Tuesday, February 9, 2010

Postal Service Shrinking More Slowly This Year

Mail volumes and the number of postal workers will shrink more slowly this year than in 2009, the U.S. Postal Service predicted today.

"The rate of decline in total mail volume has slowed, but we do not anticipate improvements for several more quarters," the USPS said in its quarterly financial report. "We expect advertising mail to stabilize and slightly increase as the economy improves."

The Postal Service's cost-cutting efforts include a plan to reduce work hours "by approximately 90 million" in the fiscal year that will end Sept. 30, which is less than the 115-million hour reduction in the previous fiscal year. One challenge to further cost reductions in general and the workforce in particular is the growth of delivery points. About 1 million new addresses have been added in the past year.

From October to December 2009, the number of mail pieces declined 9% and revenue declined 4% from the year-earlier period, the report said. That was an improvement from the previous 12 months, when volume declined 13% and revenue 9%.

Helped by a 9% reduction in career employees during calendar year 2009,USPS's cost reductions finally kept pace with its revenue declines. As a result, it lost "only" $263 million in the most recent quarter, versus a $380 million loss for October-December 2008.

But the fact that the Postal Service lost money even in what is usually its busiest quarter shows just how dire its financial situation is.

"Revenue is expected to continue to decrease in 2010 and, even with substantial cost reductions, our 2010 net loss is projected to be over $7 billion," the report said. Most of that projected loss is a $5.5 billion payment to a retiree-benefit fund that is nothing more than an accounting trick to make the federal deficit look smaller.

The Postal Service is scheduled to reveal next week its proposal to deliver mail one less day per week. But that won't have much impact on the current fiscal year.

"No significant savings are anticipated for 2010 from the proposed ability to adjust the six day delivery requirement, even if granted sometime during 2010, as multiple operational, contractual, and customer issues will need to be resolved before actual implementation of a five day per week delivery schedule," the report noted. "However, such important new flexibility could provide direct cost savings beginning in 2011."

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Anonymous said...

The Postal Service does not file reports with the SEC. They have to file "SEC-like" reports under PAEA of 2006, but they file with the PRC.

Anonymous said...

The USPS had to accrue about $1.4 billion in retirement health benefits payments mandated by PAEA. In the absence of these payments it actually would have made over $1 billion in October-December 2009, a reasonably good result -- and a very good result in a recession. So it is fair to say that the PAEA payments are a significant part of the USPS financial problems. The looming question is who should pay for these payments, taxpayers or mailers? Clearly the intent of PAEA was to keep the USPS funded by postal revenues. Postage rates need to be adjusted to cover these payments.

Anonymous said...

The intent of the PAEA payments is the same that it has been since President Reagan was in office. It's another way for the federal govt to milk it's cow. The $5.5 billion payment in retirement benefits is nothing more than blood money paid to the feds to leave us alone. I believe the mafia would call it some sort of protection insurance. The feds are just applying a lesson learned from the mafia, extortion.

Anonymous said...

The PAEA retirement health benefits payments will have to be paid sooner or later. That is a fact and the most straightforward way to deal with it is to raise prices to cover the expense.

One alternative is to take on a crippling amount of debt which would hamstring the USPS for years. Or the USPS and the mailers can go begging to Congress year after year.

Anonymous said...

Is it just me, or is the USPS missing a great opportunity to create revenue-generating electronic products such as certified or registered delivery? Wouldn't there be a robust market for secured and verified delivery of electronic documents? Who is better positioned to act as the intermediary between sender and receiver? Everyone knows mail volume is declining, costs escalting, but what is being done to "grow" their business?

Anonymous said...

here is the USPS solution...
In a special report, the USPS Office of Inspector General strengthens the case NALC has made over the past three years that the Office of Personnel Management badly miscalculated the postal surplus in the Civil Service Retirement Fund. The OIG’s investigative research unit report shows USPS was overcharged an astounding $75 billion for pension liabilities that should have been paid for by the U.S. Treasury, since they relate to service performed before USPS was created in 1971. This means the onerous prefunding schedule included in the 2006 Postal Accountability and Enhancement Act is grossly inflated, since OPM shortchanged the Postal Service Retiree Health Fund in 2007, when the agency transferred the surplus into the fund.