The Times West Virginian

May 14, 2009

Rate hikes alone won’t solve USPS financial woes

We’re now digging for a little extra change during our visits to the post office.

The price of a first-class stamp, effective last Monday, climbed to 44 cents. It’s the third straight year rates have gone up in May under a new system that allows annual increases as long as they don’t exceed the rate of inflation for the year before.

Other changes also took effect this week:

• The postcard stamp increased 1 cent to 28 cents.

• The first ounce of a large envelope increased 5 cents to 88 cents.

• The first ounce of a parcel increased 5 cents to $1.22.

• New international postcard and letter prices are, for one ounce, 75 cents to Canada; 79 cents to Mexico; and 98 cents elsewhere.

Most Postal Service shipping services prices were adjusted in January and did not change.

These rate increases alone, though, will not solve the financial problems plaguing the U.S. Postal Service.

It ended the second quarter (Jan. 1-March 31) with a net loss of $1.9 billion. USPS officials blamed the economic recession and longer-term financial pressures, such as the diversion of letter mail to the Internet, that continued to reduce mail volume and revenue. The Postal Service, officials predict, will likely face a cash shortfall of over $1.5 billion at the end of the fiscal year.

The Postal Service, according to its Wed site, has incurred net losses from operations in 10 of the last 11 quarters. The year-to-date net loss is $2.3 billion, compared to a loss in the same period last year of $35 million. A significant portion of the losses over this period can be attributed to an unprecedented decline in mail volume. In the second quarter, mail volume totaled 43.8 billion pieces, down 7.5 billion pieces, or 14.7 percent, compared to a year ago.

“The economic recession has been tough on the mailing industry, and we have seen an unprecedented decline in mail volumes and revenue that continued to accelerate during the second quarter,” said Postmaster General John Potter. “We are aggressively realigning our costs to match the lower mail volumes, while also maintaining the high level of service and reliability our customers expect. We are also taking a number of steps to grow revenue.”

The Postal Service, which does not get a taxpayer subsidy for its operations, also lost $2.8 billion last year.

This weeks’s rate increases are unlikely to cover the ongoing losses, and the possibility remains that the post office could run out of money before the end of the fiscal year. The post office could have cited extraordinary circumstances and asked the independent Postal Regulatory Commission for larger increases, but officials worried that would only result in a greater decline in mail volume and worse losses.

The USPS, like other businesses, must adapt its operations to changing times to survive.

Potter has asked Congress for permission to reduce mail delivery to five days a week. The agency, The Associated Press reported, is offering early retirement to workers, consolidating excess capacity in mail-processing and transportation networks, realigning carrier routes, halting construction of new postal facilities, freezing officer and executive salaries at 2008 pay levels, and reducing travel budgets.

Potter has also urged congressional changes in how the post office prepays for retiree health care, to cut its annual costs by $2 billion.

The Postal Service has also recently developed incentive programs to increase mail volume, including advertising mail and Priority Mail.

“We are aggressively reducing work hours and other costs to limit losses, preserve cash and improve productivity,” said Joseph Corbett, chief financial officer and executive vice president.

Initiatives designed to match work hours to reduced volume have resulted in a work-hour decline of 58 million hours – the equivalent of a reduction of 33,000 full-time employees – in the first half of fiscal year 2009, despite an increase in the number of delivery points by 1.1 million from the same period last year. The work-hour reduction is on pace to meet the goal of reducing work hours by more than 100 million for the entire year, the equivalent of 57,000 full-time employees.

The Postal Service, despite recent decreases, still is responsible for a tremendous volume of work. Even for the most simple correspondence, everyone does not have access to the Internet or may not prefer using it.

The ability to send a letter to anywhere in the country for 44 cents, when you think about it, remains quite a bargain.

We trust USPS officials will be diligent in matching their services and personnel to today’s market to ensure the long-term financial viability of the postal system.