GOING POSTAL

08.09.13

U.S. Postal Services Loses $740 Million Amid Declining Volume

Beset by impossible political demands, huge legacy costs, and an erosion in its core business, America’s mail-delivery service is struggling valiantly to break even.

Few large organizations have been as deeply impacted by the rapid rise of technology as the United States Postal Service. The volume of first-class mail delivered by the company has dropped as Americans find new ways to communicate digitally. This trend has led to financial troubles for the USPS, which relies heavily on first-class mail delivery for revenue. On Friday, the USPS reported (PDF) that it lost $740 million in its fiscal third quarter.

That report came as no surprise to most. The company posted a record yearly loss last year of $15.9 billion, and has lost over $41 billion since 2006. To top it all off, the company announced recently it would most likely default for the third time on a Congressional mandate that it pre-pay benefits for its more than 500,000 employees. By federal mandate USPS cannot change the healthcare benefits given to its employees, and must pre-pay into a benefits fund each year; a requirement that is unique to the organization. Postmaster General Patrick Donahoe has repeatedly called for Congress to enact legislation that would change this.

The long-term business of mail certainly seems troubled. USPS in 2012 delivered about 30 percent less mail in 2012 than it did in 2002. But it doesn’t seem beyond repair. The company’s Five-Year Business Plan estimates it could produce $20 billion in savings by 2016 by reducing mail delivery to 5-days a week, allowing the USPS to manage its own healthcare and cutting back on both processing facilities and employees. A recent bi-partisan bill put forth by Senators Tom Coburn and Tom Carper addressed many of these issues, but was opposed by union labor groups and House Republicans alike. Unions want fewer job cuts and House Republicans want further spending reductions.

Meanwhile, a look inside the numbers suggests USPS is actually doing a better job aligning its revenues with its spending. In the fiscal third quarter, which ended on June 30, 2013, revenues actually rose 3.6 percent from the year-before quarter. Thanks to layoffs and cutbacks (34,000 positions eliminated), operating expenses fell by $488 million in the quarter from the year before (about 4.2 percent), while spending on retiree health benefits fell by 42 percent. The upshot? In last year’s comparable fiscal quarter, USPS lost $5.142 billion. In this year’s quarter, it lost just $740 million.