The Postal Service, citing higher costs beyond its control, is falling behind on plans to reach long-term financial stability.
USPS on Tuesday reported a $6.5 billion net loss for fiscal 2023.
Under its 10-year USPS Delivering for America (DFA) plan, the agency expected it could “break even,” and start to dig out from years of billion-dollar net losses by this point.
Those financial challenges are expected to continue for the rest of this fiscal year. Postmaster General Louis DeJoy said USPS “will not reach break-even results in 2024.” USPS estimates it will end FY 2024 with a $6.3 billion net loss.
“While we are not happy with this result, we cannot lose sight of the downward trajectory the Postal Service faced in the fall of 2020, after years of neglect and willful indifference by its stakeholders and custodians prior, and of our substantial progress we have made in correcting our condition and our trajectory,” DeJoy said.
Despite falling short of goals, DeJoy told the USPS Board of Governors that the 10-year plan was developed in a “crisis environment during a pandemic, with dwindling cash and mounting year-after-year losses.”
At the time of the 10-year plan’s launch in March 2021, USPS was expected to see $160 billion in losses by 2030. At this point, however, the agency projects ending the decade with a $60 billion net loss.
The agency’s FY 2023 results mark a sudden reversal. USPS ended FY 2022 with a $56 billion net income for fiscal 2022, ending a 15-year streak of annual net losses. That’s after Congress passed the Postal Service Reform Act, meant to save USPS billions of dollars upfront and in the years ahead.
USPS Board of Governors Chairman Roman Martinez IV said the agency’s revenue remains “well ahead of what was projected” in the 10-year plan.
But DeJoy said that efforts to grow revenue, as well as reduce labor and transportation costs, were “simply not enough to overcome our costs to stabilize our organization.”
Those higher costs include $3 billion in additional payments into the Civil Service Retirement System (CSRS) benefits, which covers most employees hired before 1984.
USPS also saw $2.6 billion in higher-than-anticipated costs due to inflation.
“If not for these two specific factors, break-even results for 2023 were well within reach,” DeJoy said.
The board, in a vote Tuesday, approved allowing USPS to borrow up to $3 billion from the Treasury Department this fiscal year.
USPS borrowing the full amount from the Treasury would bring USPS to its $15 billion borrowing limit.
USPS is calling on the Biden administration and Congress for an adjustment in what it pays into the CSRS fund.
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 and its inspector general’s office both claim the agency has overpaid into the CSRS fund.
USPS board members raised concerns about the agency’s ongoing financial challenges, but said DeJoy’s 10-year plan remains the best way to overcome long-term challenges.
Governor Dan Tangherlini, head of the General Services Administration during the Obama administration, said that nearly three years into implementing the DFA plan, “we have not yet made all the progress we had hoped for.”
“The proposed losses for the coming year reiterate the continued need for reform and restructuring. As governors, we’ll need to redouble our efforts to focus on the strategies and support of achieving the necessary financial viability of this vital organization,” Tangherlini said.
Tangherlini said the 10-year DFA is a “living plan” that “needs to change and evolve, as the circumstances require.”
Governor Ron Stroman, a former deputy postmaster general, said USPS is “not where we need to be,” in terms of its budget and operations. In addition to a financial loss, Stroman said USPS missed many of its service targets for on-time delivery.
Governor Amber McReynolds acknowledged some areas of concern with USPS finances, but said the agency has made some progress in stabilizing its workforce and making long-overdue improvements to its infrastructure.
“Multiple things can be true at once. We can be achieving parts of the DFA and not others, particularly the financial stability goals and service delivery. We can be strengthening our workforce, while also still struggling to hire in some rural areas and challenging areas of the country — which has a direct and negative impact on service. We can be hitting milestones in our environmental goals, while also still identifying areas of opportunity,” she said.
“The only way we move forward to achieve our mission of universal service and financial stability at this moment is with continuous improvement, innovation, accountability, building resilience, and also doing so with honesty to adjust to the challenges that are constantly evolving,” McReynolds added.
DeJoy said USPS in FY 2024 will continue to push for a “growing share” of a package business that competes with private-sector shippers. He said USPS is looking to grow its package revenue by $1 billion by the end of fiscal 2024.
USPS, he added, also expects to cut another 28 million work hours in FY 2024, in an effort to save more than $1 billion in labor costs. Workforce salaries and benefits make up almost 70% of total USPS costs.
The agency also expects to complete construction on 20 modernized mail processing facilities, roll out 30,000 new delivery vehicles, and open nearly 100 Sorting and Delivery Centers (S&DCs) across the country.
S&DCs are large facilities that bring mail processing and mail delivery operations all under one roof.
DeJoy however, told the board that meeting the DFA plan’s goals is “not a perfect science,” and that USPS will keep making adjustments as it implements elements of the plan.
“The road to success and the scope of the challenges we are compelled to make will invariably result in some disruption on any given week, in any given area, for any given service,” DeJoy said. “However, I can assure the American people and our customers that we will respond rapidly to correct for the impacts to service that might result from these complicated changes.”
The USPS board will soon operate with less than its full strength.
The terms of two of its members, William Zollars and Lee Moak, will expire in December.
President Joe Biden has not yet nominated new members to take their place.
The board reelected Martinez to serve for another year. The board also chose McReynolds to serve as its new vice chairwoman.