Postal Service announces staggering losses in fiscal year 2011

Tuesday, November 15th, 2011 By

United States Postal Service vehicle

The United States Postal Service posted a $5.1 billion loss for the year. Photo Credit: Joseph Barilliari/Wikimedia Commons/CC-BY-SA

The United States Postal Service just released its financial statements for fiscal year 2011, which ended on Sept. 30. The postal service posted a $5.1 billion loss and is in deep trouble.

Postal Service asks for more legislative authority

The United States Postal Service has been in financial trouble for some time. During fiscal year 2010, which ended on Sept. 30, 2010, the USPS posted an $8 billion loss, according to Bloomberg. It was on course for a heavier loss for 2011.

In response, the USPS started closing post offices and asked Congress to postpone a $5.5 billion payment to its fund for retired postal worker health benefits earlier this year, and Congress complied. The deadline was extended to Nov. 18, according to the Washington Post. Postmaster General Patrick Donahoe has stated the USPS will default on the payment unless Congress postpones the payment again.

Donahoe is also, according to the Wall Street Journal, asking for Congress to grant greater leeway to restructure the USPS, including adding additional services, closing more post offices and relief from retired worker health care costs. He estimates the USPS can be profitable again by 2015 if the independent agency can trim $20 billion in costs by then. Donahoe has cautioned that the USPS may not be able to function by next year without restructuring.

Postal service posts massive loss

The USPS has posted its financial statement for fiscal year 2011, which ended on Sept. 30. The agency had a deficit of $5.1 billion, but losses would have been at least $10.6 billion had the deadline for the retiree health fund payment not been extended.

According to CNN, First Class Mail, which represents 49 percent of Postal Service revenues, totaled $32 billion for FY 2011, a 6 percent decline from last year. Mail volume declined by 1.7 percent.

Fund payments killing post office

The problem with the postal service, according to PBS, is not declining stamp revenue or fewer packages being shipped. The USPS has not received any taxpayer funds, except for mailing voting materials overseas to expatriates, since 1982.

In 2006, Congress mandated an annual $5.5 billion into the retired worker health care fund until 2016. Without that payment, the USPS would be almost as profitable as rivals FedEx and UPS.

USPS rates are generally cheaper and the organization can deliver more mail to more people. However, the USPS spends more on labor. In Fiscal Year 2001, According to the American Postal Workers Union, 78 percent of USPS spending was on labor costs, compared to 65 percent for UPS and 45 percent for FedEx.

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Some sarcastically marvel how the USPS loses so much money yet still delivers epic volumes of junk mail. The reason is that businesses pay the USPS a lot of money to deliver “advertising mail.” According to NPR, advertising mail accounted for $17.3 billion of USPS revenue in FY 2010, compared to $34 billion from First Class Mail that year. Discounting parcels, express envelopes and so forth, more than half of all conventional mail carried by the USPS is advertising mail.

Sources

Bloomberg

Washington Post

Wall Street Journal

CNN

PBS

APWU (PDF – Requires Adobe Reader)

NPR

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