Post Office Reports $2.4 Billion Quarterly Loss

By Ed O'Keefe
Washington Post Staff Writer
Thursday, August 6, 2009

The U.S. Postal Service lost $2.4 billion in the quarter that ended June 30 and forecasts a $7 billion loss for the fiscal year, according to figures released Wednesday. Mail volume dropped 12.6 percent over a nine-month period, continuing a sharp decline fueled by the economic recession that began in 2007 and by wider use of the Internet.

Though attention in recent months has focused on the potential closure of hundreds of post offices or the elimination of Saturday mail delivery to narrow the budget gap, most of the Postal Service's financial woes are tied to labor costs, especially billions of dollars in required payments to prefund future retiree health benefits. The cost of funding current and future retirees is likely to top $7 billion this fiscal year.

The payments will contribute to an expected $700 million cash shortfall when the Postal Service's fiscal year ends Sept. 30, according to Postmaster General John Potter. The Postal Service will not make prepayments to the retiree fund if it faces a shortfall next month, he said, reiterating his displeasure with the requirement.

"If we were part of the federal government and treated as an agency, we would not be paying prefunding to a retirement benefit trust," Potter said at a news conference Wednesday announcing the financial situation. "On the other hand, if we were in the private sector, we would not be prefunding these retirement payments. So therein lies a bit of a dilemma."

Congress mandated the pre-payments in 2006 when it passed a postal reform bill. The Postal Service's balance sheets were in better condition at the time, and lawmakers sought to have it prepay retiree benefits because they knew that its financial condition would probably worsen as mail volume dropped with the increase in Internet use.

The House and the Senate will consider competing measures to relax that requirement after the August congressional recess, but the bills would provide only temporary relief. Potter called on lawmakers and the Obama administration to begin serious, long-term discussions about the future of American mail delivery.

"The Postal Service does not want to do anything that would disrupt this economy," he said. "Over a trillion dollars moves through the mail in any given year, and we are a hub of an industry that employs some 8 million Americans. We have no intention of doing anything that would disrupt the flow of mail."

That flow has slowed in recent years, to an average of 4.1 pieces of mail a day delivered to each address, down from 5.9 pieces in 2000, according to Postal Service figures. The decline has contributed to losses in 11 of the past 12 fiscal quarters.

In response, the Postal Service has implemented hiring and salary freezes and has dramatically cut its workforce -- by 37,000 employees in the past year, to a total of 630,000, down from a peak of 802,000 in 1999. It recently renegotiated more than 300 service contracts, saving $200 million.

The financial numbers follow last week's classification of the Postal Service as a "high risk" government agency and come just days after it released a list of almost 700 post offices it will consider closing.

The list once included as many as 3,000 facilities, and some postal officials privately acknowledge that no more than 200 locations, most of them in downtown urban areas, are likely to close. The varying figures have raised the ire of lawmakers concerned that mail service will be trimmed in their districts with little notice.

At a House hearing last week on postal matters, Rep. Dennis J. Kucinich (D-Ohio) said the Postal Service made cuts in his Cleveland area district with little or no input from him or community leaders.

Rep. Gerald E. Connolly (D-Va.) told postal officials that unannounced reductions in operating hours at Northern Virginia post offices mean his constituents with long commutes cannot get to the post office before closing time.

"I'm afraid the Postal Service leadership has leapt to the conclusion that the only way to keep the Postal Service solvent is to cut back on hours of operation," he said.

Potter would not commit to an exact number of post office closures but said some urban facilities are likely to consolidate certain operations while others will vacate expensive locations so the Postal Service can sell the properties.

He embraced the attention and concern provoked by the closure list.

"If this happened and no one reacted to it, I think I'd be concerned as the postmaster general that people really didn't have a need for the Postal Service," Potter said.

Communities Seek Routes to Save Post Offices From Being Stamped Out

By Caitlin McDevitt
The Big Money
Sunday, June 28, 2009

A rallying cry can be heard across the country, from the swanky streets of SoHo to the tiny town of Randolph, Kan. -- "Save Our Post Office!" As the United States Postal Service, weighed down by a crippling multibillion-dollar deficit, shrinks its operations, post offices across the country are on the chopping block. Each year, hundreds of postal operations shutter, but this fall could be the single biggest consolidation in USPS history. Over the next three months, more than 3,200 post offices and retail outlets -- out of 34,000 -- will be reviewed for possible closure or consolidation.

Downsizing is a business imperative, says Linda Welch, acting vice president of delivery and post office operations at USPS. "Revenues have declined, and mail volume continues to decline," she says. Not only have e-mail and electronic bill-paying made for a thinner mail stream, the recession has added a sharp pullback in advertising mail, which has hurt the Postal Service even more. In March, Postmaster General John E. Potter asked Congress for permission to reduce the mail week from six days to five, projecting $3.5 billion in savings. Shutting down post offices will have similar cost-saving effects. And most Americans say they're fine with the cutbacks, as long as they're not paying more to send mail. A recent USA Today/Gallup poll revealed that more Americans would rather the Postal Service curtail operations than seek a bailout or raise stamp prices.

At least, that's what everyone says -- until it's their own beloved post office at stake. Consider the case of the Hawleyville, Conn., post office. After years of negotiations, this January, the Postal Service notified the community that its 166-year-old post office would officially close on Feb. 14. An article in the local newspaper poignantly noted, "The long love affair between the Hawleyville post office and its loyal customers will come to an end on -- of all days -- Valentine's Day." The post office was rickety, but the small community embraced it as a gathering place. One resident told the Newtown Bee, "The Hawleyville post office is like Cheers in Hawleyville." Fearing the loss of their precious haunt, the Hawleyville citizens mobilized. A Web site was created. A petition was circulated. They got Congress involved. And lo and behold, the community won approval for a new post office, to be opened this summer.

Every time a post office is slated for closure or consolidation, the Postal Service is legally obligated to inform its customers well in advance. "There's a very long process that they have to go through," says Mario Principe, the post office continuance consultant at the National League of Postmasters. That gives the communities plenty of time -- usually at least two months -- to stage a rescue.

The Postal Service will typically send out a survey or host a town-hall meeting before an endangered office closes. Perhaps a closing would cut too many jobs in an already hurting community. The office might house the bulletin board with important local announcements. Or perhaps the next-closest post office may be far away. If customers alert officials to such concerns, there's a better chance their office will be spared. Appealing the decision to the Postal Regulatory Commission often works, too -- but it's a step many communities don't know to take.

It's also important to check out why a post office is on the chopping block. Those under review this summer are mostly metropolitan. But in the case of small post offices, federal law states that the reason can't be solely that the office isn't bringing in enough revenue. Often, post offices face closure because their leases expire. That's the case in Deer Harbor, Wash. After failed attempts to find a new location for the post office, the community bought the property "in desperation" just to keep it running. If they can raise the $250,000 purchase price by the end of this month, the Postal Service has agreed to continue operations.

The Postal Service seems willing to negotiate, and it's not really bothered by the protests.

"It actually makes us very proud to know that we are a valuable member of the community," says Welch. She says that the USPS appreciates the great lengths that some communities will go to just to ensure that their services can continue. What would the Postal Service appreciate even more? If people would just send more mail. Oddly enough, that seems to be the unthinkable last resort.