Postal Service loses $5 billion in third quarter

The U.S. Postal Service lost $5.2 billion in the third quarter of fiscal 2012, $2.1 billion more than the same period last year, according to the agency’s latest financial report.

Of the $5.2 billion USPS lost from April to June, the agency’s obligation to prefund retiree health benefits ate up $3 billion.

The third quarter numbers mean the Postal Service is in the red for $11.6 billion and counting for the year compared to $5.7 billion during the same period in fiscal 2011. The agency’s obligation to prefund retiree health benefits have accounted for the lion’s share of the Postal Service’s expenses so far in 2012. USPS defaulted on its $5.5 billion prefunding payment on Aug. 1 and won’t be able to pay another $5.6 billion due on Sept. 30, absent legislative changes, postal officials said during a briefing on Thursday. Even though it cannot pay its debt related to that 2006 congressional mandate, the Postal Service still must account for the expenses in its books.

“Current projections show very low levels of cash, and no remaining borrowing capacity, at the end of the current fiscal year and through October 2012,” the agency said in a statement. Postal officials reiterated that USPS will continue to prioritize payments to employees and suppliers during its fiscal crisis. Acting Chief Financial Officer Stephen Masse said the agency could lose a total of about $15 billion in fiscal 2012, which is the agency’s annual debt ceiling.

Congress has been unable to agree on legislation to reform the financially ailing postal service. The Senate passed its postal reform bill four months ago, but the House version hasn’t reached the floor yet. Postmaster General Patrick Donahoe said he hopes both chambers can hammer out a deal during the lame duck session of Congress after the November elections.

Among other things, the Senate’s postal reform bill restructures the agency’s retiree health care prefunding obligation. The House bill, which the Oversight and Government Reform Committee has approved, would require USPS to pay $1 billion of its fiscal 2011 prepayment obligations and make up the remainder in fiscal 2015 and 2016. At the end of June, the prefunded retiree health benefit fund balance was $45.3 billion.

Donahoe said Congress has to step up and pass reform legislation soon. “We’ve reduced head count by one-third and work hours by one-third,” he told reporters during a conference call. “We can only do so much.”

The Postal Service has managed to cut nearly $14 billion from its annual cost base during the past five fiscal years, in part through reducing work hours and offering buyouts to thousands of postal employees. The Federal Times reported earlier this month that nearly 3,800 postmasters accepted buyouts or early retirement to leave the Postal Service as of July 31, and hundreds more plan to join them in the coming weeks. USPS, through its five-year strategic plan released in May, also is moving ahead with consolidating mail processing facilities. The agency’s compensation costs for employees fell slightly at the end of the third quarter from the same time last year.

Shipping and packaging services remain a bright spot for USPS, even as the volume of first-class mail continues to decline. Shipping services and package revenue totaled $3.3 billion in the third quarter, a 9 percent increase from the same time last year. Overall, revenue in that category for the last nine months ending June 30 was $10.6 billion, a 9.9 percent increase from the same period in 2011. Still, that success is not enough to offset the Postal Service’s significant costs related to prefunding retiree health care, officials said.

Despite the agency’s ongoing financial woes, the public remains highly satisfied with the Postal Service’s performance. Megan Brennan, USPS chief operating officer and executive vice president, said 89 percent of residents surveyed for the agency’s customer experience measurement were pleased with the Postal Service in the third quarter, an increase over last year’s third quarter. Eighty-four percent of small and medium-size businesses gave the agency a thumb’s up for the third quarter of fiscal 2012.

The Postal Service’s broke status doesn’t seem to have hindered its ability to deliver the mail on time. The National Bureau of Economic Research released a working paper this month that concluded the agency was very good at its job. Economists from several universities tested the efficiency of the postal systems in 159 countries by mailing letters to nonexistent addresses around the world. USPS had the quickest and most effective service, returning the test letters within 16 days on average. It topped other high-income countries tested, including Canada, Norway and the Czech Republic.

(Image via

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from
We think these reports might interest you:

  • Forecasting Cloud's Future

    Conversations with Federal, State, and Local Technology Leaders on Cloud-Driven Digital Transformation

  • The Big Data Campaign Trail

    With everyone so focused on security following recent breaches at federal, state and local government and education institutions, there has been little emphasis on the need for better operations. This report breaks down some of the biggest operational challenges in IT management and provides insight into how agencies and leaders can successfully solve some of the biggest lingering government IT issues.

  • Communicating Innovation in Federal Government

    Federal Government spending on ‘obsolete technology’ continues to increase. Supporting the twin pillars of improved digital service delivery for citizens on the one hand, and the increasingly optimized and flexible working practices for federal employees on the other, are neither easy nor inexpensive tasks. This whitepaper explores how federal agencies can leverage the value of existing agency technology assets while offering IT leaders the ability to implement the kind of employee productivity, citizen service improvements and security demanded by federal oversight.

  • IT Transformation Trends: Flash Storage as a Strategic IT Asset

    MIT Technology Review: Flash Storage As a Strategic IT Asset For the first time in decades, IT leaders now consider all-flash storage as a strategic IT asset. IT has become a new operating model that enables self-service with high performance, density and resiliency. It also offers the self-service agility of the public cloud combined with the security, performance, and cost-effectiveness of a private cloud. Download this MIT Technology Review paper to learn more about how all-flash storage is transforming the data center.

  • Ongoing Efforts in Veterans Health Care Modernization

    This report discusses the current state of veterans health care


When you download a report, your information may be shared with the underwriters of that document.