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The Postal Service Debt Ceiling

By

Patrick R. Donahoe

U.S. Postmaster General Patrick R. Donahoe

U.S. Postal Service
Updated August 13, 2011

The federal government has a debt ceiling, a statutory limit on the amount of money it can borrow. But so does the U.S. Postal Service, which is approaching insolvency and considered seeking an increase in its debt ceiling to pay the bills in 2011.

Also See: Postal Service Losses by Year

The Postal Service, a semi-independent government agency, has a debt ceiling of $15 billion. It is limited to annual net increases in debt of $3 billion until it reaches its debt ceiling, according to the terms of a line of credit the agency took out from the U.S. Department of the Treasury in the early 1990s.

The agency was expected to hit its debt ceiling by the end of the 2011 fiscal year, in September, after borrowing money to cover several prior years of multibillion-dollar losses.

Postal Service Debt Ceiling Measures

The Postal Service considered seeking an increase of its debt ceiling despite making an estimated $9 billion in cost cuts, including the suspension of bonuses for top managers and executives in summer 2011, as a result of its "dire financial situation."

The Postal Service lost $8.5 billion in fiscal year 2010 and expected a deficit of at least $8 billion more in 2011.

See also: Highest Paying Postal Jobs

Facing financial failure, the U.S. Postal Service also released a list of more than 3,700 facilities, including local post offices and retail locations, being considered for closure. It also vowed to eliminate wasteful spending on travel, and was considering the end of Saturday mail and cutting delivery to just three days a week.

"One of the things we'd have to look at is talking to people about looking at getting some breathing room with our debt limit since we've hit our limit of $15 billion,"Postmaster General Patrick Donahoe said in summer 2011.

About the Postal Service Debt Ceiling

The Postal Service's debt can be repaid at any time at a price determined by the secretary of the Treasury, based on prevailing interest rates in the Treasury security market at the time of repayment.

See also: Find Postal Service Jobs Without Being Scammed

The Postal Service has two lines of credit that run through May of 2012. One is a short-term credit line that enables it to draw up to $3.4 billion with two days prior notice.

The second line of credit, which only allows for borrowings on an overnight basis, allows the Postal Service to borrow up to $600 million on the same business day that funds are requested, according to the agency.

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