Postal Service losses continue
Jennifer Liberto, CNNMoney
WASHINGTON (CNNMoney) – The U.S. Postal Service’s financial struggles continued into 2012, as the agency reported a $5.2 billion loss for the three months ended June 30 despite improved revenue from shipping and packaging.
The service said declining volume in the type of mail that most Americans use and a congressional mandate to prefund retirement health care benefits continued to cause deep losses.
But the Postal Service also reported 9% growth in revenue from shipping and packaging, which brought in an extra $3.3 billion — although that was not enough to offset other losses. The $5.2 billion net loss was worse than $3.1 billion loss posted during the same period in 2011.
First-class mail — the kind most Americans use to mail letters and pay bills — took another hit in the latest quarter, with volume falling 4.4% from the previous quarter.
And the health care funding mandate, a $5.5 billion tab that was due to the federal government on Aug. 1 –but did not get paid — continued to drag on the Postal Service’s balance sheets. The service defaulted on that payment and will default on another $5.6 billion payment due Sept. 30, unless Congress steps in.
“We remain confident that Congress will do its part to help put the Postal Service on a path to financial stability,” said Postmaster General and CEO Patrick Donahoe in a statement. “We will continue to take actions under our control to improve operational efficiency and generate revenue by offering new products and services to meet our customers’ changing needs.”
The losses in the service’s third fiscal quarter brought total losses for the year to $11.6 billion, compared to $5.7 billion for the same period a year earlier. But nearly 80% of the losses in fiscal 2012 are due to the law requiring that the service prepay retiree healthcare benefits.
The Postal Service used the loss announcement as an opportunity to push its plan to stem the bleeding, which includes cutting Saturday service, consolidating postal processing plants and addressing the mandate to prefund health care retirement benefits.
If Congress doesn’t act, the Postal Service could start to run out of cash for a few weeks in October and again next spring.
The Postal Service isn’t waiting for Congress to cut some costs. It’s in the process of closing or consolidating 48 mail processing plants, a process which should be completed in coming weeks, which could displace as many as 5,000 workers. The service also offered retirement incentives to mail handlers and postmasters and now expects 7,000 employees to retire by the end of the year.
The Postal Service is, by law, an “independent establishment” of the executive branch. The agency doesn’t normally use tax dollars for operations, but it has a $12.7 billion loan from Treasury.