Postal revenues rise 4.7 percent but agency faces challenges

The U.S. Postal Service’s operating revenue rose 4.7 percent to $17.7 billion in second quarter of fiscal 2016, driven by a double-digit gain in shipping and package volume along with price increases.

The USPS reported a profit of $576 million, up from $313 million in the same period last year, but the agency still posted a net loss of $2 billion, more than the $1.5 billion for the same period last year, prompting a call for Congress to take action. 

{mosads}“While we have been successful in achieving controllable income during the quarter, we are still reporting net losses and contending with long-term financial challenges,” said Postmaster General and CEO Megan Brennan.

“We continue to focus on improving operating efficiencies, speeding the pace of innovation and increasing revenues for the postal service,” Brennan said in a statement.

The reported profit excludes the agency’s requirement to prepay retiree health benefits as well as increases in workers’ compensation expenses because of interest rate changes, “a factor outside of management’s control,” USPS said.

“Our financial situation is serious but solvable,” Brennan said. “We are confident that we can return to financial stability through the enactment of prudent legislative reform and a favorable resolution of the upcoming regulatory review of our rate-setting system.”

Sen. Tom Carper (Del.), the top Democrat on the Senate Homeland Security and Governmental Affairs Committee, said that congressional inaction is no longer an option.

“Congress must face reality and work quickly to stabilize this lynchpin of a $1.4 trillion mailing industry that employs more than 7 million Americans,” Carper said.

“We must finally tackle the tough issues in order to ensure that this critical institution is competitive and solvent for years to come,” he said.

Carper, who introduced a bipartisan measure in September and has been pushing for reforms for several years, called on his House and  Senate colleagues to team up on legislation.

“The agency’s latest financial report reiterates a hard truth: due to long-term financial challenges and constraints placed on it by Congress, the postal service is unable to raise enough revenue to cover its costs and continues to suffer unsustainable losses that threaten its long-term viability,” he said. 

The USPS said it had an 11.4 percent increase in shipping and package volume in the January-March quarter, boosted by increases in online shopping.

National Association of Letter Carriers President Fredric Rolando called the $576 million quarterly operating profit “positive news for an agency that enjoys widespread public support.”

“The continuing financial upswing shows the importance of maintaining and strengthening the unparalleled — and profitable — postal network,” Rolando said. 

The letter carriers group said that operating profit for first half of the fiscal year totaled $1.8 billion and said the USPS has posted $4.4 billion in profits since the start of fiscal 2014.

The USPS said labor costs increased by $362 million and transportation expense increased by approximately $149 million.

“During the second quarter, we expanded work hours and our transportation network, taking more trips and increasing miles flown,” said Joseph Corbett, USPS chief financial officer and executive vice president.

“This largely resulted from strategic business decisions enacted to accommodate package growth and enhance service across the country,” Corbett said. 

The main reason for the agency’s red ink is a 2006 congressional mandate that USPS prefund future retiree health benefits, costing $5.6 billion a year.

“If lawmakers adopt a smart, targeted reform package that includes addressing prefunding, allowing USPS the flexibility to use its invaluable networks for some new products and services, and adopting best private-sector practices in investing the USPS retiree health benefits fund, USPS can continue to provide Americans and their businesses with the world’s most affordable delivery services,” Rolando said.