U.S. Postal Service Close to Bankruptcy


The U.S. Postal Service has been struggling financially. Patrick R. Donahoe, the postmaster general, has stated that if Congress does not take action the agency will not be able to make a $5.5 billion payment this month and may be forced to shut down this winter. Recently, the Postal Service has proposed cuts to eliminate a deficit that will rise to $9.2 billion this year. The proposed cuts include ending Saturday delivery, closing 3,700 locations, and laying off 120,000 employees.

The financial problems can be attributed to lower revenue and increasing costs for the Postal Service. Fewer people and businesses are utilizing post office services, largely because of increased Internet usage. Additionally, the Postal Service has contractual obligations to its employees, including no-layoff provisions, which have resulted in increased costs. Labor costs account for 80% of the Postal Service’s expenses, compared to 53% at UPS and 32% at FedEx. Postal Service employees also receive better health benefits than other government employees.

The Senate Homeland Security and Governmental Affairs Committees will consider the Postal Service’s situation this week. Democrats and Republicans have been unable to reach an agreement on a solution. If the Postal Service does miss the $5.5 billion payment due at the end of September, an emergency will not immediately occur. However, in early 2012, the Postal Service will be unable to pay for its operations and will have to shut down.

 

 

Source:

Steven Greenhouse, Postal Service on Verge of Going Broke, Shutting Down, https://www.msnbc.msn.com/id/44396682/ns/business-us_business/#.TmUMDzuF4ro (accessed September 5, 2011).

Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

View all author posts →

Legal Blog Expert