Partly because of a shift to lower-paid employees, the U.S. Postal Service experienced a rare improvement in its business last year, according to a Postal Regulatory Commission analysis. But the PRC warned that USPS is still on shaky ground – losing money for the seventh year in a row, short on cash, and unable to borrow money or invest in new equipment.
In other words, the good ship Postal Service is still sinking, but it’s not taking on quite as much water as it used to.
The PRC calculates that USPS’s financial loss from operations was “only” $1 billion in FY2013, down from nearly $2.5 billion the previous year. The PRC’s calculation excludes prepaid retiree health benefits (a budgeting gimmick created by Congress that USPS has stopped paying) and one-time accounting adjustments.
“The Postal Service reduced expenses in FY 2013” despite a minuscule decline in mail volume, says the PRC’s analysis of the Postal Service’s annual 10K financial report, released a few days ago. “Workhours and the average hourly compensation and benefits rate were both lower than last year. This indicates that the Postal Service’s finances may be improving.”
“Personnel expenses, including compensation and benefits expenses and systemwide benefit expenses, account for 78 percent of total expenses. The Postal Service reduced compensation and benefits almost $1 billion by increased use of non-career workforce and voluntary retirement incentives.”
Lower average pay rates
With the help of early-retirement incentives, the number of career employees declined by 37,000, all from attrition. In many cases, they were replaced by lower-paid non-career employees, especially because of a union contract allowing more hiring of non-career postal clerks. As a result, in most segments of the Postal Service the “productive hourly rate” of pay actually declined during FY2013.
On the negative side, fuel costs were higher, and USPS had to spend an additional $137 million on supplies when Express Mail was re-branded as Priority Mail Express.
Growth in packages and Standard Mail almost made up for the ongoing decline in First Class Mail. Boosted by price increases, revenue rose by $700 million (1.2%) during the year.
USPS’s strength in residential delivery could enable it to continue prospering from the growth of e-commerce, but the agency is not prepared for such growth, the PRC warned.
“For the burgeoning e-commerce market to become a viable option, the Postal Service needs to replace and improve its existing aging vehicles to accommodate the shift in mail mix toward a higher fraction of packages and to invest in new and efficient mail processing technologies and equipment. The Postal Service’s ability to make these investments is affected by the lack of available working capital.”