Even as postal losses shrink, USPS continues call for agency overhaul

Friday - 2/7/2014, 12:45pm EST

The U.S. Postal Service announced Friday its quarterly losses fell sharply in the first quarter of fiscal 2014, thanks to revenue growth in package delivery and agency cost-cutting.

Still, the agency's $354 million loss for the quarter ending Dec. 31, marked the 19th of the last 21 quarters that USPS posted a loss.

Postmaster General Pat Donahoe said the relative improvement in the agency's financial picture should not dampen efforts in Congress to pass comprehensive postal reform legislation.

"Any idea that we've turned the corner financially, unfortunately, at this point is not really clear thinking," Donahoe said in a conference call with reporters Friday to announce the agency's quarterly financial results. "We've got to get the legislation through and then get ourselves debt-free and we'll be in much better shape for the future."

The Senate Homeland Security and Governmental Affairs Committee gave its stamp of approval Thursday to a sweeping overhaul of the cash-strapped U.S. Postal Service, sending a bipartisan postal reform bill to the Senate floor for a vote.

"It's one step down, many to go," Donahoe said. "But again, good news. ... We need this comprehensive legislation to get not only the Postal Service but our industry on good, sound financial footing going forward."

USPS finances boosted by package delivery growth

The agency's losses for the first quarter of 2014 narrowed significantly from previous quarters. In the first quarter of 2013, the agency posted a loss of $1.3 billion. The first quarter of the fiscal year, buoyed by holiday deliveries, is typically the agency's strongest. The Postal Service also lost more than $1 billion in the last quarter of fiscal 2013.

"From many perspectives, we have a very successful quarter," Postal Service Chief Financial Officer Joe Corbett said Friday.

Among the bright spots are a growth in revenue — $334 million last quarter — driven by growth in the shipping and package services and a continuing decrease in operating costs.

All told, revenue grew by $334 million last quarter. Shipping and package revenue, alone, increased by $479 million, or 14.1 percent, compared to first-quarter 2013 results.

Meanwhile, thanks to aggressive cost-cutting strategies, including voluntary early-retirement incentives issued last year, USPS reduced operating costs by $574 million.

About 22,800 employees left the Postal Service last year under early-retirement initiatives, according the agency. Many of those positions have since been filled with "noncareer flexible" employees, who are cheaper. Roughly 20 percent of all postal workers are now noncareer employees, Donahoe said, which is up from about 7-8 percent just a few years ago.

Agency remains 'in a deep financial hole'

Still, grim numbers remain on the agency's balance sheet.

Chief among them, a continuing slide in First Class mail. Volume fell by 4.6 percent compared to the same period last year and revenue decreased by $209 million.

"We remain in a deep financial hole, and we need comprehensive postal legislation in order to fill this hole in," Corbett said.

One of the largest drags on the Postal Service's finances continues to be a mandate that the agency prefund future retirees' health care costs. The prefunding requirement stems from a 2006 law and has meant billions of dollars in annual fixed payments go out the door each year. USPS defaulted on the last three payments. Absent legislation, the agency will do so again when the next payment comes due in September, Donahoe said Friday.

The postal reform bill making its way through the Senate now would suspend prefunding requirements and allow the Postal Service to create its own health insurance program that shifts enrollees to Medicare when they reach retirement age.

The bill also sets a potential timeline for the agency to end Saturday mail delivery.

Postal-employee unions have deep reservations about the legislation.

"Paving the way for eliminating six-day delivery and door-to-door service would hurt millions of residents and small businesses as well as the Postal Service itself, because it would slow service, drive mail out of the system and reduce the earned revenue that funds USPS," said Fredric Rolando, president of the National Association of Letter Carriers, in a statement following the Senate committee's approval of the bill.

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