Nov. 15 (Bloomberg) -- The U.S. Postal Service said its net loss last year widened to $15.9 billion, more than the $15 billion it had projected, as mail volume continued to drop, falling 5 percent.
Without action by Congress, the service will run out of cash on Oct. 15, 2013, after it makes a required workers compensation payment to the U.S. Labor Department and before revenue typically jumps with holiday-season mailing, Chief Financial Officer Joe Corbett said today.
The service, whose fiscal year ends Sept. 30, lost $5.1 billion a year earlier. It announced the 2012 net loss at a meeting at its Washington headquarters.
“We are walking a financial tightrope,” Postmaster General Patrick Donahoe said at the meeting. “Will we ever stop delivering the mail? It will never happen. We are simply too important to the economy and the flow of commerce.”
The Postal Service uses about $250 million a day to operate and will have less than four days of cash on hand by the end of the fiscal year, Corbett said.
The service is asking Congress to enact legislation before it adjourns this year that would allow the Postal Service to spread future retirees’ health-benefit payments over more years, stop Saturday mail delivery, and more easily close post offices and processing plants.
“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, whose members include Bank of America Corp. and EBay Inc. “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.”
Without legislative change, the service expects its losses to continue in 2013, with a forecast loss of $7.6 billion for the year that started Oct. 1, Corbett said.
“There is no margin of error,” given the low level of cash, he said.
The service is trying to cut costs by giving retirement-eligible workers a financial incentive to retire. Those employees have a Dec. 3 deadline to accept the offer, with $200 million budgeted for the incentive costs in fiscal 2013.
Next year’s loss forecast includes a $5.6 billion payment due to the U.S. Treasury for future retiree health benefits, Corbett told reporters after the meeting. The 2012 loss includes the $5.6 billion payment to the fund that the service defaulted on Sept. 30, and the previous year’s $5.5 billion obligation that was due Aug. 1 and also not paid. Because that year’s payment was deferred, the 2011 loss doesn’t include any pre-funding amount.
Mail volume for the year fell to 159.9 billion pieces, led by an 8 percent decrease in single-piece first-class items, the most profitable kind of mail that includes letters, cards and bill payments.
Operating revenue fell less than 1 percent to $65.2 billion for the year as the service cut work hours while delivering less mail.
The service’s outlook worsened this week, when the U.S. Office of Personnel Management said the service’s projected surplus in a government-worker retirement account has fallen to $2.6 billion, less than one-quarter of the previous year’s estimate, due to lower interest rates. It found another retirement account now has a $17.8 billion shortfall instead of a previously estimated surplus. The service has proposed tapping the surpluses to help cover its losses.
“Relying on a temporary, projected surplus to keep USPS solvent is a risk no matter which set of assumptions OPM is directed to use,” said Ali Ahmad, a spokesman for House Government and Reform Committee Chairman Darrel Issa, a California Republican who is a sponsor of a postal overhaul measure pending in the House. “It is no substitute for the actual cost-cutting USPS needs to do to find real savings.”
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