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Despite job cuts, Postal Service still bleeding red ink

Agency lost $8.5 billion last year alone

LIGHTER LOAD The US Postal Service said mail volume totaled 170.6 billion pieces in 2010, compared with 176.7 billion in 2009, a decline of 3.5 percent. LIGHTER LOAD
The US Postal Service said mail volume totaled 170.6 billion pieces in 2010, compared with 176.7 billion in 2009, a decline of 3.5 percent.
By Randolph E. Schmid
Associated Press / November 13, 2010

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WASHINGTON — The US Postal Service said yesterday that it lost $8.5 billion last year despite cuts of more than 100,000 jobs and other reductions in recent years.

The post office had estimated it would lose $6 billion to $7 billion, but a sharp decline in mail took a toll. Increased Internet use and the recession, which cut advertising and business mail, meant less money for the agency.

For the fiscal year ending Sept. 30, income was $67.1 billion, down $1 billion from the previous fiscal year. Expenses totaled $70 billion, a decline of about $400 million. And a $5.5 billion payment was made for future retiree health benefits.

“Over the last two years, the Postal Service realized more than $9 billion in cost savings, primarily by eliminating about 105,000 full-time equivalent positions — more than any other organization, anywhere,’’ chief financial officer Joe Corbett said in a statement. “We will continue our relentless efforts to innovate and improve efficiency. However, the need for changes to legislation, regulations, and labor contracts has never been more obvious.’’

The post office is currently in contract negotiations with two of its unions, with two more scheduled to be negotiated next year.

The loss of $8.5 billion in 2010 was $4.7 billion more than the previous year.

Mail volume totaled 170.6 billion pieces, compared with 176.7 billion in 2009, a decline of 3.5 percent. As volume was declining, the post office began service to thousands of new addresses to accommodate population growth and new businesses.

The post office has asked Congress for permission to reduce mail delivery to five days a week and eliminate annual payments for future retiree health benefits. A request from the agency for a 2-cent increase in postage rates to take effect next year was recently turned down by the independent Postal Rate Commission. The post office has appealed that decision in federal court.

While the post office does not receive tax money for its operations, it still must answer to Congress, which has been reluctant to agree to closing of local post offices and centers.

Senator Tom Carper of Delaware, a Democrat, blamed the loss on the recession and “operating restraints placed on postal management.’’ The result, he said, could represent the most serious threat to the post office in its 200-year history.

“If corrective action is not taken quickly, the Postal Service will likely run out of cash and borrowing authority by this time next year, placing its ability to continue operations in serious jeopardy,’’ said Carper, who urged quick congressional action.

Representative Darrell Issa of California, a Republican who is expected to head the House committee overseeing postal operations, said the loss “only underscores the urgent need for the Postal Service to trim its operating costs to match revenues.’’

Fredric V. Rolando, president of the National Association of Letter Carriers, said the loss “comes as no surprise.’’

“For the Postal Service to improve its financial situation, the government must let the USPS manage its financial affairs in the most effective manner possible, like any other business,’’ he said. “Essential to that process would be for Congress to fix an onerous congressional mandate from 2006, which obligates the Postal Service to make annual payments of $5.5 billion to prefund future retiree health benefits. No other institution in America, public or private, has to do this.’’

Some have suggested privatizing the service, but the requirement to provide service everywhere in the country at the same price is not likely to be attractive to private companies.

Of particular concern is the decline in the lucrative first-class mail, largely consisting of personal letters and cards, bills, payments, and similar items. First-class mail volume fell 6.6 percent in 2010, 8.6 percent in 2009, and 4.8 percent in 2008. Traditionally, this mail has produced more than half of total revenue.

Volume for standard mail — advertising and similar business items — improved, indicating some signs of economic recovery, but that generates less income.

Postmaster General John Potter has developed a 10-year plan for the post office’s future, but parts of that plan require congressional action.

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