Postal Service delivers improved financial news

What originally looked like another horrible year for the Postal Service turned into a not-so-bad one. Though the agency lost $676 million in fiscal 2002, that figure is far better than the $1.35 billion in losses originally predicted at the beginning of the year.

The improved financial picture occurred despite the fact that mail volume dropped by 4 billion pieces from 2001 and the number of addresses the Postal Service must deliver to increased by 1.7 million. Postmaster General John Potter attributed the improved performance largely to cuts in operational expenses. The agency eliminated roughly 23,000 positions through attrition this year. Revenue was also boosted by early adoption of the most recent rate hike, which, thanks to a settlement with major mailers, was implemented in June, several months ahead of schedule.

"All told, we cut and avoided $2.8 billion in costs by finding new solutions to old problems-new ways to do business and new ways to reduce costs," Potter said Tuesday at the agency's board of governors monthly meeting. "In 2002, we finally dispelled the myth that the Postal Service could not manage in a declining volume period. We did."

After Sept. 11 and the anthrax crisis, some industry experts thought agency losses could reach $4 billion.

Overall, the Postal Service saw revenues climb to $66.7 billion in fiscal 2002, up from $65.9 billion the year before. Expenses remained relatively flat at $67.4 billion.

Board of Governors Chairman Robert Rider cautioned the agency and the mailing industry not to rest on their laurels. He said the agency must build on its success and continue to improve operations. Additionally, the two sides must urge Congress to change the funding formula used to calculate the agency's contribution to the Civil Service Retirement System, he said.

Last month, the Office of Personnel Management released an analysis that showed the agency was slated to pay $71 billion more than it actually needed to cover all future costs of CSRS enrollees' pensions.

A legislative change is needed to alter the Postal Service's payments. If enacted, the agency can postpone another rate increase until 2006. Without the change, a rate hike will go into effect in 2004.

Rider also alluded to the need for more comprehensive reform of the Postal Service. Congressional efforts to enact postal reform legislation died this summer. But industry and agency sources expect the White House, perhaps as early as Wednesday, to announce a presidential commission to develop recommendations for overhauling the agency. The Association of Postal Commerce, an Arlington, Va.-based trade association, reported on its Web site that Harry Pearce, chairman of Hughes Electronics, will be tapped to lead the commission. James Johnson, former chairman of Fannie Mae, is rumored to be vice chairman. The commission would have to complete its work by July 31, 2003.

White House spokesman Taylor Griffin would not confirm the reports, but said that the administration is "intrigued" by the idea of a presidential commission given the host of security and financial problems facing the agency.