Nov. 15, 2012 at 3:16 PM ET
The struggling U.S. Postal Service on Thursday reported an annual loss of a record $15.9 billion -- more than triple its $5.1 billion loss last year.
The financial losses for the fiscal year ending Sept. 30 capped a tumultuous year in which the Postal Service was forced to default for the first time on billions in payments to avert bankruptcy.
Much of the red ink was due to mounting costs for future retiree health benefits, which made up $11.1 billion of the losses. Without that and other related labor expenses, the mail agency sustained an operating loss of $2.4 billion, lower than the previous year.
Postmaster General Patrick Donahoe said the agency has been able to reduce costs significantly by boosting worker productivity. But he said the mail agency has been hampered by congressional inaction on a postal overhaul bill that would allow it to eliminate Saturday mail delivery and reduce its $5 billion annual payment for future health benefits.
Earlier this year, the post office defaulted on two of those payments. It is forecasting additional losses next year of roughly $7.6 billion.
"We cannot sustain large losses indefinitely. Major defaults are unsettling," said Donahoe, who made clear that the Postal Service would be profitable had Congress acted. "It's critical that Congress do its part and pass comprehensive legislation before they adjourn this year to move the Postal Service further down the path toward financial health."
The Postal Service, an independent agency of government, does not receive tax money for its day-to-day operations but is subject to congressional control.
The Senate passed a postal bill in April that would have provided financial relief in part by reducing the annual health payments and providing an $11 billion cash infusion, basically a refund of overpayments the Postal Service made to a federal pension fund. The House, however, remains stalled over a separate bill that would allow for aggressive cuts, including an immediate end to Saturday delivery.
It remains unclear whether House leadership would take up the postal bill in its lame-duck session, due in part to resistance from rural lawmakers about the impact of closures in their communities. While urging quick congressional action, the Postal Service in its legal filings on Thursday assumed a 2013 financial outlook in which Congress fails to act on any legislation, acknowledging the political uncertainty of the situation.
"As the nation creeps toward the 'fiscal cliff,' the U.S. Postal Service is clearly marching toward a financial collapse of its own," said Sen. Tom Carper, D-Del., a sponsor of the Senate bill. "I am hopeful that now that the elections are over, my colleagues and I can come together and pass postal reform legislation so that a final bill can be signed into law by the end of the year."
Overall, the post office had operating revenue of $65.2 billion in fiscal 2012, down $500 million from the previous year. But expenses climbed to $81 billion, up from $70.6 billion, largely due to the health prepayments. The annual payment of roughly $5.6 billion was deferred for a year in 2011, resulting in a double payment totaling $11.1 billion that became due this year. The Postal Service is the only government agency required to make such payments.
The Postal Service, which relies on the sale of stamps and other products rather than taxpayer dollars, has been grappling for years with high costs and tumbling mail volumes as consumers communicate more online. The number of items mailed in the last year was 159.9 billion pieces, a 5 percent decrease, much of it in first-class mail.
On the plus side, the mail agency reported that its fast-growing shipping services, which include express and priority mail, grew by 9 percent, helping to offset much of the declining revenue from first-class mail.
Last month, the Postal Service said it will increase postage rates on Jan. 27, including a 1-cent increase in the cost of first-class mail, to 46 cents. But the rate increase, which is tied to the rate of overall inflation, will make only a small dent in financial losses.
The Postal Service also originally sought to close low-revenue post offices in rural areas to save money, but after public opposition, it is now moving forward with a new plan to keep 13,000 of them open with shorter operating hours.
Without legislative changes, it said, annual losses will exceed $21 billion by 2016.
"The Postal Service is facing a fiscal cliff of its own, and any unanticipated drop in mail volumes could send the agency over the edge," said Art Sackler, co-coordinator of the Coalition for a 21st Century Postal Service, a group representing the private sector mailing industry. "If Congress fails to act, there could be postal slowdowns or shutdowns that would have catastrophic consequences for the 8 million private sector workers whose jobs depend on the mail."
Information from the Associated Press and Reuters was included in this report.