Generous pensions are unsustainable and that’s not an ideological state, it’s simple math. What exactly is the USPS supposed to do when they can’t pay mandated obligations?

NEW YORK (CNNMoney) — The U.S. Postal Service warned Wednesday that it may default on some of its financial obligations later this year after reporting yet another quarterly loss.

The USPS, a self-supporting government agency that receives no tax dollars, said it suffered a loss of $329 million in the first quarter of federal fiscal year 2011. That compared with a loss of $297 million a year earlier.

The agency has been suffering from an ongoing decline in mail volume, which has undercut revenues, while retiree health care costs have been straining its reserves.

Excluding costs related to retiree benefits and adjustments to workers’ compensation liability, the Postal Service said it had net income was $226 million in the first quarter, which ended Dec. 31.

Despite ongoing cost-cutting efforts, the USPS said it expects to have a cash shortfall this year and to hit its federally mandated borrowing limit by September, when the government’s fiscal year ends.

The agency said it will be forced to default on some of its financial obligations this year unless Congress changes a 2006 law requiring it to pay between $5.4 and $5.8 billion into its prepaid retiree health benefits each year.

I’m betting there will be no change in laws. So what’s the solution?