More red ink and missed pay­ments as mail slumps

Austin American-Statesman - - VIEWPOINTS - By Hope Yen

The U.S. WASH­ING­TON — Postal Ser­vice warned Thurs­day that it will likely de­fault on up to $6.9 bil­lion in pay­ments for fu­ture re­tiree health and pen­sion ben­e­fits for the fifth straight year, cit­ing a com­ing cash crunch that could dis­rupt day-to-day mail delivery.

The ser­vice said it ex­pected cash bal­ances to run low by Oc­to­ber and to avoid bank­ruptcy would likely not make all of its pay­ments as re­quired un­der fed­eral law. Post­mas­ter Gen­eral Me­gan Bren­nan stressed an ur­gent need for fed­eral reg­u­la­tors to grant the Postal Ser­vice wide free­dom to in­crease stamp prices to help cover costs, cit­ing con­tin­u­ing red ink due to de­clin­ing first-class mail vol­ume and the ex­pen­sive man­dates for re­tiree ben­e­fits.

The Postal Ser­vice has al­ready de­faulted on $33.9 bil­lion in health ben­e­fit pre-pay­ments. Left un­re­solved, the rapidly grow­ing debt means that Amer­i­can tax­pay­ers even­tu­ally could be forced to cover the mas­sive costs when fu­ture postal re­tirees seek to cash in on the ben­e­fits to which they are legally en­ti­tled.

The Postal Reg­u­la­tory Com­mis­sion is mak­ing a de­ci­sion on stamp pric­ing next month.

“Our fi­nan­cial sit­u­a­tion is se­ri­ous, but solv­able,” Bren­nan said, cit­ing an un­rea­son­able rate cap that re­stricts stamp price in­creases to the rate of in­fla­tion. “We’re clearly look­ing for the PRC to es­tab­lish a new pric­ing sys­tem for us.”

The Postal Ser­vice on Thurs­day re­ported a quar­terly loss of $2.1 bil­lion, com­pared with a $1.6 bil­lion loss in the same pe­riod end­ing June 30 last year. That came af­ter dou­ble-digit growth in pack­age delivery was un­able to off­set drop-offs in let­ter mail, which makes up more than 70 per­cent of to­tal postal rev­enue.

Quar­terly rev­enue came to $16.7 bil­lion, a de­cline of $1 bil­lion from the same pe­riod last year.

Af­ter a 10-year re­view, the reg­u­la­tory com­mis­sion ap­pears likely to give the Postal Ser­vice more flex­i­bil­ity to raise rates, mark­ing the big­gest change in its pric­ing sys­tem in nearly a half-cen­tury. The com­mis­sion might limit how high prices could go, but the cost of a first-class stamp, now 49 cents, could jump. It’s not known how much.

The Postal Ser­vice, an in­de­pen­dent agency, is try­ing to stay fi­nan­cially afloat as it seeks to in­vest bil­lions in new delivery trucks to get pack­ages more nim­bly to Amer­i­can homes.

Mail vol­ume is drop­ping and de­mand for pack­age ship­ping is surg­ing due to the growth of on­line re­tail­ers such as e-com­merce gi­ant Ama­zon. With the hol­i­day sea­son ap­proach­ing, Bren­nan said the Postal Ser­vice planned ad­di­tional tem­po­rary hiring and was look­ing to ex­pand its pack­age de­liv­er­ies in the morn­ings, evenings and on Sun­days.

“The com­pe­ti­tion is most in­tense,” she said.

The Postal Ser­vice is also urg­ing Congress to pro­vide re­lief from the man­date to pre­fund re­tiree health ben­e­fits. Leg­is­la­tion in 2006 re­quired the Postal Ser­vice to fund 75 years’ worth of re­tiree health ben­e­fits, some­thing that nei­ther the gov­ern­ment nor pri­vate com­pa­nies are re­quired to do.

To avoid bank­ruptcy, the post of­fice has de­faulted on the multi­bil­lion-dol­lar health pre­pay­ments each year since 2012.

DAVID GOLD­MAN / AS­SO­CI­ATED PRESS 2014

Let­ter car­rier Jamesa Euler de­liv­ers mail in At­lanta. The Postal Ser­vice on Thurs­day re­ported a quar­terly loss of $2.1 bil­lion, com­pared to a $1.6 bil­lion loss in the same pe­riod end­ing June 30 last year.

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