If you need evidence that the federal government is officially running on empty, look no further than your local post office. The United States Postal Service (-USPS-), which delivery 563 million pieces of mail (40% of global volume) on a weekly basis, is “facing insolvency” according to Bloomberg. The organization announced today that it will need to suspend $115 million bi-weekly payments to employees retirement accounts (85% of post-office workers) as of June 24th, in order to “conserve cash and preserve liquidity.” The stop on payments is expected to save the USPS over $800 million through the rest of this year, but according to people familiar with the agency the move may not be enough to deliver the mail service from financial desperation. One Washington insider says, “The USPS is hanging by a thread.”
Today’s announcement is the latest in a string of drastic measures the public mail service has been forced to take. Recently, the USPS also announced that it will not be able to make payments on the $5.5 billion it owes to employees in health benefits, a payment that has a due date of Sept. 30th. The Postal Service employs over 571,000 full-time workers, and has said it may have to end Saturday delivery services in an effort to cut back on expenses.
The agency has been hard hit by the impact of the recession and decreased use of its first class mail services. Total mail volume has dropped off by 20% over the past four years, largely due to a slumping credit market and company’s that are increasingly reliant on email to contact customers in an effort to save cash. In 2010 the USPS reported a loss of $8.5 billion, on revenues of over $67 billion. The organization has borrowed over $12 billion from the US treasury to stay in business since 2008, but now, with employee wage and benefit expenses accounting for 61% of the budget, and the government to make a sweeping line of spending cuts, something will need to change soon unless your FedEx (NYSE:FDX) or UPS (NYSE:UPS).