The U.S. Postal Service had a net loss of $5.2 billion through May for fiscal year 2019, nearly $2 billion, or 61%, worse than budgeted. Even more disconcerting, the Postal Service, whose fiscal year ends September 30, is on track for a fiscal year 2019 net loss exceeding $10 billion.
In November, the Postal Service adopted an integrated financial plan projecting a $6.6 billion fiscal year 2019 net loss. The current losses are $2 billion of schedule, and the Postal Service’s strongest quarter, from October-December, is already in the books. In fact, if the Postal Service misses its budgeted losses by 61% for the full year, the net loss will be $10.6 billion.
In a June 27 filing with the Postal Regulatory Commission, the Postal Service stated the net loss through May was $5.173 billion compared to a planned loss of $3.212 billion. A significant reason is that the Postal Service’s competitive products, or packages business, is performing 1.4% below plan projections, delivering 56 million less packages than anticipated. The Postal Service’s traditional mail business missed planned projections by a smaller amount, 0.3%.
May was a terrible month for the Postal Service. The Postal Service lost $1.2 billion in the month, $691 million more than budgeted. Package volume missed its plan target by 6.4% and mail volume came up 1.3% short.
Despite these accelerating losses, the U.S. Treasury Department renewed a line of credit with the Postal Service on Sunday, June 30, the day it was scheduled to expire. The new agreement runs for 62 days, through August 31.
In September 2018, Treasury stopped a 20-year practice of making annual loans to the Postal Service. In a September 28 regulatory filing the Postal Service said shorter loan agreements meant “significant uncertainty to how USPS might fund operations in an expeditious and established manner in the face of unpredictable revenue short-falls.”
With the Treasury Department having already taken steps to conserve cash to stave off a potential federal default in September/October, it may be challenging for the Postal Service to obtain adequate financing when the renewal comes up August 31.
These developments underscore the need for the Postal Service to develop its business plan, which Congress expects soon, and for Congress to undertake serious postal reform legislation.
About the Author: Paul Steidler is a Senior Fellow with the Lexington Institute, a public policy think tank based in Arlington, Virginia.
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