Postal Service financial woes will continue in 2011

The ailing U.S. Postal Service will experience a net loss in fiscal 2011 similar to that of 2010, according to agency estimates in President Obama's budget.

Declining mail volumes have contributed to net losses for the agency every year since 2007. The Postal Service expects that trend to continue through 2011, when losses will total $7.8 billion.

The fiscal 2011 budget, which acknowledges the Postal Service's financial concerns, commits the Obama administration to working with the agency, its employee unions, Congress and other stakeholders to keep mail operations viable. Discussions already are under way on several issues, said Gerald McKiernan, a USPS spokesman.

The administration is aware of the agency's interest in moving to five-day delivery, he said, though no changes will occur before Sept. 30. The proposed fiscal 2011 budget would not eliminate Saturday mail delivery.

The Postal Service also is exploring alternatives to a 2006 provision requiring it to prefund retiree health benefits at $5 billion per year, McKiernan said, adding USPS is looking for some relief or readjustment of payment.

The agency is the only federal organization with a prefunding obligation. Congress in 2009 reduced the payment to $1.4 billion for that year, but according to McKiernan, no specific long-term proposals are on the table.

In a Feb. 1 question-and-answer session hosted by YouTube, Obama said he has no plans to privatize USPS because of its commitment to universal service.

"[Privatization is] a bad idea, most of the time," he said, adding that companies focused on revenue likely wouldn't be willing to deliver mail to hard-to-reach areas. "You've got to make sure that you look carefully at what privatization proposals are out there."

The Postal Service on Feb. 9 announced a net loss of $297 million in the first quarter of fiscal 2010. The agency posted a 3.9 percent decline in revenue but also saw expenses decline 4.4 percent because of work-hour reductions equivalent to 15,800 full-time employees.

"Unfortunately, economic drivers that significantly affect mail volumes, such as continuing high unemployment levels and lower investments, appear to be lagging general economic recovery and last quarter's growth in [gross domestic product]," said John Corbett, USPS chief financial officer and executive vice president, in a statement. "This situation, coupled with the growth in electronic alternatives to mail, creates a very challenging environment."