Postal Service lost $8.5 billion last year despite job cuts, other reductions

Postal Service lost $8.5 billion last year despite job cuts, other reductions

Randolph E. Schmid
Associated Press
November 12, 2010

WASHINGTON - The Postal Service said Friday it lost $8.5 billion last year despite deep cuts of more than 100,000 jobs and other reductions in recent years. The post office had estimated it would lose $6 billion to $7 billion, but a sharp decline in mail took a toll. Increased use of the Internet and the recession, which cut advertising and other business mail, meant less money for the agency.

For the year ending Sept. 30, the post office had income of $67.1 billion, down $1 billion from the previous fiscal year. Expenses totaled $70 billion, a decline of about $400 million. The post office also was required to make a $5.5 billion payment for future retiree health benefits.

"Over the last two years, the Postal Service realized more than $9 billion in cost savings, primarily by eliminating about 105,000 full-time equivalent positions — more than any other organization, anywhere," chief financial officer Joe Corbett said in a statement. "We will continue our relentless efforts to innovate and improve efficiency. However, the need for changes to legislation, regulations and labor contracts has never been more obvious."

The post office is currently in contract negotiations with two of its unions, with two more scheduled to be negotiated next year.

The loss of $8.5 billion in 2010 was $4.7 billion more than the previous year.

Mail volume totaled 170.6 billion pieces, compared with 176.7 billion in 2009, a decline of 3.5 percent. At the same time, volume was declining the post office was required to begin service to thousands of new addresses to accommodate population growth and new businesses.

The post office has asked Congress for permission to reduce mail delivery to five-days-a-week and to eliminate annual payments for future retiree health benefits. A request from the agency for a 2-cent increase in postage rates to take effect next year was recently turned down by the independent Postal Rate Commission. The post office has appealed that decision in federal court.

While the post office does not receive tax money for its operations it still must answer to Congress, which has been reluctant to agree to closing of local post offices and centers.

Sen. Tom Carper, D-Del., blamed the loss on the recession and "operating restraints placed on postal management." The result, he said, may represent the most serious threat to the post office in its 200-year history.

"If corrective action is not taken quickly, the Postal Service will likely run out of cash and borrowing authority by this time next year, placing its ability to continue operations in serious jeopardy," said Carper, who urged quick congressional action.

Rep. Darrell Issa, R-Calif., who is expected to head the House committee overseeing postal operations, said the loss "only underscores the urgent need for the Postal Service to trim its operating costs to match revenues."

Fredric V. Rolando, president of the National Association of Letter Carriers, said the loss "comes as no surprise."

"For the Postal Service to improve its financial situation, the government must let the USPS manage its financial affairs in the most effective manner possible, like any other business," he said. "Essential to that process would be for Congress to fix an onerous congressional mandate from 2006, which obligates the Postal Service to make annual payments of $5.5 billion to pre-fund future retiree health benefits. No other institution in America, public or private, has to do this."

Some have suggested privatizing the service, but the requirement to provide service everywhere in the country at the same price is not likely to be attractive to private companies.

Of particular concern has been the decline in the lucrative first-class mail, largely consisting of personal letters and cards, bills and payments and similar items. First-class mail volume fell 6.6 percent in 2010, 8.6 percent in 2009, and 4.8 percent in 2008. Traditionally, this mail has produced more than half of total revenue.

Volume for standard mail — advertising and similar business items — improved somewhat, indicating some signs of economic recovery, but generates less income.

Postmaster General John Potter, who retires in December, has developed a 10-year plan for the future of the post office, but parts of that plan require congressional action.

I work part time for the USPS, so I happen to have a look at the inside of this entity. They're losing business because private businesses want to do everything via e-mail. They don't want to spend the money printing and mailing. The loser is the USPS. The USPS is almost an irrelevant service save for one area only. Until technology comes up with a way to transport parcel post in a way like the transporter on Star Trek's Enterprise does it, packages cannot be emailed. All information can be sent and received electronically. The idea of charging more for stamps in silly on its face. I don't hardly use any stamps right now. Why would charging me more more for something I use none of now increase revenue for the USPS? That would just send more customers into the 21st century.

About all that's left for the USPS to legitimately handle are package deliveries. And even there, they would need to compete with UPS, FedEx, and DHL. So, the reality is that USPS is becoming an archaic enterprise. Adapt or perish. They may also have to rethink their retirement programs for one thing, like many other businesses have had to do.

Which leads me to ask.... why is it that no one comments on the enormous retirement fund that the USPS must maintain? The cost of living increases as well as the medical alone will put them into bankruptcy. We cannot sustain all of these expenses and still pay peanuts for mail. Why? Unions. Unions of all stripes have their collective hands in the sand (or up someones ass). Always looking for the gravy train at the expense of someone else.

Just like much of the unions in the private sector, the USPS has allowed itself (because of unions) to be put into irrelevancy. Ever wonder why k-12 (teachers) and college expenses are going through the roof? Ever wonder why the cost of federal/state/local government is going through the roof? Unsustainable and unreasonable union pay and benefits. The time of reckoning is here. You can either work to scale back the damage that unions have done or allow this destruction spread further to every corner of America.