Factbox: Why the Postal Service is going bankrupt

(Reuters) - The U.S. Postal Service has come under scrutiny for a plan to close thousands of post offices - a move the money-losing agency says it must make to avoid bankruptcy.

The Postal Service lost $5.1 billion in fiscal year 2011, and officials have warned that it may not be able to borrow money by the end of this fiscal year. The agency relies on the sales of stamps and other products, rather than taxpayer dollars, to fund its operations.

Most of its cost-cutting efforts require permission from Congress, which remains deeply divided over how to overhaul the agency. Postal officials hope closing facilities, reducing the workforce and other changes will help keep the mail carrier afloat.

Here are some of the factors that have contributed to the Postal Service’s financial troubles:


Mail volumes in the United States have been on the decline since 2006. The trend is largely due to changes in the way Americans communicate. Email and online bill paying have chipped away at first-class mail volumes.

The economic downturn also led businesses to mail fewer advertisements. So-called standard mail has recovered slightly, but not enough to make up for the loss of first class volume, the most profitable mail category.

To read the Postal Service's annual financial filing, click this link:


Congress, in a 2006 law, required the Postal Service to make annual payments to fund 75 years’ worth of future retiree health benefits in 10 years. So far, the agency has paid more than $21 billion into a special fund for these obligations.

Congress allowed the Postal Service to delay the $5.5 billion payment in 2011. Postmaster General Patrick Donahoe has said the agency will not be able to make its payment in 2012.

Critics of the requirement say most of the agency’s $25 billion in losses in the past five years was due to the payments. A bill in the Senate would spread the payments over a longer time, though many lawmakers want to end the prefunding.

Others argue the payments are needed to protect taxpayers from having to bail out Postal Service benefits down the road.


Personnel costs, including compensation and benefits for more than half a million employees, worker’s compensation and the prefunding obligation, accounted for about 77 percent of USPS operating expenses in 2011.

For most private employers, worker costs represent a much lower percentage of total costs.

The agency has eliminated more than 100,000 jobs since 2008, but officials say that number needs to drop more.

The Postal Service expects about 100,000 employees to retire by 2015, and officials want to eliminate up to 120,000 jobs through layoffs.

Reporting By Emily Stephenson and Cezary Podkul