U.S. Postal Service posts $1.9 billion loss, despite efficiency efforts

May 10, 2013

Savings from efficiency efforts and increased revenues from some categories of business were not enough to prevent the U.S. Postal Service from posting a loss of $1.9 billion in its second fiscal quarter, postal officials announced Friday.

(Shannon Stapleton/Reuters)
(Shannon Stapleton/Reuters)

The report, which follows a previous loss of $1.3 billion in the first quarter, spurred officials to once again call on Congress to enact changes the Postal Service has proposed, including switching to five-day delivery of mail while continuing six-day delivery of packages, and savings on employee health insurance, retirement and other costs.

Revenue from shipping and packages rose in the second quarter by $267 million, or 9.3 percent, compared with the prior year, while advertising mail revenues were up $96 million, or 2.4 percent. However, revenue from first-class mail, the Postal Service’s most profitable category, decreased $198 million, or 2.7 percent. Total mail volume fell to 38.8 billion pieces from 39.4 billion pieces.

Officials said the agency is seeing results from its cost-saving efforts, including closing processing facilities, reducing retail operating hours and downsizing its workforce through retirement incentives. The number of career employees decreased by about 25,000 in the second quarter and by 46,000 in the last year, bringing the number to just below 500,000, the smallest since 1966.

“Everything that we can do, we have and will continue to do . . . We need action on the legislation,” Postmaster General and CEO Patrick Donahoe said in a conference call with reporters. He pointed in particular to a requirement that the agency pre-fund health insurance costs for its retirees, calling it the “single biggest change that would have the least negative impact” among possible reforms.

The key committees of both the House and Senate sides have held hearings in recent months on the Postal Service’s financial situation, with leaders expressing hope that legislation can be enacted this year.

The six-day mail delivery issue has proven to be a major barrier, however. Last year, the Senate approved legislation that would have delayed five-day mail delivery for two years while trying out other cost-saving tactics. A House bill that would have ended Saturday delivery right away never reached a floor vote.

After initially announcing earlier this year that it would go ahead with its five-day delivery plan even without congressional approval, the Postal Service last month backtracked, following a decision by its governing board that language in a budget law requires six-day delivery.

Other postal proposals involve greater flexibility in pricing, creating its own health insurance program and changing to a defined-contribution only retirement plan for new hires.

The National Association of Letter Carriers on Friday noted that USPS operating revenue was $121 million higher than the same period a year ago, while expenses were down by $1.2 billion.

Association President Fredric Rolando  said the Postal Service report “shows the USPS moving sharply towards breaking even” compared to previous years.

Rolando added that the relative improvement in Postal Service finances negates the necessity for ending six-day delivery.

“Instead of the postmaster general’s ‘shrink to survive’ strategy — which will only begin a death spiral for the USPS — what is needed is a dynamic business plan for the future to take advantage of the many opportunities for growth, including the exploding package-delivery market.”

Sen. Tom Carper (D-Del.), who chairs the Senate committee that oversees the Postal Service, issued a statement on Friday calling for comprehensive postal reform and saying that the declining losses are nothing to celebrate.

“The reality is that any decline of revenue at this rate is unsustainable and threatens the Postal Service’s long-term viability,” Carper said.

Sen. Tom Coburn (R-Okla.), the committee’s ranking member, said the USPS should act independent of Congress to reduce its losses.

“While reform is necessary, the Postal Service should not wait on a parochial-minded Congress and must immediately take steps within its control to secure additional revenue and achieve cost savings, including potential action to secure additional revenue through price increases,” Coburn said. “I will continue to support giving the Postal Service the independence it needs to ensure its long-term viability.”

This post has been corrected to reflect that the U.S. Postal Service posted a first-quarter loss of $1.3 billion, not $1.5 billion as initially reported. It has also been corrected to attribute to National Association of Letter Carriers President Fredric Rolando comments that were initially attributed to a union spokesman.

 

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