The U.S. Postal Service (USPS) reported a net loss of $2.5 billion in the second quarter of fiscal year 2023 on $19.3 billion in revenue. That represents an increase in net loss of $1.8 billion over the $639 million net loss for the same quarter last year.
The results are still bad even using the agency’s non-GAAP (generally accepted accounting principles) financial reporting. In that scenario, the quarterly loss was $498 million, compared to adjusted income of $427 million for the same quarter last year.
USPS says this non-GAAP accounting measure “is calculated as net loss adjusted for costs outside of management’s control, including workers’ compensation expenses caused by actuarial revaluation and discount rate changes and the amortization of the Postal Service Retiree Health Benefits Fund (PSRHBF), CSRS, and FERS unfunded liabilities.” In other words, it is a way of downplaying any bad news in the financial results by saying most of it isn’t the agency’s fault.
First-Class Mail revenue increased $33 million (0.5%) on a volume decline of 1.1 billion pieces (8.1%) compared to the same quarter last year. Marketing Mail revenue decreased $161 million (4.3%) on a volume decline of 1.7 billion pieces (11%) versus the same quarter last year. Shipping and Packages revenue decreased $162 million (2.1%) on a volume decline of 89 million pieces (5%) versus last year.
Total operating expenses were $22.0 billion for the quarter, an increase of $1.6 billion (7.6%).
“We continue to be challenged by declining mail volumes and rising operating costs due to inflation,” said Chief Financial Officer Joseph Corbett. “We are managing the costs within our control, such as reducing work hours by 7 million hours compared to the same quarter last year. However, price increases are necessary to try to offset declining mail volumes and inflation. Despite these increases, our prices remain among the most affordable in the world.”
USPS said in April that it wants to raise the price of a stamp to 66 cents from 63 cents. This comes after it already got approval to raise stamp prices from 60 to 63 cents. Upon approval, stamp prices will have risen 32% since 2019.
In 2022, USPS reported an adjusted loss of $473 million without the financial aid from Congress via the Postal Service Reform Act. The new law allowed the agency to cancel all of its past due retirement pre-funding obligations, thereby showing that it had net income of $56.0 billion for the year. USPS reported a $4.9 billion net loss in 2021 and a $9.2 billion net loss for fiscal year 2020.
The Postal Service Reform Act was recently signed into law. When President Biden signed the bill, he said, “With this bill, we’re repealing the pre-funding mandate and setting the Postal Service on a more sustainable and stable financial footing. We’re guaranteeing that the mail will continue to be delivered six days a week.”
Among the changes in the bill was the elimination of the requirement for USPS to pre-fund health benefits for Postal Service retirees. This was a change long called for by USPS advocates and was touted as a major fix for the deteriorating financial condition of the agency.
Congressman Gerry Connolly (D-VA) for instance said in 2021:
…the bill would eliminate an ill-conceived Congressional mandate from the 2006 lame-duck session that required the Postal Service to pre-fund retiree health benefits. Since the enactment of that requirement, the Postal Service has posted net revenue losses each year ranging from $2.7 billion to $15.9 billion. Unable to make its statutorily-required payments – by the way unique to the Postal Service, required by Congress – the Postal Service racked up roughly $35 billion in unfunded retiree health benefit liabilities. Congress can fix this problem, a problem we created, by removing the pre-funding requirement, eliminating the $35 billion in health fund liabilities, and requiring the Postal Service only to fund costs incurred by current Postal Service annuitants.
Not everyone agreed that this would be the fix that it was touted to be. For instance, Senator Rick Scott (R-FL) said, “This bill doesn’t reduce costs — it just shifts them from one unfunded government program to another unfunded government program.” The government will still have to pick up the tab for the retirement expenses.
Other changes in the new law include:
- It would require USPS employees to enroll in Medicare when they turn 65. Currently, about one-fourth of agency employees do not enroll in Medicare. This change would purportedly save about $22.6 billion over 10 years.
- The bill requires the Office of Personnel Management (OPM) to establish the Postal Service Health Benefits Program within the Federal Employees Health Benefits Program under which OPM may contract with carriers to offer health benefits plans for USPS employees and retirees.
- The bill would make delivery of mail six days a week a permanent service provided by the agency.
The exceptions to this requirement are for “weeks that include a Federal holiday, in emergency situations, such as natural disasters, or in geographic areas where the Postal Service has established a policy of delivering mail fewer than six days a week as of the date of enactment of the Postal Service Reform Act of 2022.
“ - The Postal Service would be authorized to work with State governments, local governments, or tribal governments to provide services such as licenses for fishing, hunting, and drivers’ licenses and to provide “property or nonpostal services to the public on behalf of such agencies for non-commercial purposes…” with some restrictions.
