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Accounting change boosts USPS bottom line

Nov. 15, 2009 - 06:00AM   |  
By GREGG CARLSTROM   |   Comments
Postmaster General John Potter said that after exploring new revenue-generating opportunities, it became clear the best way for the Postal Service to make more money is to spend less.
Postmaster General John Potter said that after exploring new revenue-generating opportunities, it became clear the best way for the Postal Service to make more money is to spend less. (FILE PHOTO)

The U.S. Postal Service will post a smaller-than-expected deficit in its final 2009 financial report, scheduled for release this week, thanks to a last-minute accounting change.

Congress allowed the Postal Service to postpone $4 billion in payments into its retiree health benefits trust fund but the legislation wasn't signed into law until Oct. 1, one day after the Postal Service's fiscal year ended. The Postal Service asked the Postal Regulatory Commission, the independent agency which oversees it, for permission to count the savings on its 2009 financial report.

PRC approved the request last week, allowing the Postal Service to defer $4 billion in expenses, and reducing a deficit that was expected to approach $7 billion.

The final financial report will cap off a year of bad news for the Postal Service, which saw its mail volume drop by 28 billion pieces nearly 13 percent compared with 2008. The red ink would have been far worse, though, were it not for nearly $5 billion in cost-cutting measures adopted by the agency. Postal managers cut more than 110 million work hours in fiscal 2009, and the agency is under a nationwide hiring freeze.

Postal officials this week will also release a final financial plan for fiscal 2010; details of that report were not available at press time.

But several officials have said in recent interviews that the agency expects to run at least a $5 billion deficit in 2010 and needs to cut another 100 million work hours to help balance the budget.

Mail volume is expected to rebound slightly this year, thanks largely to the easing recession. The Postal Service is counting on increased demand, not increased prices, to lift its sagging revenues: The agency announced last month that it would not increase mail service prices in 2010.

"[We] expect this will stimulate some level of growth for those products," said Robert Bernstock, the president of the agency's mailing and shipping services division. "We believe some volume will return as the economy improves, [but] we do not expect volume to rebound to previous levels."

The Postal Service also plans to study new sources of revenue. The House Oversight and Government Reform Committee, which oversees the Postal Service, held a hearing earlier this month on alternative sources of income for the beleaguered agency. Post offices in other countries often provide retail and banking services. Union leaders also want the Postal Service to consider expanded delivery offerings, such as a program to deliver prescription drugs to senior citizens.

"We need to utilize the last mile of our network. There are so many things we can do," said Fred Rolando, the president of the National Association of Letter Carriers, in a recent interview. "The other delivery companies don't have our delivery network."

The Postal Service has also been pursuing some cost-cutting through environmental initiatives, according to a sustainability report the agency released last week. The agency's total energy use has dropped by 9 percent over the last four years; most of that savings has come from more efficient facilities, which use 18 percent less energy than they did four years ago, according to the report.

Postmaster General John Potter said last month that the agency plans to reduce its gasoline use by 20 percent and energy use at its facilities by 30 percent over the next five years. Reaching those two goals could generate more than $250 million in savings.

Smaller sustainability programs have also led to modest cost savings. The agency saved $3 million from an agencywide energy challenge, which encouraged employees to use less electricity; it also saved $1 million through investments in more efficient computers and servers.

Those small-scale projects generated some $37 million in savings last year, according to the Postal Service.

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