Pensions Sink Postal Services Profit

February 10, 2011       Mark Hrywna      

Continuing to push for Congressional relief from prefunding future retiree healthcare benefits, the United States Postal Service (USPS) said it would have netted $226 million in income for the first quarter if not for the required $5-billion payment. Instead, the USPS reported a loss of $329 million, more than the $297-million loss a year ago, and it expects to have a chase shortfall by the end of this fiscal year (Sept. 30), as well as reaching its statutory borrowing limit.

USPS lost $456 million in the previous fiscal year, however, it would have netted $109 million if not for the healthcare funding requirement and workers’ compensation liability.

“The Postal Service continues to seek changes in the law to enable a more flexible and sustainable business model,” said Postmaster General and CEO Patrick Donahoe. We are eager to work with Congress and the administration to resolve these issues prior to the end of the fiscal year,” which ends Sept. 30, he said.

The decline in mail volume as a result of the recession may be ebbing, with USPS reporting total mail volume up 1.5 percent for the first quarter, or about 707 million pieces from 45.7 billion to 46.4 billion pieces, compared to the first quarter of 2010. Total mail volume, however, remains below the 2006 peak. An increase in revenue from Standard Mail was not sufficient to offset the loss of revenue from reduced volume of First-Class Mail, according to USPS.

First-Class Mail revenue was $8.8 billion on volume of 20 billion pieces, Standard Mail revenue was $5 billion on almost 24 billion pieces, and periodicals revenue was $480 million on 1.8 billion pieces.

On Monday, five groups representing mailers sent a letter to President Barack Obama urging him to correct the USPS retirement system overpayment and apply the overage to the retiree health benefit fund. “Significantly increasing postage to fund the $5.5-billlion health benefit payment is a prescription for failure, as organizations flee the mail in the face of escalating rates,” the letter read. The PRC and the Inspector General of the Postal Service have determined that mailers, through postage, have over-contributed to the Civil Service Retirement System (CSRS) by as much as $50 billion to $75 billion.

Postage rates are scheduled to rise by an average 1.7 percent, based on the Consumer Price Index (CPI), effective April 17. The USPS filed for a rate hike on Jan. 13 and the Postal Regulatory Commission (PRC) has 45 days to review it. The PRC next meets March 2. The Alliance of Nonprofit Mailers (ANM) and other mailing groups contend that the rate increase should be limited to an average 1.154 percent, based on the CPI-U of the last 12 months, and that the USPS should not be allowed to bank deflation that occurs after a previous rate hike, as in this case.

A fight over another, larger rate increase is still being battled out in court. The PRC last year rejected an exigent rate case filed by the USPS that called for an average 5.6-percent increase this year, which the Postal Service has appealed. Oral arguments are scheduled March 15 in the U.S. Court of Appeals for the District of Columbia Circuit with a decision expected in the spring. Several mailer groups filed a legal brief Jan. 14 in support of the PRC’s rejection. Sen. Susan Collins (R-Maine), a ranking member of the Postal Service oversight committee, filed an amicus brief support the decision.

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