The USPS’s Outlook for 2010

TO SAY 2009 WAS A ROUGH YEAR FOR THE U.S. POSTAL SERVICE WOULD CERTAINLY BE AN UNDERSTATEMENT. The USPS lost $3.8 billion in fiscal 2009, or $1 billion more than it lost in fiscal 2008.

What’s more, total mail volume for the fiscal year was 177.1 billion pieces, compared to 202.7 billion pieces in 2008. That’s a decline of more than 25 billion pieces, or 12.7%.

On the bright side, the Postal Service did reduce costs by $6 billion during fiscal 2009, says Joseph Corbett, its executive vice president and chief financial officer. The agency aims to reduce another 93 million work hours in fiscal 2010, he says.

The USPS also received a reduction in required payments for retiree health benefits for this year. Stop-gap legislation signed by President Obama on Sept. 30 lowered the U.S. Postal Service’s $5.4 billion health-care retiree payment for fiscal 2009 to $1.4 billion. That’s a big help, but the USPS needs permanent change, says Corbett.

“The legislation that passed was great and allowed us to meet our financial obligations,” Corbett says. “We weren’t able to make that [payment] before the legislation. We will continue to work with Congress and the administration to get longer-term structural changes.”

Lobbying efforts contributed to USPS’s one-year partial reprieve on retiree health benefits. But next year USPS will have the same problem of prefunding about $5.4 billion from its operating budget for retiree health benefits — an annual payment through 2016 as dictated by the 2006 Postal Reform legislation.

Postal Regulatory Commission Chairman Ruth Goldway believes that the valuations used for these payments should be recalculated to see if the current liability is lower than previously determined. That would ensure that the effects of all the USPS workforce reductions are accurately reflected in the overall liability, she says.

“If this recalculation results in a lower liability, as our study indicates, the scheduled payments could be reduced,” while still meeting the original objectives of 2006 legislation, she notes.

The PRC’s study found that the Postal Service’s liability was much less than projected with the Office of Personnel Management’s assumptions, Goldway says. If that proves to be the case, she says, a reduced payment schedule is possible while still being able to fund future retiree obligations.

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