The second quarter of the U.S. Postal Service’s (USPS) fiscal year, which ended March 31, should have ended with green shoots of financial improvement. Instead, as a recently-released assessment from the Service indicates, consumers and taxpayers are still seeing too much red ink.
USPS’s data releases of this sort are often heroic exercises in accentuating the positive. Among the achievements touted this time:
- The Service’s operating revenues are up 4.7 percent overall, and 15.9 percent for the important subcategory of “marketing mail,” versus the same quarter in 2021.
- First-Class delivery time has also improved over a year, down to 2.7 days from 2.9 days.
- Excluding workers’ compensation adjustments, the net loss in the most recent quarter is roughly the same as it was in 2021. “Controllable” losses, meaning those that conscious management decisions could somehow affect, are down more than 6 percent compared to Q2 of 2021.
- The Service managed to deliver more than 320 million COVID test kits under a program the Biden Administration initiated in January.
Here’s the rest of the news, which will likely leave consumers and ultimately taxpayers thinking of zeroes rather than heroes:
- Despite the revenue jump, operating expenditures obviously rose much faster – with everything from fuel and utility costs to rent hikes to compensation making for a 7.7 percent year over year inflation increase. The net result: a loss of $639 million for the last quarter. A year prior, the loss was $82 million. USPS has managed to rack up $90 billion in total losses over the past decade and a half, while effectively defaulting on tens of billions in health and pension obligations.
- The First Class and marketing mail revenue jumps are likely to be unsustainable, especially in First Class, which the news release admitted is declining in volume “due to continuing migration from mail to electronic communication and transaction alternatives.” Postage price increases in these categories are the primary reason revenues rose.
- “Controllable” losses are often in the eyes of the beholder. Contractual labor cost increases, viewed as inevitable in a given quarter, are the result of voluntary choices that labor and management negotiated in the past. Rent and utility cost hikes on Postal property can’t always be planned for, but the Service’s outsized real estate footprint was the result of decades of neglectful oversight.
- Government agencies typically contract with USPS to deliver their products at set prices. How much additional revenue and package volume is attributable to the delivery of COVID tests, and where is it accounted for in the ledger books? Taxpayers already footed the bill for the tests themselves. How long will this line of “delivery business” last? The Service’s notoriously opaque cost attribution practices have yet to undergo sufficient reform to provide readily accessible and transparent answers to the public.
But not to worry, says the Service’s intrepid leadership. As the USPS’s Chief Financial Officer notes, “We remain on track to achieve break-even performance for the ten-year period from FY2021 to FY2030, reversing the $160 billion in projected losses over the same period.”
How is this to be achieved? According to USPS, we should be seeing brighter days ahead from the legislation that took effect April 5 expectantly titled the “Postal Service Reform Act of 2022.” But as NTU noted in a lengthy analysis right after this bill passed the House of Representatives, the legislation “is still missing several comprehensive postal reforms that, sooner rather than later, taxpayers will need to avoid a massive shock to their wallets.”
On one hand, the package that became law avoided a direct taxpayer bailout of USPS and didn’t encourage the Service to enter unrelated lines of business such as banking. It also mandated that the Service publish regular performance data, and required the Postal Regulatory Commission to identify and implement remedies for inefficiencies in activities like sorting and transportation of mail. On the other hand, the bill scrapped prudent prefunding of retirement and health benefits for postal employees while allowing the Service to default on nearly $52 billion in previous prefunding obligations it failed to pay, despite the law. Also untouched were two huge problems facing USPS’s expensive infrastructure: excess facilities and labor overhead. And as our friends at Taxpayers Protection Alliance noted, the Service is already placing bets on business purchases that may not pay off as well as expected, such as electric vehicles.
It is not implausible that the so-called Postal Reform Act could provide a ray or two of sunshine for USPS’s finances. Still, the cloud cover on the far horizon looks quite thick. One thing is certain: taxpayers will need to carefully scan the fiscal skies until USPS’s next report. NTU would not be surprised if the long-term forecast remains stormy.