The Postal Service is falling short of its goal to start turning around its financial losses this year, but Postmaster General Louis DeJoy says the agency is taking “aggressive actions” to get the agency back on track to break even by the end of the decade.
USPS reported a $2.5 billion net loss for the second quarter of fiscal 2023, and is expected to see a net loss for the entire fiscal year.
The agency saw more than an 8% decline in first-class mail volume and a 5% decline in package volume, compared to the same period last year.
Under the 10-year “Delivering for America” plan, released in March 2021, USPS expected to start breaking even on its annual finances as soon as 2023, but no later than 2024.
USPS, under this plan, anticipated fully digging out of its long-term financial hole by 2030, going from $160 billion in projected net losses to a $200 million net profit.
Two years into its 10-year reform plan, USPS has cut its projected losses for the next decade in half — from $160 billion to $70 billion.
“Not meeting our short-term financial goals, as specified in the DFA is not taken lightly,” DeJoy said during a meeting of the USPS Board of Governors Tuesday. “We will be taking more aggressive actions to get back on track.”
Congress last summer passed the Postal Service Reform Act, a long-awaited reform bill expected to save USPS $107 billion in total. Given an immediate $57 billion forgiveness if payments owed to its retiree health benefits fund, USPS reported a $56 billion net profit in fiscal 2022.
USPS Chief Financial Officer Joe Corbett said the agency is seeing a continued reduction in its surge in packages that started under the COVID-19 pandemic. However, USPS package volume remains above pre-COVID levels.
To further cut costs, USPS is calling on the Biden administration for an adjustment in what it contributes to cover postal employees under the Civil Service Retirement System (CSRS).
The Office of Personnel Management is responsible for administering CSRS benefits for USPS employees, and calculates what USPS must contribute every year to cover retiree health benefits for current employees.
USPS, by law, can only invest its retiree and pension funds in low-risk, low-reward Treasury bonds.
But a recent report from the inspector general’s office found that if USPS invested those funds in a portfolio of 60% stocks and 40% bonds, its financial situation would improve dramatically.
Under this hypothetical investment portfolio, USPS’s CSRS fund would go from a $41 billion deficit to a $700 billion surplus, and its Federal Employees Retirement System (FERS) fund would go from a $32 billion deficit to a $74 billion surplus.
Meanwhile, USPS is settling into a familiar routine of biannual rate increases for its monopoly mail products. USPS plans on July 9 to raise the price of a first-class stamp from 63 to 66 cents — after raising rates last January and in July 2022.
However, Martinez said USPS rates still remain competitive, compared to what other postal organizations charge for their services in other countries.
He added USPS is required by its regulator, the Postal Regulatory Commission, to contribute a “significant portion” of the revenue from its increased mail rates toward its retirement funds— about $600-$900 million annually.
DeJoy said USPS has stabilized its workforce and service performance over the past two years under the 10-year plan.
“From an operational standpoint, it is a different Postal Service from two short years ago. Throughout the organization, there is a new can-do attitude, growing optimism and operational aptitude. People are ready to take on the many challenges and opportunities that remain in front of us,” he said.
DeJoy added that, under current USPS service standards, 50% of first-class mail is getting delivered a day early.
“Our improvements to service have occurred because of, and while making, many significant changes to our operating conditions and strategies,” he said.
DeJoy said USPS has “ambitious plans” to address areas with lower on-time delivery, “particularly rural areas that are not receiving improved experienced we have delivered to the rest of the nation.”
“We expect the next two years to be more exciting and consequential than the first — they need to be. And we will work diligently to fulfill the goals that are Delivering for America Plan,” he said.
USPS Governor Ron Stroman, a former deputy postmaster general, said a long-awaited service performance dashboard will go live on May 19. The dashboard is mandated under the Postal Service Reform Act.
The postal community is counting on USPS to use its upcoming performance dashboard next month to begin addressing degradations in delivery service that have persisted in recent years.
Stroman said the dashboard is also critical, “given the sweeping changes underway in our processing delivery and transportation networks.”
He also said the dashboard would allow the public to see how well USPS is upholding its obligation to “provide fair and equitable delivery of mail and packages” all across the country.
“The issue of service equality needs to be studied and analyzed and addressed in a systemic and data-driven fashion. Otherwise, the discussions can degenerate into accusations and self-serving justifications,” Stroman said.