The U.S. Postal Service lost another $1.3 billion in the first quarter of fiscal year 2013, but would have actually turned a $100 million profit had it not been for one expensive detail postal officials would really like Congress to change really soon.
The Postal Accountability and Enhancement Act of 2006 requires the Postal Service to prepay 75 years worth of its future retirees' health benefits at the rate of approximately $5.6 billion per year over the 10 years from 2007 to 2016. Accounting for payments already made, the Postal Services' still owes about $46.2 billion in retiree health prepayments to be paid by Sept. 30, 2016.
During the first quarter of fiscal year 2013, the Postal Service paid $1.4 billion toward it future retiree health benefit obligation, thus turning a potential $100 million profit into a $1.3 billion loss.
In slightly better news, the Postal Service reported a 4.7% increase in its shipping and package delivery revenue for the first quarter of 2013.
NOTE: According to the Congressional Research Service report, The U.S. Postal Service's Financial Condition, the Postal Service's average weekly operating expense is also about $1.4 billion. Not a good sign for a business that had only $1.5 billion in cash on hand at the end of fiscal year 2011.
Comptroller Calls Situation 'Dire'
On February 13, U.S. Comptroller General Gene Dorado told the Senate Committee on Homeland Security and Governmental Affairs that while the Postal Service had succeeded in reducing its operating costs by $15 billion and cutting nearly 170,000 employees, it had recorded a net total loss of over $40 billion since 2006.
Laying it on the line, Dorado told the committee that Postal Service now "faces a dire financial situation and does not have sufficient revenues to cover its expenses, putting its mission of providing prompt, reliable, and efficient universal services to the public at risk."
"USPS continues to incur operating deficits that are unsustainable, has not made required payments of $11.1 billion to prefund retiree health benefit liabilities, and has reached its $15 billion borrowing limit," stated Dorado.
Speaking of borrowing, by law, the Postal Service can borrow its maximum of $15 billion only from the U.S. Treasury. While the Postal Service gets a premium interest rate from the Treasury, postal officials say it could save money by borrowing an uncapped amount of money from private sector lending institutions, which might compete to service its debt.
But, like being released from the retiree health prefunding requirement, gaining freestyle borrowing freedom will require the Postal Service to get lots of legislative help from Congress. Help, that is, which was placed in jeopardy when Postmaster General Patrick Donahoe announced that the Postal Service would stop Saturday mail delivery on August 1, with or without the approval of Congress.
Clearly believing the action did require congressional approval, Senate Majority Leader Harry Reid said of Postmaster Donahoe's Saturday mail gamble, "The postmaster general's actions have damaged his reputation with congressional leaders and further complicate congressional efforts to pass comprehensive postal reform legislation in the future."