Sponsored Link
Email This Post Email This Post

Losses Continue as Postal Service Seeks Lifeline from Congress

Even as the U.S. Postal Service reported another sizable quarterly loss, officials highlighted the bright spots of the business – particularly shipping services – and hailed the advance of a bill in the Senate that could provide needed financial relief for the beleaguered agency.

For the first quarter of fiscal 2014, the Postal Service reported a loss of $354 million, its balance sheet weighted down by the continued declines in First-Class Mail, its most profitable product. That comes as the 19th net loss in the last 21 quarters.

That’s the bad news.

On the other hand, the Postal Service grew its shipping and package business by double digits and slashed its operating costs. And while the quarterly loss was steep, it was dwarfed by the $1.26 billion the agency lost in the same period a year ago.

The Postal Service has been pursuing a variety of initiatives to increase revenues and cut costs, including Sunday package delivery and substantial workforce reductions, but officials say that they will only achieve financial stability once they are given the statutory authority to make core changes to the benefits that the agency must pay current and retired workers.

To that end, on Thursday, the Senate Homeland Security and Government Affairs Committee approved a bill that would grant the Postal Service more operating flexibility and provide relief from some of its workforce-related obligations, sending the measure to the Senate floor.

“I think (Thursday’s) vote coming out of the Senate was very helpful for this industry and gives us the opportunity to get the entire industry back on good solid footing,” Postmaster General Patrick Donahoe told reporters on a conference call.

Donahoe stressed that the Postal Service has been working closely with its unions and other stakeholders in an effort to build consensus on how to address the structural issues that have put the agency on an unsustainable path.

“A large amount of those issues can be resolved,” Donahoe said, citing the agency’s debt and obligations relating to health care and workers’ compensation. “That’s why we are so pleased. It’s not just short-term fixes – it allows us to fix these issues for the long term.”

The Senate bill, backed by Tom Carper (D-Del.), the chairman of the government oversight committee, and Tom Coburn (R-Okla.), would offer the Postal Service a more favorable formula for prefunding retiree health benefits and more flexibility in negotiating benefits for new employees. The bill would also authorize the Postal Service to scale down to a five-day weekly delivery schedule for regular mail (as it has long sought to do), though not before one year following the bill’s enactment.

But passage of postal reform legislation is hardly imminent.

Carper spokeswoman Emily Spain told EcommerceBytes that it is “far too early” to forecast when the bill might head to the Senate floor for debate. In a statement, Carper acknowledged that considerable work remains if his legislation is to clear the full Senate and then get reconciled with a markedly different reform bill working its way through the House.

“We took a big step today, but we are not even halfway there yet,” Carper said of his bill’s passage. “Clearly, this is no easy task and we have a lot of work ahead of us. It’s time that Congress and the administration work together to save the Postal Service for the long haul.”

In the meantime, the Postal Service continues to warn of its precarious finances. In the absence of legislation, the agency projects that it will default on another employee benefits payment coming due at the end of September.

The Postal Service did manage to cut its operating costs by $574 million in the most recent quarter, reductions driven largely by trimming its workforce by around 28,000 employees through either attrition or an early retirement program.

Overall revenues increased $300 million in the first quarter, buoyed by a 14 percent increase in shipping and packages. Revenues from that segment jumped by $479 million, helping to offset some of the declines from the First Class Mail and Standard Mail classes.

“Our sales folks continue to hit home runs in terms of gaining growth in the package area,” said USPS Chief Financial Officer Joseph Corbett, calling that segment’s revenues “the result we’re most proud of.”

Note from the Editor: The Office of Inspector General said the U.S. Postal Service did not properly implement the pilot test of its same day delivery pilot program in San Francisco, which is suspended as of March 1, 2014. See more information on the EcommerceBytes Blog.

Kenneth Corbin on Linkedin
Kenneth Corbin
Kenneth Corbin
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn.