Sunday, February 3, 2013

What Happens If the Postal Service Runs Out of Cash?

The U.S. Postal Service’s cash crunch could cause a “catastrophic” disruption of mail service this year, according to a government official who wants USPS to reveal its crisis-management plans.

The Postal Regulatory Commission “should request a description of the Postal Service’s priorities and plans for providing service across the Nation and across classes in the event cash shortages require services to be reduced,” PRC staffer Kenneth E. Richardson told the commission Friday.

“Although the Postal Service survived FY 2012 without running out of cash to operate, continuing operations for a second year at such low cash levels . . . is risky, not only from a financial standpoint, but from the standpoint of potential service disruptions and the impact on mailers,” Richardson, a PRC public representative, wrote.

During four months of FY2013, Richardson noted, USPS projects it will have less than $1 billion of liquidity, which is four days of expenses. If actual results are only slightly below those projections, the Postal Service will lack “sufficient working capital to pay its employees and suppliers,” and “its ability to provide effective and regular postal services will be in jeopardy.”

Slim margin for error
USPS has acknowledged that its “margin for error is slim – a commercial
entity our size would typically have minimum liquidity sources totaling $7 to $10 billion to allow for sufficient variations to plan and to invest.”

Richardson believes that even a temporary disruption of service could be “catastrophic” for customers, employees, and suppliers because “if mail customers cannot rely upon mail delivery and thus flee the Postal Service in short order, most never to return, they would critically reduce the Postal Service’s revenue stream.”

Richardson said the Postal Service’s only statement on the subject is overly vague: “In the event of a projected liquidity shortfall, we will prioritize payments to our employees and suppliers to help ensure that the Postal System continues to operate in a quality manner.”

He fears USPS, in a pinch, would resort to cutting back service more for some customers (presumably the most unprofitable ones) than for others, though such discrimination would be illegal.

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Unknown said...

That is inconceivable! How does a government of the people and by the people justify the absurd military budget when this crisis is obvious. In comparison to the other governmental agencies, the USPS carries its own financial load. Congress needs to stop holding back the USPS's business potential just to favor fed-x and ups. We are the last mile delivery system of over 400 million destinations.

Anonymous said...

Clerks and carriers can get the job done, without all the admin folks and redundant management positions.

Anonymous said...

Why did the writer not post the whole sentence on liquidity which states: In the short-term, should circumstances leave us with insufficient liquidity beyond the nonpayment of the legally mandated prefunding PSRHBF payments, we would consider emergency measures to ensure that mail deliveries continue. These measures could require that we prioritize payments to our employees and suppliers ahead of those to the Federal Government.

He never mentions that that the postal service would stop paying the federal government before it interupts mail service.

Anonymous said...

Cut the salary and bonus packages of the top execs!!!Why should the pmg earn more than the vice pres for running our service to the ground. Let them pay their own health care. Take away company cars. The PO is full of xxx and the public swallows it whole.

Anonymous said...

Postal service runs out of cash, fire all postmaster.

Anonymous said...

I'm not a postal employee and have never been, but...why do I see a person following around a mail carrier. That person is in a different vehicle and shadows that person for 8 hours? That's crazy! If the mail carrier is not delivering the mail and mail is coming back or the people are complaining, THEN do something. But I see 20 year mail carriers being followed. Are you kidding me? Why don't the follow the executives around to see if they are being efficient.

Anonymous said...

This is not much of a crisis. I worked at USPS in both management and craft positions. We were preparing for this back in 2002 the last time things were bad. Once The USPS is out of cash or close to it, they can simply slash what they pay to all their employees. If they don't have the money, and can't borrow the money, then the union contracts are worth less than the paper they're printed on. Even if they slashed pay by 50%, where in this economy would most of these employees run to anyway? That's still over $13 per hour at half pay. The mail will move on. This is much ado about nothing.

Anonymous said...

RIF 40-50% of management slugs...NOW!!!!!

Anonymous said...

Stop Saturday delivery, we don't need it.

Anonymous said...

Your a moron

Anonymous said...

How about if the USPS looks at the Union contracts it has. I have been to many postal facilities and seen the "break" rooms of employees sitting watching TV's because the contract says they need to be in the building to get paid and cannot be laid off after 3 years. Why not use what you have the best way possible like any other business has to.