USPS calls on Congress to fix its ‘fundamental financial challenges’

The U.S. Postal Service fared better this financial quarter than it did last year, but the Postmaster General says Congress has been slow to remove a weight around the agency’s neck.

USPS increased its “controllable” income in the second quarter to $576 million, compared to $313 million last year. These figures account for operational costs like workers’ compensation and benefits.

However, Postmaster General Megan Brennan said that progress shouldn’t “mask the fundamental financial challenges” that the Postal Service faces.

Factoring in the USPS’ obligation to pre-fund health benefits for future postal retirees, however, the agency actually registered a $2 billion net loss this quarter. Combined with the Postal Regulatory Commission’s reduction of postal rates on April 10, Brennan said the agency can’t go on like this without major postal reform from Congress.

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“This is clearly revenue that we can’t afford to lose. It worsens our financial conditions, and it’s why we are seeking restoration of the exigent surcharge through legislation,” Brennan said Tuesday. “While serious, our financial situation is solvable, and we’re confident that we can return to financial stability through prudent legislative reform.”

Brennan, who is scheduled to testify before the House Oversight and Government Reform Committee on Wednesday, mapped out a four-point platform of reforms that would bring in $32 billion in costs savings and new revenue over the next five years. Those proposals include:

  • Medicare integration for postal retiree health plans.
  • Bringing back the exigent postal rate increase that the PRC did away with on April 10.
  • Calculating retirement benefit liability using postal-specific salary growth.
  • Allowing USPS more product flexibility.

“Frankly, we believe that these provisions are capable of gaining broad support, so I’m pleased that we’re having the House Oversight Committee hearing tomorrow, giving us again an opportunity to discuss these critical issues,” Brennan said.

The plan to require full participation in Medicare for all postal retirees is a major component of Sen. Tom Carper’s (D-Del.) Improving Postal Operations, Service, and Transparency Act. Carper, the leading postal advocate in the Senate, said USPS has been put in an unfair disadvantage for too long.

“Despite a rise in revenue and shipping volume, the Postal Service is, yet again, reporting significant  losses. The agency’s latest financial report reiterates a hard truth: due to long-term financial challenges and constraints placed on it by Congress, the Postal Service is unable to raise enough revenue to cover its costs and continues to suffer unsustainable losses that threaten its long-term viability,” Carper said in a statement. “Without a legislative fix, these losses will inevitably get worse, especially after the Postal Service was forced to lower rates last month for the first time in nearly a century.”

The Postal Service is projected to lose $1 billion in revenue in the absence of the temporary postal rate increase, and $2 billion in subsequent years.

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Fredric Rolando, president of the National Association of Letter Carriers, voiced his support for reversing the PRC’s reduction of postal rates.

“This makes no financial sense, particularly when USPS already has the lowest rates in the industrialized world and other nations’ postage rates are rising,” Rolando said in a statement. “Nevertheless, the adverse effect on postal revenues should be short-term in nature since the Postal Regulatory Commission’s scheduled review of the postage rate-setting system begins in less than seven months. We are confident that the PRC will restore rates to sensible levels before implementing a new system.”

Overall mail volume increased by 1.4 percent this year, compared to last year’s Q2 results, and shipping and package volume rose 11.4 percent.

“We are competing effectively for customers in this competitive space,” Brennan said of the Postal Service’s performance in package delivery.

Regardless of mail volumes, Brennan said USPS is required to maintain an “extensive network” to process and deliver mail six days a week.

“The cost of that network is largely fixed or growing, regardless of volume. But less volume and limited pricing flexibility means that there’s less revenue to pay for that network and fund other costs imposed upon us by law,” Brennan said.

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Rolando said the time for Congress to act on postal reform is long overdue.

“If lawmakers adopt a smart, targeted reform package that includes addressing pre-funding, allowing USPS the flexibility to use its invaluable networks for some new products and services, and adopting best private-sector practices in investing the USPS retiree health benefits fund, USPS can continue to provide Americans and their businesses with the world’s most affordable delivery services,” Rolando said.