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Posted at 11:53 AM ET, 02/ 9/2011

Postal Service had $329 million loss in first quarter

By Ed O'Keefe

The U.S. Postal Service delivered more bad news Wednesday, announcing it lost hundreds of millions of dollars during its first quarter because of costly health-care payments for its future retirees.

The mail agency lost $329 million in the first quarter of its fiscal year -- Oct. 1 to Dec. 31 -- up from $297 million during the same period the year before. Without including health-care payments for future retirees and adjustments to its workers compensation liabilities, USPS would have earned $226 million in the first quarter, it said.

The Postal Service warned again that it is likely to run out of money and default on some financial obligations at the end of its fiscal year in September when it surpasses its legal borrowing limit with the U.S. Treasury.

Postmaster General Patrick R. Donahoe said he's seeking changes to postal laws "to enable a more flexible and sustainable business model. We are eager to work with Congress and the administration to resolve these issues prior to the end of the fiscal year."

Lawmakers have yet to consider three postal reform bills that would address the mail agency's financial condition.

Total mail volume increased last quarter by 1.5 percent to 707 million pieces delivered. But related revenues dropped 3.3 percent, or $520 million, as mailers opted for less expensive advertising mail instead of the costlier First Class option.

Package volume also increased to 422 million pieces, up 2.4 percent from a year ago. Revenues from packages climbed 1.7 percent to $42 million. Donahoe, who took over in December, is hoping to increase package delivery sales to compete with United Parcel Service and FedEx.

Leave your thoughts in the comments section below

By Ed O'Keefe  | February 9, 2011; 11:53 AM ET
Categories:  Postal Service  
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Comments

Congress can eliminate the USPS financial problem with the stroke of a pen... by transferring the Postal Agency to the Department of Defense.

Eliminating ONE weapons program would wipe out the Postal debt.

Raising postage is also NOT the answer as it merely reduces the number of customers.
I would reduce the price of a first class mail to $0.25 per ounce.

Using the postal service needs to be made simple and convenient again.

Posted by: Hazmat77 | February 9, 2011 1:03 PM | Report abuse

Lets see here, 707 million pieces of mail delivered, 329 million dollar loss. That's a net loss of 46 cents per piece delivered. WOW. That's not exactly a business model to follow. That loss figure also does not included future costs for retired employees. The simple answer here, declare bankruptcy and renegotiate contracts. These postmen who make 100K a year, and I have spoken to several, are killing the service. I'm sorry, but carrying a letter from door to door or driving the mail around is not worth 100K a year, not to mention lifetime pension and benefits. Government BS at it's finest!!! WORTHLESS.

Posted by: Jsuf | February 9, 2011 1:34 PM | Report abuse

@Hazmat77, I don't think price is the cause of the postal system's decline. Compared to UPS or FedEx the post office is the least expensive option for anything I've ever had to ship. The postal employees also work the hardest to find people the cheapest rates and make sure everything is filled out right, IMO. The root cause of their financial crisis is no different than those plaguing other public agencies, rising healthcare and retirement costs being propped up by an increasingly diminished workforce. The environment is also aggravating this problem by the fact that more and more people are sending more and more communications electronically.

Posted by: jasoncostello42 | February 9, 2011 1:41 PM | Report abuse

Two items spelled out in the US Constitution are establishing Post Offices and post Roads.

In 1971, Republican President Richard Nixon replaced the cabinet-level Post Office Department with the independent United States Postal Service. The Act took effect on July 1, 1971.

Starting in 1971, when a first class stamp was 8 cents, this has caused stamp costs to rise to 44 cents for one first class stamp.

I submit that the Post Office is suppose to be handled, even spelled out in the constitution, for the good of the nation's economy and its people.

Business gets 100% of the cost of using the Postal Service back on a dollar for dollar basis as business expense.

It is the small business with little up front money to start a business, and the individual, like you and me, who must absorb 100% of the cost of using the postal service.

Since Nixon turned the postal service into a business, Republicans have turned the cost of running the nation's post offices into a losing proposition for the people.

This is similar to Republican President Ronald Reagan's adding user fees instead of taxes to provide taxpayers the benefits of living in this great country. We, the people have suffered.

Why would anyone vote Republican?

Posted by: SCVoter | February 9, 2011 1:58 PM | Report abuse

@jasoncostello42: So if you realize that more and more people are mailing electronically, why continue to keep all post offices open and not fire postal workers? The problem is labor costs and future benefit costs. The government entitlement model is broken. These public agencies need to follow the private model. Once you retire, you get your lump sum retirement and you are own your own. I also know that my postman makes 100K a year. That's absurd.

Posted by: Jsuf | February 9, 2011 2:04 PM | Report abuse

@Jsuf. If you read the article correctly, you would have noticed that the $329 million loss DOES include the retirement costs. Without retiree medical costs included, the USPS would have earned $226 million. The USPS has paid into its CSRS pension fund for years and now also pre-pays medical costs as well.

