Postal Service to default — again

By Bernie Becker - 09/26/12 04:12 PM ET

The Postal Service announced Wednesday that it would not make a scheduled $5.6 billion payment to the Treasury Department by the end of the month, officially throwing in the towel on a second large payment in as many months.

The agency, which lost more than $5 billion in the most recently completed quarter, had been widely expected to default on the prepayment for future retiree benefits, and rushed on Wednesday to assure customers that business would continue as usual.

“Customers can be confident in the continued regular operations of the Postal Service,” USPS said in a statement. “We will continue to deliver the mail and pay our employees and suppliers. Postal Service retirees and employees will also continue to receive their health benefits.”

The second default — USPS also failed to make a $5.5 billion prepayment due on Aug. 1 — comes as postal officials plead with Congress to reach a final agreement on a broad overhaul of postal operations.

USPS has lost billions of dollars in recent years, both due to new technology and the downbeat economy.

Postal unions and some on the left also chalk up many of the agency’s financial woes to what they call the unneeded prepayments for retiree healthcare.

In all, the agency lost $5.1 billion in fiscal 2011, even without having to make a healthcare payment. The Aug. 1, 2012, default came only after Congress pushed back the due date on that particular payment, which was originally due at the end of September 2011.

Key lawmakers are now hoping to reach an agreement on a postal reform package in the post-election session of Congress, after the House failed to vote on their measure before skipping town last week.

The Senate passed a postal bill in April, but House Republicans have acknowledged that they didn’t want to force members to take a tough vote on the issue before the election.

Top lawmakers in both chambers have been trying to lay the groundwork for a lame-duck deal on the postal service, but there is some fear that the issue could spill over into the next Congress.

The Senate measure would give the Postal Service more relief from the prepayment than the current House proposal, but would also not let the agency move as quickly on scrapping Saturday delivery, another key USPS priority.

On Wednesday, the Postal Service also said that it would continue to focus on the cost-cutting tools already at its disposal. But some Republicans have said USPS has not been aggressive as it could be on that front, including with some of its contracts with unions.