Volume for primary source of revenue, lettermail, declined by five billion pieces
The U.S. Postal Service (USPS) has reported a financial loss for the 11th consecutive year as mail volumes continue to decline while the cost of its pension and health care programs climb.
The postal service reported a revenue of $69.6 billion for the fiscal year 2017 (Oct. 1, 2016-Sept. 30, 2017)—a decrease of $1.8 billion compared to the prior year. The lower revenues were driven largely by accelerated declines in First-Class and Marketing Mail volumes, according to a statement issued by USPS.
This year, mail volumes declined by about five billion pieces (3.6 per cent) while package volumes grew by 589 million pieces (11.4 per cent), continuing a multi-year trend of declining mail volumes and increasing package volume. While mail volume declines for the year were somewhat offset by growth in package volume, overall volume has declined by 4.9 billion pieces.
GROWTH IN SHIPPING, PACKAGES
The growth in the Shipping and Packages business provided some help to the financial picture of the postal service as revenue increased $2.1 billion (11.8 per cent); however, that growth was offset by the decline in mail volumes as well as a $1.1 billion 2016 non-cash change in accounting estimate and the 2016 roll-back of the exigent surcharge mandated by the Postal Regulatory Commission (PRC) that further reduced revenue by $1.1 billion.
“Our financial situation is serious, though solvable,” said Postmaster General and CEO Megan J. Brennan. “There is a path to profitability and long-term financial stability. We are taking actions to control costs and compete effectively for revenues in addition to legislative and regulatory reform. We continue to optimize our network, enhance our products and services, and invest to better serve the American public.”
URGENT ACTIONS NEEDED
Brennan stressed the path forward for a financially stable future must also include urgent actions outside of the postal service’s control. They include advancement and passage of the postal reform provisions contained in H.R. 756 in the 115th Congress and the adoption by the PRC of a new pricing system as part of its 10-year pricing review, enabling USPS to generate sufficient revenues to cover our costs.
Operating expenses for the year were $72.2 billion, a decrease of $4.7 billion (6.1 per cent) compared to the prior year, although this net reduction was “largely attributable to changes in actuarially determined expenses outside of management’s control,” according to the postal service.
Expenses for retiree health benefits and workers compensation declined by $4.8 billion and $3.5 billion, respectively, but were partially offset by $2.4 billion in higher expenses for the amortization of unfunded retirement benefits, the result of statutory mandates effective for 2017 and changes in Office of Personnel Management actuarial assumptions. Expenses for compensation and benefits and transportation also added $667 million and $246 million, respectively, to 2017 operating expenses.
NET LOSS OF $2.7B
The postal service reported a net loss for the year of $2.7 billion, a decrease in net loss of $2.8 billion compared to 2016. Of this decline in net loss, $2.4 billion was the result of changes in interest rates, outside of management’s control, that reduced workers’ compensation expense compared to last year.
The controllable loss for the year was $814 million, a change of $1.4 billion, driven by the $775 million decline in operating revenue before the 2016 change in accounting estimate, along with the increases in compensation and benefits and transportation expenses of $667 million and $246 million, respectively.
Similar to the last several years, USPS was unable to make any of the payments due to the federal government at the end of the fiscal year, which amounted to nearly $7 billion in 2017, to pre-fund pension and health benefits for postal retirees.
“Making the payments to the federal government in full or in part would have left the postal service with insufficient liquidity to ensure that we will be able to cover our current and anticipated operating costs, make necessary capital investments, and absorb any contingencies or changes in the marketplace,” said Chief Financial Officer and Executive Vice President Joseph Corbett.
“We will continue to prioritize the maintenance of adequate liquidity to ensure the Postal Service is able to perform our primary mission of providing universal service to all Americans.”
To read the complete financial report, click here.