The U.S. Postal Service (USPS) has projected that it may deplete its cash reserves for employee and vendor payments by 2027 if current operational trends continue. Amid ongoing financial challenges, the agency recently announced a temporary suspension of payments to the Federal Employees Retirement System pension plan. USPS officials have appealed to Congress for legislative intervention, citing a critical juncture for the federal agency.
USPS Faces Imminent Liquidity Crisis
Dire Projections and Historical Shortfalls
Postmaster General David Steiner informed lawmakers that the USPS faces a potential liquidity crisis, with the possibility of running out of cash by 2027. He stated that, at its current spending rate and payment of required obligations, the agency could be without cash within a shorter timeframe than the 2027 projection.
This indicates a critical juncture for the federal agency.
The USPS operates on revenue generated from stamps and service fees, not taxpayer dollars. The agency has experienced financial shortfalls almost annually since 2007. This trend is attributed in part to a decrease in first-class mail usage, historically its most profitable service, as digital communication has become more prevalent.
Other contributing factors include increases in workers' compensation, retiree health benefits, and general operating expenses. For fiscal year 2025, the USPS reported a net loss of $9 billion and recently posted its fourth consecutive quarterly loss of $1.3 billion.
Historically, the USPS has maintained mail deliveries by borrowing from the U.S. Treasury and deferring some pension obligations. However, the agency has reached its federal borrowing cap of $15 billion, which has remained unchanged since 1992.
Temporary Measures to Conserve Cash
Pension Payments Halted, Operational Adjustments Made
In response to the impending liquidity crisis, the USPS temporarily suspended payments to the Federal Employees Retirement System pension plan, effective recently. According to USPS chief financial officer Luke Grossmann, this measure is intended to conserve cash.
Grossmann stated that the risk to postal operations from insufficient liquidity outweighs any longer-term risk to the pension funds from deferring these payments. He assured that this will not cause an immediate detrimental impact to current employees or retirees.
The USPS anticipates this suspension will save approximately $2.5 billion in the current fiscal year, as pension payments previously amounted to about $200 million every other week. Contributions to employees' Thrift Savings Plans remain unaffected.
In other efforts to manage finances, the USPS reached an agreement with Amazon to reduce the volume of deliveries from the e-commerce company by 20%. The agency is also soliciting bids from businesses for special shipping rates utilizing its nationwide "last-mile" delivery network. Industry experts have suggested this strategy could potentially encourage large shippers, such as Amazon, to further reduce their reliance on the Postal Service.
Appeals to Congress for Urgent Reform
Proposals for Debt, Pricing, and Benefit Adjustments
USPS officials, including Postmaster General Steiner, have appealed to Congress for legislative assistance to address the agency's financial challenges. Proposals include increasing the Postal Service's debt limit, enabling the agency to raise postage prices beyond existing limits, and reforming retiree benefit obligations.
Amber McReynolds, chair of the Postal Service's board, emphasized the need for policymakers to act urgently to address what she described as "structural and statutory cost pressures."
A USPS FAQ document also states that legislative action is needed to return the Postal Service to profitability.
Past Efforts and Political Context
2022 Act and Unresolved Issues
In 2022, Congress passed the Postal Service Reform Act. This legislation eliminated a requirement for the USPS to prepay future retiree health benefits and canceled approximately $57 billion in past-due prefunding payments. This act contributed to the only fiscal year without a shortfall for the USPS in the past two decades. However, previous multi-year reorganization efforts initiated in 2021 have not generated sufficient efficiencies to resolve the ongoing financial issues.
The Trump administration previously expressed interest in the Postal Service's financial state, proposing the Commerce Department take over the independent agency, though these discussions have lessened. Former President Trump continues to appoint nominees to the agency's board of governors; the current politically appointed members were nominated by former President Joe Biden.