Alliance Report – October 7, 2014
When the Postal Service was down to about as many days of cash as you can count on one hand, it had a pretty compelling narrative to convince everyone including Congress that major new legislation was needed. In its latest 10-Q financial report, USPS has changed from quoting the exact number of days to “the present cash balance can fund less than one month of operating activity.” To be clear, that means if all revenue were turned off which will never come close to happening.
The compelling reason for reform voiced by USPS management has changed from we’re about to run out of cash to we need about $5 billion to update our truck fleet by 2017. Another oft-repeated goal is to be debt-free by a future date. Actually, when the USPS was recreated as a businesslike entity in 1970, a $10 billion debt limit was put in place as a businesslike means to finance long- term assets that a large operation would need. Very low-cost financing was set up at the Federal Financing Bank in the US Treasury, at 1/8 of a percent over Treasury rates.
In the mid-1990s, Postal Service management made the case that with inflation its debt ceiling should rise to $30 billion; Congress raised it to $15 billion. Of course, we all know that USPS is currently using the full $15 billion financing capacity. Its latest 10-Q attests to the great rates it gets:
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