USPS Posts $3.1 Billion Loss In Q3, Warns Of Default [More Stimulus Money Needed?]

YahooNews ^ | August 05, 2011

[Steelfish]

USPS Posts $3.1 Billion Loss In Q3, Warns Of Default By Emily Stephenson

WASHINGTON (Reuters) - The U.S. Postal Service posted a net loss of $3.1 billion in its third quarter and warned again it would default on payments to the federal government if Congress did not step in. Total mail volume for the quarter that ended June 30 fell to 39.8 billion pieces, a 2.6 percent drop from the same period a year earlier, as consumers turn to email and pay bills online.

The mail carrier, which does not get taxpayer funds, has struggled to overhaul its business as mail volumes fall. It has said personnel costs weigh heavily and is facing a massive retiree health benefit prepayment next month.

"We are experiencing a severe cash crisis and are unable to continue to maintain the aggressive prepayment schedule," Joseph Corbett, the agency's chief financial officer, said in a statement.

"Without changes in the law, the Postal Service will be unable to make the $5.5 billion mandated prepayment due in September." Congress, which last week ended a vitriolic debate about the U.S. government's debt levels and budget deficit, is now in recess until early September.

USPS cut work hours during the quarter by 3.1 percent compared to the previous year, when quarterly net losses were $3.5 billion.

[Pelham]

Is that money a loan from the FFB, or is it tax money that the USPS gets without any necessity of repayment?

When I looked at the 2005 report I noticed that the USPS had zero debt.

[Oceander]

A capital contribution is not a loan, by definition. One who makes a contribution to capital generally does not get a single cent until all of the corporation's creditors are paid off, including trade creditors. As the USPS is so far in the hole it'll never see a net profit, that $45 million was simply a disguised taxpayer handout.

On the debt, I'd consider the most recent report a bit more relevant than the 2005 report, and according to both the current USPS report and the most recent release from the Federal Financing Bank, the USPS is about $12.7 billion in the hole, debt-wise.

Finally, if you review the data, you'll see that the federal government - the federal taxpayers - have already made capital contributions of about $3 billion to the USPS, none of which will ever be repaid considering that the USPS has an accumulated deficit of about $5 billion. That is just more federal taxpayer money that has, essentially, simply be handed over to the USPS.

[Oceander]

Also, look one year forward from 2005; as per the Federal Financing Bank's Report for the 2005 to 2006 fiscal year, the USPS was net in the hole by $2.1 billion as of September 30, 2006 (even though it started out with no debt due the FFB as of September 30, 2005).

[Pelham]

That $3 billion capital contribution that you speak of appears, unchanged, in every report from from 1999 to 2009. 1999 is the earliest report available at the website so there isn’t a way to see how far back it goes.

However I wonder if this isn’t capital credited to the USPS by the old Post Office Department when the POD was reorganized as the Postal Service back in 1971. The Post Office Department received a taxpayer subsidy. The USPS was intended to be self supporting.

[Oceander]

I've seen data on the accrual of that contribution, and not all of it originated in 1971. With respect to the USPS being financially independent of the federal government, it never has been, as the CBO itself mentioned in a 1984 report entitled "Curtailing Indirect Federal Subsidies to the U.S. Postal Service."

In terms of the continuing capital contributions by the federal taxpayer, the USPS' own 2010 annual report is revealing. On page 2, "The past year in review," is a summary chart showing that the federal taxpayer made additional capital contributions for the fiscal year ending Sept. 30, 2009 of $54 million, and - as has been mentioned - an additional $45 million for the fiscal year ending Sept. 30, 2010.

So, regardless of where that $3.034 billion may have originated from (and even so, it's still US taxpayer money), the USPS has still gotten an additional $99 million from the US taxpayer in just two fiscal years as capital contributions - in a business that has never operated at a profit, that money will never come back out to the idiot shareholder who contributed it - and that is federal taxpayer money that the USPS has received, notwithstanding its claims to the contrary.

[Route797]

the USPS' own 2010 annual report is revealing

Page 9 is very revealing.

Unlike any other public or private entity, under a 2006 law, the U.S. Postal Service must prefund retiree health benefits. We must pay today for benefits that will not be paid out until some future date.

and...

Adopting a traditional “pay-as-you-go” method would produce an average of $5.65 billion in additional cash flow per year through 2016.

[Oceander]

In other words....?

[newnhdad]

just another union bailout for Obama to take from his stash..

[yuleeyahoo]

And you actually think that’s a real possibility? Name one power Congress has ever given up, Constitutional or otherwise.

[Route797]

Just pointing out a handicap the USPS operates under.

[Oceander]

Which handicap is that?