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Postal Service posts $5B loss; CFO says USPS in 'precarious position'
Friday - 11/15/2013, 4:08pm EST
The Postal Service's top financial official painted a grim picture of his agency's financial state Friday, as USPS announced that it had lost $5 billion over the last year.
"We are sitting here at a very precarious situation, our liabilities exceed our assets by $40 billion," said Chief Financial Officer and Executive Vice President Joseph Corbett, during a press briefing. "Liabilities of $60 billion exceed the assets of roughly $20 billion. ... We have a $5 billion loss and a $1 billion operating loss."
The agency's seventh straight annual loss came despite its first growth in revenue since 2008. Operating revenue rose 1.2 percent to $66 billion, thanks to growth in the post office's package delivery business and higher volume in standard mail.
But that was not enough to offset long-term losses in first class mail — the post office's most profitable service — where revenues declined by 2.4 percent.
"We've achieved some excellent results for the year in terms of innovations, revenue gains and cost reductions, but without major legislative changes, we cannot overcome the limitations of our inflexible business model," Postmaster General Patrick Donahoe said.
The Postal Service has struggled for years with declining mail volume, but the lion's share of its financial plight stems from a 2006 congressional requirement that it make annual $5.6 billion payments to cover expected health care costs for future retirees. It has defaulted on three of those payments.
"The key for us is Congress has to act," Donahoe said. "That is the lion's share of what's left just in terms of the health care changes alone. Medicare integration is worth $8 billion on a yearly basis on our profit and loss statement. That one act will straighten our finances out in the short term and, by teaming up with that our business plan agenda items, including moving [from six-day to five-day] mail delivery, we can be profitable, pare that down and be in very good shape financially, we think, at least 10 years."
Postal officials have been pressing Congress to let the agency end Saturday mail delivery and reduce the payments for retiree health benefits. But prospects for a legislative fix are increasingly unlikely this year.
"The lack of action is simply unfair to customers and employees and all the stakeholders that depend on a healthy Postal Service," Donahoe said.
The Postal Service also has asked for an emergency rate hike in the cost of a first-class stamp from 46 to 49 cents. That request must be approved by the independent Postal Regulatory Commission.
Donahoe said the Postal Service has saved $1 billion over the past year by consolidating 143 mail processing centers, eliminating 1,400 delivery routes and modifying retail hours in 7,000 post offices. It has also reduced its career workforce by 37,400 through attrition.
The $5 billion loss is less than a third of the record $15.9 billion loss the Postal Service reported last year.
"We can't continue to remain in the precarious position," Corbett said. "Congress has to do the responsible thing in terms of restoring us to a financial position where our customers and the rest of our stakeholders can rely on us to be here day-in and day-out. We need to avoid a situation where essentially we accelerate the downward pressure that we have on the organization already due to any further damage to our brand."
In its Five-Year Business Plan, which was released in April, the Postal Service outlined what it needs from Congress, including:
- Refunding the overpayment to the Federal Employees Retirement System (FERS) and lowering future FERS payments;
- Making changes to the frequency of six-day packages and five-day mail deliveries;
- Eliminating duplicative oversight;
- Being given the authority to expand the types of services and products it offers;
- Defining the contribution retirement system for future USPS employees;
- Allowing arbitrators to consider the Postal Service's financial condition; and
- Reforming Workers Compensation.
Earlier this week, the agency announced a lucrative deal with retail giant Amazon to begin package delivery on Sunday. While growing Internet use has shrunk the volume of first class mail dramatically, the rise of online shopping has been a boon to the postal service's package delivery business.
"Despite an annual loss of $5 billion, the Postal Service has been working to improve its financial condition through innovative business opportunities, like its agreement with Amazon to deliver packages on Sunday, but the only way the Postal Service will be put on a sustainable fiscal path for the future is if Congress enacts bipartisan, comprehensive reform legislation that enables it to continue to innovate and offer services that will meet the needs of a changing marketplace," said Rep. Elijah E. Cummings, ranking member of the House Committee on Oversight and Government Reform, in a statement.