US Postal Service bosses are demanding urgent legal changes to cut financial burdens after theagency’s losses spiralled to a massive $15.9 billion in the year ending September 30, 2012, largely
due to $11.1 billion worth of disputed employee health payments.USPS said 70 per cent of the 2012 net loss, which followed a $5.1 billion loss last year, wasmade up by the $11.1 billion payments to prefund retiree health benefits. The Postal Service, whichis uniquely required by law to prefund these obligations, was forced to default on thesepayments.
“It’s critical that Congress do its part and pass comprehensive legislation before they adjournthis year to move the Postal Service further down the path toward financial health,” saidPostmaster General and CEO Patrick Donahoe. “We continue to do our part to grow revenue and reduceexpenses by making our operations more efficient and by providing our customers with new andexpanded services to meet their mailing and shipping needs.”
The agency has lobbied heavily for Congress to remove this financial burden as well as to makelegal changes giving it more commercial freedom and permission to downscale operations andinfrastructure in order to cut costs. Under its business plan, USPS wants legal changes allowing itto determine delivery frequency and the ability to offer non-postal products and services.
USPS ended the 2011-12 year with revenues of $65.2 billion, down 0.7% from $65.7 billion lastyear and significantly lower than the 2010 figure of $67 billion. This was despite higher mail andshipper prices. Total mail volume declined to 159.9 billion pieces compared to 168.3 billion piecesa year ago.
The one bright note in the agency’s results was the strong growth of the package servicesbusiness. Package revenue increased by 8.7% to $11.6 billion and volumes grew 7.5% to 3.5 billionitems. Higher consumer spending, higher e-commerce retail sales plus increased marketing effortsdrove much of the growth, USPS noted.
But these increases were not enough to offset the declines in First-Class Mail and StandardMail, which together account for nearly 70% of total revenues. First-Class Mail revenuedropped 3.9% to $28.9 billion, although this was less than the previous year’s 6.5% revenuedecline, and volumes dropped 5.3%. Standard Mail revenues decreased 4.3% to $16.4 billion andvolume also fell by 5.3%.
On the cost side, USPS said that $13.4 billion in expenses were outside its control in theshort-term, including the $11.1 billion retiree health benefits prefunding expenses and theexpenses related to the long-term portion of workers’ compensation. The net loss would have been$2.5 billion without these expenses.
“Our productivity grew to a record level as we captured cost savings and improved productivityfor the thirteenth straight quarter,” said Chief Financial Officer, Joseph Corbett. This year’simprovement is largely attributable to the reduction in work hours, which decreased by 27 million,or 2.3%, in 2012 from the previous year. “These work hour reductions reflect our efforts to improveproductivity and to respond to the decline in mail volume,” he added.
At the end of 2012 fiscal year the Postal Service reached its statutory debt ceiling of $15billion for the first time. “Our liquidity continues to be a major concern and underscores the needfor passage of legislation that gives the Postal Service a more flexible business model to improveits cash flow,” said Corbett. “Despite reaching the debt limit, the Postal Service mail operationsand delivery continue as usual and employees and suppliers continue to be paid on-time.”
More positively, USPS said revenue over the first six weeks of fiscal 2013 is benefiting fromthe start of the holiday mailing season and political and election mail from the just completedgeneral election season.
