‘We are not financially strong’: USPS reports 12th year of net losses

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The day after getting the green light to significantly raise postal rates in 2019, the Postal Service marked its 12th straight fiscal year of net financial losses.

USPS on Wednesday posted a net loss of $3.9 billion for fiscal 2018, more than a billion-dollar increase from the $2.7 billion loss it reported for 2017, but still lower than its $5.6 billion loss for 2016.

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The Postal Service saw first-class mail volume decrease by 2.1 billion pieces, or 3.6 percent, but saw a 6.8 percent increase in its package delivery volume. And despite previous concerns about the sustainability of double-digit growth, the agency saw more than a 10 percent increase in package revenue, worth about $2 billion.

On Tuesday, the Postal Regulatory Commission approved the biggest increase in first-class stamp prices since 1991, raising rates up from 50 cents to 55 cents starting on Jan. 27, 2019.

The PRC also approved a pricing increase for the Postal Service’s shipping and package products. The USPS Board of Governors requested the rate hikes from the PRC last month.

Postmaster General Megan Brennan, speaking to reporters in a conference call Wednesday, said the rate increase would provide USPS with “vital additional revenue that we absolutely need to help fund our operations.”

Joe Corbett, USPS chief financial officer, estimated the upcoming price increase would’ve brought in $1.6 billion in additional revenue — about $800 million from “market-dominant” mail products like letters, and about $880 million from “competitive products” like its package and shipping business.

It remains unclear when President Donald Trump plans to release a final report based on a White House postal task force he created in April. The task force, chaired by Treasury Secretary Steve Mnuchin, gave the president its recommendations in August. 

“The release of the report is within the discretion of the administration, and we don’t have any definitive information regarding its release,” Brennan said.

The Homeland Security and Governmental Affairs Committee was originally slated to hold a hearing on the postal task force recommendations, but postal sources say the White House decided to hold off on publicly releasing the findings until after the midterm elections.

However, the administration has already signaled its intention to restructure and privatize USPS as part of its larger government reorganization plan, but has met strong bipartisan opposition from lawmakers on selling the Postal Service.

In the meantime, Brennan said legislative reform remains an essential part of putting the Postal Service on firm financial footing — along with “aggressive management” of the business and pricing system reform.

“While the organization is fundamentally strong in terms of the value we deliver and the role we play in America’s economy and community, we are not financially strong,” Brennan said. “The Congress and our regulator must make statutory and regulatory changes to our business model to return the Postal Service to financial stability.”

House and Senate lawmakers have introduced several similar postal reform bills in recent years. Last year, the House Oversight and Government Reform Committee passed its version of postal reform, but the bill failed to receive a full House vote.

Most of the bills would require postal retirees to enroll in Medicare Part B, and would eliminate the current mandate to pre-fund retiree health benefits.

Despite the National Active and Retired Federal Employees Association’s (NARFE) opposition to the Medicare provision, as it would also require current retirees to enroll, Brennan said the provision remains the “cornerstone of our legislative ask.”

“Without these changes, our financial results will continue to deteriorate, and likely at an accelerating rate. Simply put, absent legislative and regulatory change, we cannot generate revenue or cut enough costs to pay all of our bills,” she added.

Corbett said USPS defaulted on $6.9 billion in payments to prefund retiree health benefits in FY 2018, adding that making the payments would’ve put “undue risk” to the agency meeting its core mission.

Brennan said the Postal Service looks to make postal reform a primary goal of the new congressional session.

“While we’re conscious of the waning weeks of this session, we’ll continue to emphasize the urgency of moving reform and we’ll take it up again in the next Congress,” she said.

The Postal Service is also ramping up for its busiest delivery period. Brennan said USPS expects to deliver 16 billion pieces of mail and packages between Thanksgiving and Christmas, and more than 900 million packages — about a 5 percent growth in its holiday package volume from last year.

“We’ve increased our network capacity, we’ve expanded our air and surface transportation,  we’ve added package sortation capability,” Brennan said. “We have an unrivaled ability to flex our delivery window, we’re hiring seasonal workers and we’re enhancing visibility across the enterprise.”

USPS remains in negotiations with the American Postal Workers Union and the National Rural Letter Carriers’ Association.

“We want to reach a negotiated agreement that’s fair to the employees, fair to the Postal Service and to our customers,” Brennan said.

Fredric Rolando, president of the National Association of Letter Carriers, in a statement Wednesday called on lawmakers to address the pre-funding mandate and called on the PRC to improve the postage rate-setting system.

“Fixing the external financial burdens posed by the price rollback and pre-funding will put postal finances on a stable footing and allow USPS — which is based in the Constitution, funds itself through earned revenue, and enjoys broad public and political support — to continue providing Americans and their businesses with the industrial world’s most affordable delivery network,” Rolando said.

John McHugh, chairman of the Package Coalition, said in a statement his organization was encouraged by the success of USPS’s package business.

“This continued growth is the result of USPS’ unparalleled ability to deliver packages to more than 157 million doorsteps, seven days a week. Postal package delivery is particularly critical for small businesses and consumers in remote and rural areas,” McHugh said.