The U.S. Postal Service anticipates having only five days of operating cash on hand after making its annual workers’ compensation payment in October, leaving the agency with slim reserves in the event of an unforeseen downturn.

“This is a dangerously low level of cash,” said USPS Chief Financial Officer Joseph Corbett during a teleconference with reporters on Monday. “We do not have a sufficient cash cushion to run a business the size of the Postal Service.”

(Kevork Djansezian/Getty Images)

USPS spokesman David Partenheimer clarified Tuesday that the agency should be able to survive with a five-day reserve until the first quarter, when revenues for the agency typically begin to increase. “But no business should have to operate that way,” he added.

What happens if the Postal Service experiences an unexpected downturn?

“If we reached the point of not having enough cash to operate, we would prioritize other payments so that employees and suppliers continued to be paid on time so there is no interruption in our mail operations,” Partenheimer said. “That means the possibility of defaulting on other payments.”

Already, the Postal Service expects to default on its next payment for a controversial requirement to prefund its retiree health benefits. Congress imposed the rule in 2006, but USPS officials and labor groups are calling for a repeal of the policy, which costs the agency about $5.5 billion each year.

The Postal Service released its third-quarter financial report Monday, showing a loss of $740 million for that period. The number represents a vast improvement over a $5.2 billion loss during the same period last year.

Postal officials have credited the progress to increased efficiencies, a decrease in workers’ compensation, and growth in shipping and package services — although first-class mail volume has declined.

Labor groups such as the National Association of Letter Carriers have argued that the USPS would return to profitability if Congress simply ends the prefunding mandate. But Postal Service officials have said further changes would be needed to stabilize its finances.

During the teleconference, Postmaster General Patrick Donahoe applauded recent postal-reform proposals from the House and Senate that would include cuts in service, including an end to Saturday mail delivery and a reduction in door-to-door service in exchange for more use of curbside delivery and neighborhood cluster-boxes.

“We’re pleased with the progress, but the legislative actions need to continue to get us back to where we need to be,” Donahoe said.

Labor groups oppose the plans to end Saturday mail service and cut back on door-to-door service.

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