U.S. Postal Service on a
‘Tightrope’ Lost $15.9 Billion
By Angela Greiling Keane -
Nov 15, 2012 7:50 AM PT
U.S. Postal Service Faces
Default Without Action
The U.S. Postal Service
said its net loss last year widened to $15.9 billion, more than the $15 billion
it had projected, as mail volume continued to drop, falling 5 percent.
Without action by
Congress, the service will run out of cash on Oct. 15, 2013, after it makes a
required workers compensation payment to the U.S. Labor Department and before
revenue typically jumps with holiday-season mailing, Chief Financial Officer
Joe Corbett said today.
The service, whose fiscal
year ends Sept. 30, lost $5.1 billion a year earlier. It announced the 2012 net
loss at a meeting at its Washington headquarters.
“We are walking a
financial tightrope,” Postmaster General Patrick Donahoe said at the meeting.
“Will we ever stop delivering the mail? It will never happen. We are simply too
important to the economy and the flow of commerce.”
The Postal Service uses
about $250 million a day to operate and will have less than four days of cash
on hand by the end of the fiscal year, Corbett said.
The service is asking
Congress to enact legislation before it adjourns this year that would allow the
Postal Service to spread future retirees’ health-benefit payments over more
years, stop Saturday mail delivery, and more easily close post offices and
processing plants.
Over Edge
“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,” said Art Sackler, co-coordinator of the
Coalition for a 21st Century Postal Service, whose members include Bank of
America Corp. and EBay Inc. (EBAY) “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.”
Without legislative
change, the service expects its losses to continue in 2013, with a forecast
loss of $7.6 billion for the year that started Oct. 1, Corbett said.
“There is no margin of
error,” given the low level of cash, he said.
The service is trying to
cut costs by giving retirement- eligible workers a financial incentive to
retire. Those employees have a Dec. 3 deadline to accept the offer, with $200
million budgeted for the incentive costs in fiscal 2013.
Health Benefits
Next year’s loss forecast
includes a $5.6 billion payment due to the U.S. Treasury for future retiree
health benefits, Corbett told reporters after the meeting. The 2012 loss includes
the $5.6 billion payment to the fund that the service defaulted on Sept. 30,
and the previous year’s $5.5 billion obligation that was due Aug. 1 and also
not paid. Because that year’s payment was deferred, the 2011 loss doesn’t
include any pre- funding amount.
Mail volume for the year
fell to 159.9 billion pieces, led by an 8 percent decrease in single-piece
first-class items, the most profitable kind of mail that includes letters,
cards and bill payments.
Operating revenue fell
less than 1 percent to $65.2 billion for the year as the service cut work hours
while delivering less mail.
The service’s outlook
worsened this week, when the U.S. Office of Personnel Management said the
service’s projected surplus in a government-worker retirement account has fallen
to $2.6 billion, less than one-quarter of the previous year’s estimate, due to
lower interest rates. It found another retirement account now has a $17.8
billion shortfall instead of a previously estimated surplus. The service has
proposed tapping the surpluses to help cover its losses.
“Relying on a temporary,
projected surplus to keep USPS solvent is a risk no matter which set of
assumptions OPM is directed to use,” said Ali Ahmad, a spokesman for House
Government and Reform Committee Chairman Darrel Issa, a California Republican
who is a sponsor of a postal overhaul measure pending in the House. “It is no
substitute for the actual cost-cutting USPS needs to do to find real savings.”
To contact the reporter on
this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net
To contact the editor
responsible for this story: Bernard Kohn at bkohn2@bloomberg.net
Comments
Post a Comment