Postmaster General Patrick Donahoe testified this morning before the Senate Committee on Homeland Security and Governmental Affairs, giving senators the bad news that the Postal Service will only have enough cash on hand next month to cover around five days worth of expenses.

“The Postal Service continues to be in a very poor financial position,” Donahoe said in prepared remarks, “as the depth of its $62 billion liability could only be partially filled with $22 billion in assets, as of June 30, 2013… Current projections indicate that it will continue to have a dangerously low level of liquidity in the foreseeable future.”

One of the biggest drains on the USPS coffers is the requirement to fund its mammoth pension.

“The Postal Service will be unable to make the required $5.6 billion Retiree Health Benefits (RHB) prefunding payment due by September 30, 2013,” said Donahoe. “This is in addition to similar payment defaults on $11.1 billion in 2012. Our cash position will continue to worsen in October 2013, when the Postal Service is required to make its annual payment of approximately $1.4 billion to the Department of Labor (DOL) for workers’ compensation expenses. By mid-October 2013, the Postal Service projects it will have a cash balance on hand of approximately five days of average daily expenses.”

He points out that most comparable private sector businesses generally have available liquidity of at least two months of operating expenses, meaning the USPS is in need of cash… stat.

“The Postal Service is quickly moving down a path that leads to becoming a massive, long-term burden to the American taxpayer,” admitted Donahoe.

He says the USPS Board of Governors could decide as early as next week to ask for an emergency rate hike to help out in the short term. Any rate increases that are above the current rate of inflation must get the approval of the independent Postal Regulatory Commission.

Among the required long-term fixes, says the Postmaster General, is the elimination of Saturday delivery to homes and businesses. That alone would save the USPS $2 billion a year, about one-third of its expected losses this year.

“Simply put, the enactment of comprehensive postal reform legislation cannot wait,” said Donahoe. “The Postal Service has exhausted its borrowing authority, faces massive unnecessary unfunded liabilities, and is constrained in how far it can go to bridge the massive gap between revenues and expenses. In no uncertain terms, the Postal Service does not want to become a burden on the American taxpayer.”

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