Third Quarter Losses and a Fuzzy Future

Third Quarter Losses and a Fuzzy Future 

Losses and a It is no secret that the United States Postal Service has seen better financial days, and not much seems to be improving. Recently, the United States Postal Service reported a third quarter loss of $586 million. That’s right half a billion dollars lost in a time frame of three months, but good news, this is massive improvement to the reported losses one year ago –  $1.50 billion less.

“On a more positive note, despite a controllable loss reported for the quarter, our year-to-date controllable income is $1.2 billion,” stated Sarah Ninivaggi, USPS public relations representative. “This is basically a measure of business performance that the Postal Service controls – after the costs of legislative mandates have been backed out. We continue to see double-digit increases in package volume, which is a testament to the how we are meeting growing demand. Additionally, we are seeing improved productivity in many areas of our operations.”

While many are not jumping up and down at the “savings,” the newest loss pales in comparison to the multi-billion dollar deficit the entity currently operates under.

But how did USPS get into such a precarious situation? A few huge missteps in their past are still haunting the bottom line of USPS today.

A huge blow to the Postal Service’s financial statement was oversight from 1972-2003. The United States Postal Service paid an astonishing $103 billion more than it should have into Civil Service Retirement System for its retirees.  The same deficit ballooned with the same laissez faire accounting techniques from the Office of Personnel Management (OPM) in 1983 when the new Federal Employee Retirement System (FERS) was introduced; adding another $36 billion to the overpayment.

Fast forward to 2007 when Congress mandated health benefits become pre-funded for retirees and instantaneously USPS has another $54 billion bill they cannot afford to pay right away. Bringing USPS deficit to the grand total of $200 billion.

Bringing us back to present day, and a changing market, it seem that the Postal Service is hanging off of a cliff that doesn’t have a rock bottom. The most recent reports indicate that first-class and standard mail usage is down another 2.3 percent this past quarter – a total decrease of 738 million pieces of mail of mail for the quarter.

“Unfortunately, first-class mail in particular, volumes are steadily declining.” stated Ninivaggi. “Those are more profitable services and higher-margin products. So when those decline it has a negative impact.”

The Postal Service also experienced an increase of $256 million in controllable expenses due to compensation costs and contractual salary escalations.

However, it isn’t all bad news coming out of USPS. Shipping and packaging revenue increased by 10.6 percent for the third quarter despite the drop in usage; this was aided by raised shipping costs. This makes the USPS’s controllable profit trend now in its third year.

“This three-year trend in operating profitability makes it clear the need to strengthen – not degrade – the now-profitable networks,” stated Fredric Rolando, president of the National Association of Letter Carriers. “We hope to work with lawmakers on both sides of the aisle, the administration and the postmaster general to build on the progress achieved in the last Congress, within the mailing industry and among major stakeholders on consensus postal reform that promotes a strong and vibrant Postal Service.”

Under the reign of newest postmaster general Megan Brennan, USPS is aggressively trying to new tactics to stay relevant with Postal Services’ competitors. Trying such ventures as making Amazon deliveries on Sundays and holidays. Other ventures include expanding same-day deliveries, and performing test drives of grocery delivery services in select areas. Ms. Brennan is hoping to overturn an ancient Prohibition-era ban that prohibits the shipment of alcohol through the Postal Service.

In a USPS press release, Brennan stated, “the continued growth of our shipping and packaging services is a direct result of the Postal Service’s continued efforts to offer consumers more choices, excellent value and reliable service in a growing and competitive marketplace. We are investing in our network and continually enhancing our services to best compete for America’s shipping and packaging delivery business.”

Most notably, the postmaster general is calling for a modification to the mandate that forces USPS to prepay its retiree health benefits for 75 years and its worker compensation fund.

“We’re just reinforcing the need for comprehensive legislation to help restore us to a place of financial stability,” Ninivaggi said. “That would include things like adjusting the pre-funding mandate, integrating Medicare and providing us with some more flexibility for expanding products and services.”

Presently, the House and the Senate have a Bill waiting for approval to make changes to the USPS system. The Bill lays out changes to return the United States Postal Service back to its original ideology from 236 years ago; connect our growing nation through written communication at a reasonable price with reliable service, especially in rural areas.