U.S. Postal Service urges legal changes to avert default

WASHINGTON — The US Postal Service faces default by the end of September without legislative relief, and it plans to slash one in four jobs to reduce costs, the head of the public company said Tuesday.

Postmaster General Patrick Donahoe told Senate lawmakers that without legislative changes, the Postal Service will not have enough money to make a congressionally mandated $5.5 billion payment to pre-fund retiree health benefits.

The service's operating expenses are not funded by taxpayers; instead it relies on the sale of postage, products and services.

"Without legislative change this year, the Postal Service faces default, as available liquidity at the end of this month will be insufficient to meet our financial obligations," Donahoe said.

Donahoe said that 138,000 payrolls would be eliminated over the next three years.

"Our stated goal is to reduce annual costs by $20 billion over the next three years, ultimately driving costs down to under $60 billion per year with a streamlined workforce of approximately 425,000 employees," he testified in a hearing of the Senate Committee on Homeland Security and Governmental Affairs.

The Postal Service, a public employer that claims to handle nearly 40 percent of global mail, has been piling up losses since early 2008 due to rising costs and a decline in volumes caused by rising Internet use and e-commerce.

The USPS said it is seeking a range of legislation, including the authority to determine delivery frequency and to restructure its healthcare system to make it independent of federal programs.

Donahoe estimated the service would suffer a $10 billion loss for the fiscal year ending September 30.

But, he stressed: "We don't want taxpayer money."