Economy and Technology Not Main Villains in $16 Billion Postal Service Loss

Throwing Money AwayLast week, the Postal Regulatory Commission released their Annual Compliance Determination Report (ACDR) from the 2012 fiscal year.  This report highlights legal issues, the financial condition, and overall performance.

In an opening letter from Chairman Ruth Goldway, a breakdown is provided that sheds a dim light on the Postal Service’s financial woes.  With a loss of $16 billion in 2012, many may be curious as to how this is possible.

$11.1 billion of the loss was from required pre-paid expenses to the Retiree Health Benefits Fund (RHBF).  For the first time since funding the RHBF was legally mandated in 2006, the Post Office has defaulted on this payment.  The RHBF directly relates to the Postal Accountability and Enhancement Act (PAEA), which requires an additional $33.9 billion be paid to the RHBF by 2017.  This includes the $11.1 billion that the USPS has already defaulted on.

In a feature titled “How Healthcare Expenses Cost Us Saturday Postal Delivery” in Time Magazine, Reporter Josh Sanburn stated that paying the RHBF was possible in 2006 when the post office was healthy.  Sanburn also points out that the Post Office was hit hard by a shift in digital communication and the financial recession since 2006.

If the Post Office was not forced to contribute to this fund, the deficit would only be around $5 billion.  The ACDR reported that $2.4 billion of the remaining deficit was due to a workers’ compensation liability adjustment and the other $2.4 billion was from operating losses.

In the ACDR report, Goldway also stated that the Postal Service cannot adequately support needed innovations and will now need to focus on cutting costs.  On page 27 of the report, the Commission said that while the RHBF expenses don’t impact day to day operations, the Post Office could “successfully operate without paying toward the RHBF.”

Echoing what Sanburn reported in February, the ACDR also took notice of the permanent change in mailer behavior rather than defaulting that fiscal woes could be caused by the economy.  The Commission continued by stating that the increase in internet access, structural changes in advertising markets and the use of social media should also be taken into account when assessing the 5.8% decline in Standard Mail or other operating losses.

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