The U.S. Postal Service made a strong first impression in fiscal 2016, marking the second consecutive year in which it posted a billion-dollar profit.
In a conference call with reporters, Postmaster General Megan Brennan said USPS’ first-quarter financial report reflects stable letter revenue and yet another record year for package delivery this holiday season. However, she held firm on her determination for Congress to pass postal reform legislation.
Overall, USPS made $1.3 billion in controllable income in the first quarter of fiscal 2016. That figure excludes costs beyond the Postal Service’s control, most notably its congressional requirement to pre-fund retiree health benefits for the next decade. Factoring those costs in, USPS earned a net income of $307 million.
USPS’ shipping and package revenue grew 13.5 percent compared to last year’s first quarter, while volume rose by 16 percent volume. Brennan said negotiations with the four postal unions allowed for the postal workforce to scale up quickly to meet peak demand this holiday season.
“When I look from a national perspective, roughly 20 percent of the workforce is a flexible workforce that gives us, again, that ability to adjust, not just given the seasonality of volume, but on a daily basis. We appreciate the responsible position that the union presidents have negotiated with us,” she said.
Brennan said USPS should focus on improving the number of deliveries made per hour through better use of technology and dynamic routing to drive up efficiency.
“The $1.3 billion quarterly operating profit announced today by the Postal Service is positive news that augurs well for the future. The continuing financial upswing shows the importance of maintaining and strengthening the unparalleled — and profitable — postal network, which offers Americans the world’s most affordable delivery services,” National Association of Letter Carriers President Fredric Rolando said in an email to Federal News Radio. “This impressive performance at the start of Fiscal Year 2016 builds on back-to-back years of operating profits each exceeding $1 billion, without a dime of taxpayer money.”
The Postal Service will be in the middle of labor negotiations with all four of its unions by the end of this month. USPS is currently negotiating with the National Rural Letter Carriers’ Association, and will begin interest arbitration with the American Postal Workers Union on Feb. 17, during which both parties will bring their unresolved contract negotiations before an independent authority for settlement.
The Postal Service will open its contract negotiations with the National Association of Letter Carriers on Feb. 19, and with the National Postal Mail Handlers Union on Feb. 25.
“We’re still talking with the parties. Our objective is a fair contract for our employees, our customers, and the Postal Service,” Brennan said. “In the meantime, the parties will continue to follow the current agreement until a new contract is reached.”
Executive Vice President Joseph Corbett said he expects revenue to significantly increase this fiscal year due to the postage rate increase that went into effect on Jan. 17.
Despite the first quarter’s positive numbers, Brennan reiterated her push for postal reform legislation from Congress. She recently testified before Senate Homeland Security and Governmental Affairs committee during a Jan. 21 hearing on the subject.
“We need legislation. Absent that, our financial condition worsens, and that’s not good for the industry, given that the Postal Service is a platform to enable their continued growth,” Brennan said.
Sen. Tom Carper (D-Del.) introduced a bill in September that would create a new health benefits program specifically for postal employees and annuitants and require those eligible to enroll in Medicare. He said USPS’ good news won’t last long without action from Congress.
“Behind these positive numbers lie longstanding financial burdens that threaten the Postal Service’s future. And in just two months, things will get worse when the emergency rate increase that has been keeping the Postal Service’s head above water expires. Even a 13.5 percent increase in packages is not enough to compensate for an expected $2 billion revenue loss should the temporary emergency rate increase expire in April,” Carper said. “There is broad consensus among a large number of stakeholders, union leaders, and postal leadership that substantive legislative reforms are urgently needed to head off these expected losses.”
A federal court of appeals ruled in June that the USPS had to roll back its emergency postage increase of 49 cents, up from 46 cents, for first class mail in order to recoup losses from the 2008 recession.
President Barack Obama on Tuesday requested a permanent extension of the emergency rate in his fiscal 2017 budget proposal.