Budget

Is another year of financial losses beyond USPS control?

The U.S. Postal Service found itself in the red once again for 2019, despite revenue increases and investment in cost-cutting measures.

USPS reported a net loss of $8.8 billion for fiscal year 2019, more than double the loss reported last year, according to the USPS financial report released Nov. 14.

The Postal Service is a government agency but also unique in that it is entirely self-funded and does not receive appropriations from Congress for its operations.

Though package and periodical sales increased in 2019, sales of first class, marketing and international mail declined, following the trend of sales reductions in USPS’s primary revenue area.

“We continue to adjust to declining mail volume and remain focused on leveraging our unique and unrivaled network to gain new customers and grow profitable revenue in the increasingly competitive package business,” said Postmaster General and CEO Megan J. Brennan in a news release.

"However, revenue growth in our package business will never be enough to offset imbalances in the Postal Service's business model, which must be addressed through legislative and regulatory reforms in order to secure a sustainable future.”

USPS officials place the blame for the agency’s financial shortcomings not on its own financial practices, but rather on legal requirements placed on them by Congress and other regulatory bodies.

“We continued to make progress in the fiscal year in containing expenses that are under management’s control,” said USPS Chief Financial Officer and Executive Vice President Joseph Corbett in a news release. “However, actions within the control of the Postal Service are not enough to return the Postal Service to financial health.”

A significant detriment to that financial health is the requirement that the agency pre-fund retiree health benefits, meaning that the agency must contribute funds for an employee’s retirement health benefits once they’re hired, rather than after they retire decades later — something no other agency is required to do. USPS plans to once again default on those payments.

“This accounted for $4.5 billion in red ink this year. Fortunately, efforts are underway to relieve this unfair burden. Already, a bipartisan majority of 281 House members has co-sponsored a bill to repeal the pre-funding mandate,” said National Association of Letter Carriers President Fredric Rolando in a statement.

“Meanwhile, the Postal Regulatory Commission should expeditiously complete its ongoing review of the postage rate-setting system. At present, USPS is constricted in its ability to adjust rates by no more than the Consumer Price Index, but the CPI is an economy-wide measurement of consumer goods and services that doesn’t fit a transportation and delivery provider. The PRC has the ability to correct this mismatch and relieve the resulting financial pressure. It also should revisit its misguided decision to roll back the price of stamps by two cents in April 2016, the first rollback since 1919. That decision reduces postal revenue by about $2 billion a year.”

In fact, subtracting just the normal business costs from the agency’s 2019 revenue would result in a $400 million surplus, according to Rolando.

The agency has been instituting cost-cutting measures to improve its financial outlook, such as reducing work hours by 4.3 million last year through overtime reductions and employee attrition, but legal mandates require that the agency deliver to every address six days a week and restrict how much they can charge for each service.

Brennan told reporters on a call about the financial report that the agency needs “structural reform” that will enable it to create a workable business model without the current restraints.

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