Postal Service to manage losses with more workforce cuts

By Emily Long

November 12, 2010

The U.S. Postal Service lost $8.5 billion in fiscal 2010 despite significant work hour reductions, and the agency could find itself out of cash in 2011, officials said on Friday.

During a board meeting, Postal Service leaders reported losses of $6 billion last year, plus $2.5 billion in workers' compensation liabilities, despite lower operating expenses and workforce cuts. USPS lost less than half that total -- $3.8 billion -- in fiscal 2009.

Chief Financial Officer Joseph Corbett said the Postal Service was able to fulfill its financial obligations in 2010 thanks to higher revenue and reduced costs, but noted workers' compensation and requirements to prefund retiree health benefits at more than $5 billion annually were out of the agency's control.

"We expect to go through the year with significant cash to continue operations, but we don't plan to have sufficient cash to pay all our obligations, including the $5.5 billion retiree health payment at the end of the year," Corbett said. He noted USPS will do everything possible to meet its financial obligations but still will require fundamental organizational change.

The Postal Service in 2010 cut 75 million work hours, including a 10.6 percent decline in mail processing and a 10.1 percent drop in customer service hours. The agency has eliminated the equivalent of 105,000 full-time employees since 2009 and plans to take out almost 50 million additional work hours in 2011. Corbett said he expects growth in mail volume for the first time in four years, but noted USPS will have to manage the increase with fewer people. Labor costs account for nearly 80 percent of the agency's expenses.

The board also approved the Postal Service's fiscal 2011 financial plan, which projects losses of $6.4 billion. Members expressed concern about USPS' potential to reach its $15 billion borrowing limit, but said the agency is in dire circumstances.

Lawmakers noted significant change is necessary to solve the Postal Service's financial problems.

"This latest historic loss by the U.S. Postal Service is disappointing, but not surprising given the serious financial peril in which it currently finds itself," said Sen. Tom Carper, D-Del. "If corrective action is not taken quickly, the Postal Service will likely run out of cash and borrowing authority by this time next year, placing its ability to continue operations in serious jeopardy. This report underscores the urgent need for Congress to move swiftly to consider comprehensive postal reform legislation … in order to avert a catastrophe for the Postal Service."

Carper has introduced legislation granting the Postal Service flexibility to address its financial predicament. Rep. Darrell Issa, R-Calif., who likely will chair the House committee that oversees USPS, also plans to tackle reform, but noted the agency still needs to cut cost.

"This loss only underscores the urgent need for the Postal Service to trim its operating costs to match revenues," Issa said. "Congress has an obligation to ensure that effective solutions are implemented and taxpayers don't get stuck paying for a bailout."

USPS is self-funded and receives no tax dollars for operating expenses.

The board also approved the nominations of Chairman Louis Giuliano and Vice Chairman Thurgood Marshall to serve in their positions for another year. Starting in December, Deputy Postmaster General and Chief Operating Officer Patrick Donohoe will take over for Postmaster General John Potter, who is retiring.


By Emily Long

November 12, 2010

http://www.govexec.com/oversight/2010/11/postal-service-to-manage-losses-with-more-workforce-cuts/32732/