Financially-strapped Postal Service won’t ask to boost debt limit
Officials at the U.S. Postal Service proudly point out that they don’t take a dime of taxpayer funding, but they do accept billions of dollars in government loans.
With the Postal Service nearing its borrowing limit of up to $15 billion from the Federal Financing Bank (FFB), an arm of the Treasury Department, officials say they have no plans to ask to borrow even more money.
“The Postal Service has not sought, nor does it have plans to seek an increase in its debt limit from the Congress,” postal spokesman Gerald J. McKiernan said.
“The postmaster general does not believe that the way out of debt is to borrow more. Further, the Postal Service has not sought any modifications to its current arrangement with the Federal Financing Bank,” he said. “FFB funds are borrowed and will be paid back.”
Treasury officials did not respond to questions May 24 about what would happen if the Postal Service couldn’t pay back the money it’s borrowed. Two weeks ago, postal officials said that without intervention from Congress, the Postal Service wouldn’t be able to pay some obligations, including a looming $5.5 billion payment due for retiree health benefits.
With cash in short supply, the Postal Service has borrowed billions over the years from the FFB, which also issues loans to colleges and universities, rural utilities and companies such as Tesla Motors and Ford Motor Company. It does not maintain a reserve for loan losses.
Except for the Postal Service, its loans are backed by the government. The bank can lend to federal agencies for federal agencies’ use, or for private sector entities whose loans are guaranteed by agencies.
“Loan principal and interest are backed by the full faith and credit of the U.S. government, except for loans to the U.S. Postal Service,” a recent FFB financial report states. “The U.S. Postal Service is an independ- ent establishment of the executive branch. [. . . ] The Bank has not incurred and does not expect to incur any credit-related losses on its loans.”
the Postal Service has used its borrowed money for “general purposes” over the years.
In a recent regulatory filing, the Postal Service noted that it’s limited by statute to net annual debt increases of $3 billion and that total debt cannot exceed $15 billion.
“It is likely that the Postal Service will exhaust its borrowing capabilities with the FFB in September 2011,” postal officials noted in the report to the Postal Regulatory Commission.
Mr. McKiernan said postal officials are working with Congress to turn around the Postal Service by asking lawmakers for help accessing tens of billions of dollars in retirement fund overpayments and to loosen a mandate to prefund retiree health benefits. Officials also need permission from lawmakers to eliminate home delivery on Saturdays.
Earlier this month, the Postal Service announced net loss of $2.2 billion for the second quarter, compared to $1.6 billion for the same period in 2010. Total mail volume was also down.
“At this time, the Postal Service has a responsible set of proposals before Congress which, if enacted, would provide a clear path to solvency,” Mr. McKiernan said.
Stacking a load of debt: U.S. Postal Carriers sort mail at a post office in Annapolis, Md.