US Postal Service in trouble

US Postal Service in trouble

The US Postal Service (USPS), a self-supporting government agency that receives no tax dollars, said it suffered a loss of $329 million in the first quarter of federal fiscal year 2011. That compared with a loss of $297 million a year earlier. The agency has been suffering from an ongoing decline in mail volume, which has undercut revenues, while retiree health care costs have been straining its reserves. Excluding costs related to retiree benefits and adjustments to workers' compensation liability, the Postal Service said it had net income was $226 million in the first quarter, which ended Dec. 31. The agency said it will be forced to default on some of its financial obligations this year unless Congress changes a 2006 law requiring it to pay between $5.4 and $5.8 billion into its prepaid retiree health benefits each year. The Postal Service has taken a number of steps to increase revenue, including marketing initiatives and price increases. The agency raised rates an av
erage of 3.6% in January.

It is also perusing more dramatic changes. Last year, the USPS submitted a request to the Postal Regulatory Commission, which oversees the agency, to eliminate Saturday mail service. The commission has yet to respond to the request, but a spokesman said it is in the "final phase" of making its decision. The USPS has also cut back on hours to save money. The agency expects to eliminate 40 million work hours this fiscal year as part of a plan to save $2 billion. However, the service is currently negotiating new contracts with the American Postal Workers Union and the National Rural Letter Carriers Association, which will probably object to cutting hours. On the bright side, the Postal Service said improving economic conditions suggest the "worst of the precipitous volume decline during the recession is over." But mail volume continues to be anemic, rising only 1.5% in the first quarter as economic growth remains sluggish.