Is USPS growth hindered by legislation?
The USPS reported a loss of $5.1 billion for fiscal 2015, but a controlled income of over $1 billion. The discrepancy may be a result of difficult legislation, critics say.
The United States Postal Service has reported a $5.1 billion loss for the 2015 fiscal year.
The Post Service has reported its ninth consecutive year in the red with loses totaling $5.1 billion. However, with a $1.1 billion increase in revenue from 2014 and a good operating profit, some are praising the USPS as a fiscal success hindered by government.
"The red ink you hear about has nothing to do with the mail but rather with congressional politics,” National Association of Letters Carriers president Frederic Rolando told the Federal Times.
Despite the glaring negative numbers, the final budget for the USPS in 2015 had some bright spots. Revenue increased, the package delivery business continued to grow, and 2015 was the second time controllable income topped more than $1 billion, following 2014’s $1.4 billion. The USPS finished the fiscal year with $1.2 billion in controllable income, a number that excludes, among other costs, $5.7 government-mandated “pre-payment” for retirement benefits.
Following legislation passed in 2006, the Postal Service is required to pre-fund 75 years’ worth of health benefits for its workers – an expensive policy often criticized for being the only one of its kind.
“No other entity, public or private, is required to do this for even one year in advance,” Mr. Rolando said to the Federal Times.
However, lauding the Postal Service as a fiscal success story if the policy was repealed might be premature. The Postal Regulatory Commission (PRC) approved a temporary surcharge to adjust prices after a fall in pack volume following the recession. The PRC released a statement in July stating the surcharge would be ending, taking a chunk of USPS profit with it.
"The road is difficult for a number of reasons," said Chief Financial Officer Joseph Corbett told the Associated Press. "Without the surcharge, for example, in 2015, we would have recorded a controllable loss of $800 million, not income of $1.2 billion. Also, our costs continue to escalate."
The Postal Service also faces challenges from the market. Letter volume is expected to shrink in the coming years as people increasingly rely on e-mail or online business transactions and less on physical contracts.
However, the increased reliance on the Internet and the blooming of online shopping, specifically, has been of benefit to the Postal Service. The package delivery business has increased by 50 percent over the last five years and grew 14 percent last year alone, according to The Wall Street Journal.
Despite the success, Postmaster General Megan J. Brennan told The Wall Street Journal, growth won’t be enough for the Postal Service without "the enactment of legislation that makes our retiree health benefit system affordable and that provides increased pricing and product flexibility.”