation obligations to help fund four major disability compensation programs.

The Postal Service also announced Friday that it plans to deplete its $15 billion line of credit with the U.S. Treasury by borrowing the remaining $3.5 billion available. Though the Postal Service does not use taxpayer funding, it has tapped the credit line since the early 1990s. Depleting it means the Postal Service likely will go broke at the end of fiscal 2011 unless Congress takes action, officials said Friday.

The historic losses occurred despite more than $9 billion in cost cuts in the last two years, including the elimination of about 105,000 full-time jobs, "more than any other organization, anywhere," said USPS Chief Financial Officer Joe Corbett.

"We will continue our relentless efforts to innovate and improve efficiency. However, the need for changes to legislation, regulations and labor contracts has never been more obvious," Corbett said.

Potter in March proposed a series of reforms that would allow USPS leadership to set delivery schedules and routes and close post offices without Congressional approval. He also wants lawmakers to rewrite a 2006 postal reform law that requires USPS each year to pay about $5 billion to pre-fund future retiree health benefits. Potter's successor, Deputy Postmaster General Patrick R. Donahoe, also supports the proposals.

Frederic V. Rolando, president of the National Association of Letter Carriers, said Congress can remedy the Postal Service's financial situation by transferring money it has overpaid to the Civil Service Retirement Fund since 1971. The overpayment ranges from $55 billion to $75 billion, according to two separate government estimates.

"This internal transfer would not involve a dime of taxpayer money, nor -- unlike other proposals -- would it entail cuts in service to American customers or layoffs of American workers during a recession," Rolando said in a statement.

But Rep. Darrell Issa (R-Calif.), who is set to lead the House committee overseeing postal affairs, said USPS should urgently consider further cost cuts to help match its revenues. "Congress has an obligation to ensure that effective solutions are implemented and taxpayers don't get stuck paying for a bailout," Issa said.

Friday's meeting of the Postal Service Board of Governors was Potter's last as postmaster general. He plans to step down on Dec. 3, after 9 1/2 years, to make way for Donahoe.

"I will always bleed postal blue," Potter joked in his remarks to the board.

"Believe me, there is no one better-versed or accomplished in postal operations than Pat," Potter said of his successor, adding later, "It's not going to be an easy road, but we have the right man."

Donahoe did not speak at Friday's meeting, but plans to introduce himself to the general public in a series of media interviews in early December, officials said.

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