A $5.1 billion net loss ordinarily would be a major incentive for a company to make some adjustments. But it appears unlikely that the U.S. Postal Service will see any major changes any time soon despite announcing that red ink Friday.
That’s not because the postal service’s leaders don’t think changes are needed; it is that their hands are tied. They can’t act without Congress’s approval, and while the leaders could fairly be said to have begged for new legislation, lawmakers are a long way from agreeing on any legislation to overhaul the post office.
“Controllable income will be hard to sustain in the coming years absent substantive changes to our business model and, as you know, this requires legislative change,” Postmaster General Megan Brennan told reporters Friday. The postal service reported net losses of $5 billion in fiscal 2013 and $5.5 billion in 2014.
Neither congressional committee with jurisidiction over the postal service has any legislation on the front-burner. Sen. Tom Carper, D-Del., the top Democrat on the Homeland Security and Government Affairs Committee, urged lawmakers Friday to back a modernization bill he introduced in September. A Republican source on the committee who declined to speak on the record said they are giving Carper’s bill a look, but so far it has no co-sponsors and no hearings scheduled.
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Carper is hopeful that Friday’s announcement will spur Congress to act. “Today’s report makes it clear that, despite a growing revenue stream, the U.S. Postal Service continues to suffer significant losses that threaten its future,” he said. “I will continue to work with my colleagues on both sides of the aisle, stakeholders and the Postal Service to refine this legislation to right the Postal Service and ensure its viability long into the future.”
His bill would keep in a place a current rate increase set to expire in April, halt closing and consolidation of post offices for five years, and create a new Postal Service Health Benefits Program administered by the White House. It would require Medicare-eligible postal retirees and employees enrolled in the health benefits program to also enroll in Medicare, a change the Postal Service itself called for Friday.
Carper’s proposal has drawn mixed reviews from unions, which are key stakeholders in the Postal Service. The National Rural Letter Carriers’ Association called it a “first step to facilitate discussions” and the National Association of Letter Carriers called it a “constructive start” but both made clear that substantial changes would be needed. It is not clear what changes they want to see in the bill.
Created by the federal government, the Postal Service remains under its authority but operates as an independent business. It does not receive federal funding and must rely on the sale of postage and related products for its operation.
Its unique status makes adjusting its business practices difficult. Congress has the final say on the rates it can set, the products it can offer and the number of regional branches it can operate. But getting lawmakers to agree on anything related to the Postal Service other than naming local branches is difficult. Few are willing to support anything that could result in higher rates. Conservative groups have called for privatization, while labor organizations argue that the reports of net losses are misleading.
In a statement Friday, National Association of Letter Carriers President Fredric Rolando pointed out that the Postal Service reported that its operating profits, as opposed to net profits, were $1.2 billion in the black. It was only because Congress has mandated that the Postal Service aggressively pay down its retiree pension obligations that it is showing a net loss, he said.
“No other entity, public or private, is required to do this for even one year in advance. USPS must pre-fund 75 years’ worth of these benefits in advance. That’s the ‘red ink,'” Rolando said. He noted that it was the second consecutive year the postal service had operating profits above $1 billion.
The postal service’s revenue for fiscal 2015 was $68.9 billion, up 1.6 percent from the previous fiscal year. But the service had operating expenses of $73.8 billion, an increase of 0.9 percent.
Friday’s losses could have been worse. The Postal Regulatory Commission allowed a temporary a price increase on its products last year that brought in $3.5 billion in extra revenue. The surcharge is set to be rolled back in April.
Overall shipping and package volume were up by 14.1 percent from the previous year, but traditional mail, long the postal service’s main source of revenue, continues to drop off as people switch to email and social media. First-class mail and standard mail volume fell by 2.2 percent and 0.3 percent, respectively. Meanwhile, the postal service faces intense competition in the package delivery market. Postal Service Chief Financial Officer Joseph Corbett noted Friday that many of its traditional customers were now themselves starting to deliver packages.
