What Happens If the Postal Service Runs Out of Cash?

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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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