USPS Loses Staggering $15.9B for Fiscal Year

The U.S. Postal Service (USPS) ended the 2012 fiscal year (Oct. 1, 2011–Sept. 30, 2012) with a record net loss of $15.9 billion, compared to a net loss of $5.1 billion for the same period last year. The loss included expenses of $11.1 billion related to two payments to prefund retiree health benefits.

Resolving the prefunding requirement, which made up 70 percent of the net loss, and providing more commercial flexibility to allow the Postal Service to manage its business, are among legislative changes the USPS feels is needed to fully implement its business plan to return to financial stability.

“It’s critical that Congress do its part and pass comprehensive legislation before they adjourn this year to move the Postal Service further down the path toward financial health,” said Postmaster General and CEO Patrick Donahoe. “We continue to do our part to grow revenue and reduce expenses by making our operations more efficient and by providing our customers with new and expanded services to meet their mailing and shipping needs. Additionally, through the expanded use of technology, including better use of digital tools and mobile technology, we are providing business mailers with new opportunities to connect with customers in a more individualized way.”

Besides resolving the accelerated schedule to prefund retiree health benefits and allowing the Postal Service the flexibility to sponsor its own health care program for employees and retirees, the USPS Business Plan includes these other actions that require legislative action:

• Allowing the Postal Service to determine delivery frequency;
• Allowing the Postal Service to offer non-postal products and services;
• Developing a more streamlined governance model for the Postal Service that would allow for quicker pricing and product decisions;
• Instructing arbitrators that, during labor negotiations, they must take into account the financial condition of the Postal Service when rendering decisions;
• Resolving the overfunding of the Postal Service’s obligation to the Federal Employees’ Retirement System (FERS).

The Postal Service continues to grow its package services business. Revenue from that business increased by $926 million, or 8.7 percent, on a volume increase of 244 million pieces compared to the same period last year. Higher consumer spending, higher e-commerce retail sales plus increased marketing efforts drove much of the growth in this segment of the Postal Service business during the last year.

The encouraging growth trend in the package business is not, by itself, enough to offset the declines in First-Class Mail and Standard Mail, the USPS said. First-Class Mail revenue, which peaked in 2007, dropped $1.163 billion, or 3.9 percent, this fiscal year, while Standard Mail decreased $747 million, or 4.3 percent, compared to last year. However, the rate of decline in the First-Class category did slow in 2012.

Other details of the yearly results compared to the same period last year include:

• Total mail volume of 159.9 billion pieces compared to 168.3 billion pieces a year ago;
• Operating revenue of $65.2 billion compared to $65.7 billion in 2011;
• Operating expenses of $81.0 billion (including the $11.1 billion expense associated with prefunding retiree health benefits) compared to $70.6 billion the year before.

The $15.9 billion loss was driven by $13.4 billion in expenses that were outside the control of the Postal Service in the short-term. These expenses include the $11.1 billion retiree health benefits prefunding expenses and the expenses related to the long-term portion of workers’ compensation. When these expenses are deducted the net loss would have been $2.5 billion. The Postal Service has been successful in reducing controllable expenses as mail volume and revenues have declined.

This year’s improvement is largely attributable to the reduction in work hours, which decreased by 27 million, or 2.3 percent, in 2012 vs. the previous year. Total work hours continue to decrease despite increases in the number of delivery points, which rose by approximately 1.3 million over the last two years.

The Postal Service’s revenue over the first six weeks of fiscal 2013 is benefiting from the start of the holiday mailing season and political and election mail from the just completed general election season.