Postal Service losses reach $3.9B in 2013

The troubled United States Postal Service (USPS) on Friday reported its losses for 2013 have reached $3.9 billion, a substantial loss that nonetheless puts it on track to have a smaller loss for the year than last year.

The USPS had a net loss of $740 million in the third quarter that ended June 30.

"[T]he Postal Service will not return to profitability and long-term financial stability without passage of comprehensive legislation to fix a business model that does not allow it to adapt to changes in the marketplace," the USPS said in a statement. 

The service’s newest losses came after its losses declined by $3.2 billion in the first six months of fiscal 2013, and after it lost a record $15.9 billion in 2012.

The vast majority of that red ink stems from a requirement for the agency to prepay for future retirees healthcare, but the Postal Service has also faced declining first-class mail volume for some seven years now.

A rare bright spot for the agency has been an increase in revenue from package delivery, spurred at least in part by the rise in online shopping.

Package revenue was up 8.8 percent, compared to the third quarter of 2012, while first-class mail revenue declined 0.9 percent due to a 3.4-percent decrease in mail volume. 

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Lawmakers in both parties and both chambers are pushing legislation to try to solidify the Postal Service’s financial situation. Postmaster General Patrick Donahoe says that the service will be facing around a $20 billion annual gap in the coming years.

Legislation introduced in both the House and the Senate seeks to change the prepayment requirement and give the agency more leeway to cut costs and find new revenue streams. But Congress has been trying to reach a deal on postal reform for more than two years, and partisan differences still remain.

House Oversight Committee Chairman Darrell Issa (R-Calif.) has moderated some of his previous proposals, but Democrats in his chamber and postal unions have blasted Issa’s current plan for allowing the USPS to end Saturday letter delivery and move away from door-to-door and curbside delivery.

In the Senate, Homeland Security Committee Chairman Tom Carper’s (D-Del.) bill with Sen. Tom Coburn (R-Okla.) would open the door for the service to only deliver packages on Saturday after a year. Donahoe pushed to unilaterally implement that set-up this year, before backing down amid complaints from lawmakers.

Other Democrats and organized labor have pushed to keep Saturday delivery, saying it’s a competitive advantage for USPS. Sen. Bernie Sanders (I-Vt.), who played a key role in crafting the postal bill the Senate passed in 2012, has also criticized Carper and Coburn’s bill for dropping or softening some of the provisions in that measure. 

The Postal Service said efficiencies it has imposed helped expenses decline from $20.8 billion in the same period last year to $16.2 billion this year. This year, USPS has consolidated 104 processing facilities and reduced career employee hours by 41 million. The main components of the drop were related to a smaller pension pre-funding requirement and changes to workers compensation, however.

USPS revenue was also up 3.6 percent to $16.2 billion, compared to the third quarter of 2013.

Carper in a statement said the results once again make the case for his bipartisan bill crafted with Coburn.

"While last quarter was an improvement compared to what we saw in 2012 – and even earlier this year – these figures certainly make it clear that the only way to alleviate the Postal Service’s financial challenges is by passing comprehensive postal reform legislation," Carper said.

His office pointed out that the USPS has $15.9 billion debt stemming from its first default to the government last year and does not have the cash to make a new $5 billion payment due in September.

A postal workers union leader said the improving results for the USPS make the case for ending the pre-funding requirement for future health benefits but keeping door-to-door and Saturday delivery in place.

"Although it reported a loss of $740 million, the agency would have reported a profit of $660 million absent the $1.4 billion payment it was charged for pre-funding future retiree health benefits -- a bill no other company or agency in the country is required to pay," said Fredric Rolando, president of the National Association of Letter Carriers.

"Given this, it makes no sense to degrade service or dismantle a network that is performing well and that provides Americans and businesses with the world's most affordable delivery network," he added.

--This report was updated at 4:08 p.m.