As Postmaster General Louis DeJoy was testifying to the U.S. House of Representatives’ Oversight and Reform Committee on Monday, August 24, the U.S. Postal Service (USPS) reported whopping losses for the month of July to the Postal Regulatory Commission (PRC).
First, the good news. The filing is in sync with previous statements from USPS that it has more than enough cash to operate through the election and until at least August 2021.
Even so, the financials are brutal.
- For the month of July 2020 USPS reported a $1.03 billion loss, $423 million more than it lost in July 2019.
- In the first ten months of USPS’s fiscal year 2020 (period ended July 31), USPS net losses are running $2.02 billion ahead of the same period in fiscal year 2019 and $2.68 billion more than was budgeted.
- USPS revenues rose 9.2 percent in July 2020 from July 2019, though the mix of revenues changed significantly. Competitive products (i.e., packages) were up 46.5 percent while market dominant products (i.e., mail) fell 10.3 percent.
- Year-to-date revenues are essentially flat. For the ten months ended July 31 USPS revenues are $60.99 billion, a one percent increase from the same period in fiscal year 2019.
- Much of the added $2.02 billion loss may be due to the pronounced shift to package business, which is less profitable for USPS. For the quarter ended June 30, USPS reported spending $233 million more on “supplies and services, including PPE associated with the COVID-19 pandemic.” If we double this figure for July and the end of March, there would be $466 million in such expenditures. This would account for just 23 percent of the additional $2.02 billion loss for the first 10 months of the current fiscal year.
During a particularly frustrating period of his testimony on Monday, Postmaster General DeJoy asked, “Am I the only one in this room that understands that we have a $10 billion a year loss?” Earlier, in commenting on USPS’s revenue mix shift he said, “Package volume is up substantially but package volume is very costly for us to handle in (an) overcapacity method.”
Congress must focus on the broader structural issues impacting USPS and soon. The Postmaster General’s Monday warning and the July 2020 financial filing to the PRC both underscore the need to do so, and for USPS to better understand its costs so that efficiencies can be realized and that products are priced accordingly.
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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