WASHINGTON, Sept. 6 (UPI) -- U.S. Postmaster General Patrick Donahoe told a Senate panel Tuesday the U.S. Postal Service is on "the brink of default" on a healthcare payment.
"The postal service is at the brink of default," Donohoe said. "Without the enactment of comprehensive legislation by Sept. 30, the postal service will default on a mandated $5.5 billion payment to the Treasury to prefund retiree health benefits. Our situation is urgent. The congressional action is needed immediately to avoid this default."
Donohoe also told the Senate Committee on Homeland Security and Governmental Affairs the postal service "requires radical changes to its business model if it is to remain viable into the future. The postal service is in a crisis today because it operates with a restrictive business model. As a self-financing entity that depends on the sale of postage for its revenues, the postal service requires the ability to operate more as a business does."
Panel Chairman Sen. Joseph Lieberman, Ind-Conn., said the postal service "is expected to have a deficit of approximately $8 billion, maybe more, for the second year in a row. The postal service will also soon bump up against its $15 billion credit line with the U.S. Treasury ... which could force it to default ... on a $5.5 billion payment into the health carefund for its retirees, which would normally be paid at the end of this month.
"The bottom line here is that if nothing is done, the postal service will run out of money," Lieberman said, "and be forced to severely slash service and employees, and that's the last thing our struggling economy and our country need right now."
The future-retiree health benefits fund was mandated by a 2006 postal reform act that officials now say doesn't meet the realities of declining revenues and a smaller workforce.
Spokeswoman Yvonne Yoerger said the USPS was required to make the payment into the fund "and probably won't be able to make it when it comes due [Sept. 30]" but will continue mail delivery, making payroll and paying suppliers, CNN reported Monday.
Yoerger said Donahoe wants the fund to be reconfigured from the days of a 900,000-person workforce. Since its inception, the mandated funding level hasn't changed even though the Postal Service cut 250,000 jobs.
"The fact is, no other government agency and few corporations in the private sector are required to fund retiree health benefits 75 years out," Yoerger said.
A proposed business plan seeks relief from the future retiree payment mandate, Yoerger said, and includes a combination of closing post offices, expanding joint ventures with private industry and changing the frequency of mail delivery.