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Postal Service suffers record loss in 2012: $15.9 billion

Nov. 15, 2012 - 11:40AM   |  
By SEAN REILLY   |   Comments
The U.S. Postal Service suffered a record loss of $15.9 billion in fiscal 2012, which ended Sept. 30.
The U.S. Postal Service suffered a record loss of $15.9 billion in fiscal 2012, which ended Sept. 30. (Justin Sullivan / Getty Images)

The U.S. Postal Service suffered a record loss of $15.9 billion in fiscal 2012, which ended Sept. 30.

That compares to a $5.1 billion loss in the previous year.

Seventy percent of that loss — $11.1 billion — was for two large payments to prefund future retirees’ health benefits. By law, the agency is required to make annual payments of roughly $5.5 billion each into the retirees’ health care fund, but the required 2011 installment was delayed by Congress until this year, forcing the Postal Service to make two such payments in 2012. In both cases, the Postal Service defaulted on those payments.

Also hurting the bottom line on paper was $2.4 billion in long-term workers’ compensation charges.

But by one measure, the mail carrier’s finances showed some improvement: Operating losses shrank from $2.7 billion in 2011 to $2.4 billion last year.

Although the mail carrier hit its $15 billion borrowing limit with the U.S. Treasury in late September, it expects to skirt through the rest of this fiscal year without a cash-flow crunch, Chief Financial Officer Joe Corbett told the agency’s board of governors at a meeting Thursday.

The Postal Service has repeatedly sought congressional relief from the retiree health care prepayments as part of a broader postal reform bill, but without success.

“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 in a statement released Thursday.

“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.”

As part of a postal reform legislative package, the Postal Service is also pressing lawmakers to authorize it to:

• Create its own healthcare program for employees and retirees.

• Decide its own delivery schedules, such as adopting five-day delivery service.

• Streamline decisions to set postal prices and offer new products.

• Instruct arbitrators reviewing labor contract impasses to consider the Postal Service’s financial condition when making decisions.

• Redirect excess funds paid into the pension fund — the Federal Employees’ Retirement System (FERS) — toward other priorities.

Yet as lawmakers this week begin a lame-duck legislative session, there is little sign that postal reform will get attention. In a brief interview after Thursday’s meeting, Donahoe said “we haven’t heard anything” about possible action on postal legislation.

Art Sackler, co-coordinator of the Coalition for a 21st Century Postal Service, an association of businesses that rely heavily on the mail, said in a statement that “the Postal Service is facing a fiscal cliff of its own and any unanticipated drop in mail volumes could send the agency over the edge. If Congress fails to act, there could be postal slowdowns or shutdowns that would have catastrophic consequences for the 8 million private sector workers whose jobs depend on the mail.”

In its year-end financial report, the Postal Service said other losses were driven by continued declines in First-Class Mail and Standard Mail volume. First-Class Mail revenue dropped roughly $1.2 billion, or 3.9 percent, while Standard Mail dropped $747 million, or 4.3 percent, from last year.

Overall, total mail volume dropped from 168.3 billion pieces in 2011 to 159.9 billion pieces in 2012. And operating revenues dipped slightly from $65.7 billion in 2011 to $65.2 billion in 2012. One factor helping to stem the continuing decline in first-class mail use was more than a half-billion dollars in election mail revenue.

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