Postal Service Reports a Decline in Losses

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Postal Service Posts $1.9 Billion Loss in Second Quarter

Over all, the Postal Service reported operating revenues of $16.3 billion in the second quarter, an increase of $121 million, or 0.7 percent, which it attributed to strong growth in e-commerce deliveries and a small increase in standard mail, also known as junk mail. It is the first increase in revenue for the agency in five years.

But postal officials said the service’s expenses of $18.2 billion, which included continuing debt, offset the modest increase in revenue. Joseph Corbett, the Postal Service’s chief financial officer, said it had nearly $50 billion in debt obligations.

Officials said the Postal Service continues to lose $25 million a day as it waits for Congress to pass legislation to overhaul the postal system.

The Postal Service has struggled as mail volume has declined, which it continued to do in the second quarter, to 38.8 billion pieces, down from 39.4 billion for the same period a year earlier, according to agency financial documents.

Revenue from first-class mail, which provides the bulk of Postal Service revenue, declined $198 million, or 2.7 percent, from the same period last year, with a decrease in volume of 713 million pieces, or 4.1 percent.

There were a few bright spots in the gloomy report. Revenue from advertising mail increased $96 million, or 2.4 percent, in the second quarter compared with the same period a year earlier, on a volume increase of 181 million pieces, or 1 percent.

Revenue from package deliveries continued to grow, up $267 million, or 9.3 percent, compared with the same period last year.

Postal unions praised the second-quarter numbers, saying the figures show the continuing viability of the Postal Service.

“This positive trend undermines the doom-and-gloom scenarios postal critics cite — and it shows the folly of reducing services to Americans, as the postmaster general seeks to do,” said Fredric Rolando, president of the National Association of Letter Carriers.

Postal officials said they were able to curb the losses by cutting back the hours at many post offices, reducing staff through attrition and consolidating about half of the service’s processing plants. But the agency said these actions were not enough to reduce its huge debt.

Patrick R. Donahoe, the postmaster general, said Congress should pass a postal overhaul bill that will give the service the flexibility it needs.

“We need comprehensive legislation to provide the Postal Service with a workable business model for today’s marketplace,” Mr. Donahoe said at a morning briefing on the service’s finances for its board of governors.

The Postal Service said it continued to suffer from a 2006 Congressional mandate that requires it to pay $5.5 billion annually into a health fund for its future retirees. The agency defaulted on two payments last year for the first time and said it would not be able to make payments into the fund this year because of its worsening finances. The Postal Service and postal worker unions said Congress needed to fix the requirement by lowering the amount of the payments and stretching out the length of time needed to pay it.

The service also said the continuing shift to electronic communication, including online bill paying and e-mail, was affecting its bottom line. To offset the losses in this area, postal officials have asked Congress for the authority to enter into new lines of business, like beer and wine delivery, from which it is currently prohibited. The Senate passed a postal overhaul last year, but a House version never made it out of committee. Congress has not set a timetable for work on a new bill.

Mickey D. Barnett, chairman of the Postal Service board of governors, said that in the absence of Congressional action the board has asked agency officials to take several steps to deal with the continuing losses.

The changes include renegotiating labor agreements with postal worker unions, administrative actions to reduce costs and, as a last resort, increasing prices on post office products.

“We’re looking at every option to close our widening budgetary gap,” Mr. Barnett said.

Ford & Huff Opens D.C. Office Centered on Postal Affairs

Ford & Huff is opening a new office in Washington, D.C., focused on a unique practice -- postal affairs.

The practice is led by former U.S. Postal Service general counsel Harold Hughes, a senior attorney. Hughes is joined in Washington by new hires Robert Brinkman and Arthur Slacker.

"We're very excited about adding federal legislative and regulatory matters to our broad range of practice areas, and especially about starting with postal affairs," managing partner Adam Ford said in a written statement. "With Art and Bob joining Hal, we will have the deepest postal bench of any firm in the country."

A quick search of Washington firms showed that Patton Boggs and Husch Blackwell have practices involving postal regulation and postal service contracting, respectively. On its website, Husch Blackwell touts seven attorneys in the practice compared to Patton's one practitioner.

"The postal service is an organization that is going to be around for a long time," Brinkman said in an interview. "Big hunks of its first-class products are going away and it has to adapt [to the modern era]."

The postal service butted up against its $15 billion borrowing limit in September and has seen a sharp decline in first-class mail during the past few years. The new practice hopes to capitalize on some of those challenges.

"The Postal Service, despite its recent concerns, remains a huge and indispensable institution, on which a $1 trillion industry depends," Slacker said in a written statement. "We are looking forward to jointly helping members of that industry navigate legal and public policy challenges at the Postal Service, the Postal Regulatory Commission and on Capitol Hill."

This marks the fourth office for South Jordan, Utah-based Ford & Huff, which has about a dozen attorneys in its ranks.

This article first appeared on The BLT: The Blog of Legal Times.

Postal Service Defaults on a $5.6 Billion Benefits Payment

The agency said it expected net operating losses to be $15 billion for the fiscal year that ended Sept. 30. That loss includes the two missed payments totaling $11.1 billion for the agency’s future retiree funds. This month, the Postal Service also faces a $1.5 billion workers’ compensation insurance payment to the Labor Department. It said on Monday that it would most likely make that payment, but that it would be left with a cash shortage of about $100 million.

Postal Service officials said they expected the shipping of holiday packages and election mailings to help offset some of the losses. Patrick R. Donahoe, the postmaster general, said there would be no disruptions in post office operations. Mail will continue to be delivered on time, and employees and vendors will continue to be paid, he said.

“Customers can be confident in the continued regular operations of the Postal Service,” Mr. Donahoe said.

The agency had warned Congress for months that it would not be able to make the payments into the fund for its future retiree health benefits. The first $5.5 billion payment was due last September, but lawmakers allowed the service to push back the payment until August while they worked on postal legislation. The second payment was due on Sept. 30.

The payments are required by a 2006 law and do not affect current retiree benefits.

Lawmakers left Washington last month without passing legislation that would have helped the Postal Service deal with its crippling debt and its operating losses.

The agency is seeking to end Saturday delivery, enter new lines of business like shipping beer and wine, close nearly half of its mail processing centers and reduce hours at local post offices. It is also seeking to stretch out the payments for its future retiree benefits and to receive a refund of $11 billion that it has overpaid into one of its pension funds.

The Senate passed a postal bill that would give the agency some of the changes it seeks, but the bill does not allow the agency to end Saturday delivery. The House has not passed its version of the legislation.

Although Mr. Donahoe said he expected Congress to take up the measure when it returns after the elections, passage remains uncertain. Lawmakers will have to devote much of their time during the lame-duck session to dealing with the “fiscal cliff” — the end-of-the-year deadline for the expiration of hundreds of billions of dollars in tax cuts and for billions in across-the-board spending cuts.

For now, the agency said it was doing what it could to lower costs, like reducing staffing levels and closing mail processing facilities.

But Postal Service officials, postal unions and large mailers said the agency could do only so much on its own. If the service is to survive, Congress needs to pass postal reform legislation, they said.

Postal Service revenue continues to decline as mail volume drops. Since 2006, first-class mail volume has fallen by 26 percent as online bill payments, e-mail and other forms of electronic communication become more widespread.