Posted by: dlafave | February 9, 2011 2:08 PM | Report abuse

@dlafave: Yes, the benefits are crippling the Postal Service. They need to do away with that. Pay people a lump sum and be done with them. Ok fine, if you want to keep the same retirement model, then why not still close post offices and lower pay grades. If a 226 million dollar profit is not enough to cover benefit costs, then the model is still broken. If it keeps on this pace, the loss will be over 1.2 Billion annually, which if I'm not mistaken has been the case for most the last decade.

Posted by: Jsuf | February 9, 2011 2:16 PM | Report abuse

eliminate all the free advertising crap stuff,designer stamps and return to providing mail service to the the public at a reasonably cost. tricky dickie screwed us in 71 and it has not stopped.

Posted by: pofinpa | February 9, 2011 2:24 PM | Report abuse

Health costs of "future retirees?" Wouldn't those be current employees?

When you consider that the USPS has to deliver mail to everyone, everywhere (unlike FedEx and UPS, who can choose their routes) the price per ounce is a steal. What people bristle at is being told that "this is the last rate increase," only to be hit with another rate increase a few months later, or that rate increases are actually a solution at all. We have about 12 consecutive quarters of losses to disprove that hypotheses.

Posted by: epinchicago | February 9, 2011 3:00 PM | Report abuse

The only "BAD" news from the US Post Office, is that it will still be around. But then, where else would we see all those pics of National Football league stars.

Posted by: fregameeate | February 9, 2011 3:00 PM | Report abuse

The USPS issue, like many of our current problems, date back to Ronald Reagan’s presidency. It was then thatt FED EX, UPS, and other defunct delivery companies like Flying Tigers got their start. Congress allowed them to deliver packages (the high profit deliveries), without requiring them to deliver bulk mail and regular postage (low profit deliveries). Another cherry picked privatization move.
With that said, the USPS has to be fixed. First step is to cancel Saturday deliveries. Next, mandate all delivery companies deliver all types of mail. The private companies will price bulk and regular mail accordingly and the post office can follow suit. Consolidate post offices. For low volume rural routes make delivery every other day, except deliveries that pay an extra fee for next day or express delivery. Shrink the staff (see consolidating post offices). We can’t do much about pension obligations now, but it will self correct over time. A single payer health care program will raise the competitiveness of the post office along with every other business in America.

Posted by: GabsDaD | February 9, 2011 3:28 PM | Report abuse

To those of you who did not read the entire article, or are not informed of certain policies of the USPS, if not for the pre-funding of the future retiree healthcare benefits, they would have earned $226 Million in the first quarter this fiscal year! Does your company pay that much for your future healthcare benefits? NO! No other company or government office is required to do this!
Let the lawmakers end this nonsense, and allow the USPS to handle the healthcare of the future retirees with half of the pre-funding... They will still be money ahead, and the future retirees will be taken care of as well.
Here's another idea, instead of punishing the people of many rural areas, how about reducing the overpaid salaries and benefits of the PMG and his staff. In 2009, the PMG salary skyrocketed to $265,000! At the same time the USPS was losing money fast! So much for the United States Postal Service having a PAY FOR PERFOMANCE structure. I guess that does not include PMG and his staff, just the people below him!
Let's try something a little different now...START TRIMMING FAT FROM THE TOP!!!

Posted by: tlcitsme | February 9, 2011 7:25 PM | Report abuse

How many of the 12 people that commented here EVER worked at the p.o.? I have. I know no postal carriers that make 100k yearly. Maybe with overtime??? In northern states, with walking in freezing weather you don't think they deserve decent pay? How about freezing rain? Would YOU want to do that job? But my supervisor makes 70,000 to just sit around and surf the web all day. WHY? There's not enough for him to do. Unlike the clerks, mailhandlers, carriers etc... We have plenty. In spite of the fact that business is declining. If you want to save money get rid of the ties. My manager stands around flirting with the pretty women. I've heard this crap from my own relatives for years,but what you all don't understand is all the work that goes in to delivering a letter from point A to point B. The Postal Service is governed by laws that UPS FEDEX are NOT! Plain and simple. We must jump through several hoops to deliver mail to your doorstep.(EVERY doorstep in the US). I know all of you would love not receiving bills in the mail, but just imagine if there was no post office. We give FREE postage to all active duty military. How do you think that mother feels when she gets that letter in the mail from her son or daughter serving in Iraq or Afghanistan? What would happen if her son or daughter never made it home alive? That mother would keep and treasure that letter FOREVER! The postal sevice doesn't just send bills and "junk mail" they send love and treasured memories.

Posted by: fedup100 | February 10, 2011 10:56 AM | Report abuse

Hey, I know what the answer is! Lets throw more taxpayer money at this failed business model!

UPS and FEDEX = Successful

USPS (with a MONOPOLY on general post) = failure

Now what's the difference between these?

Posted by: BradG | February 10, 2011 1:13 PM | Report abuse

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