USPS ends year with $6 billion loss

The U.S. Postal Service is expecting to lose $6 billion in fiscal 2010 and is continuing to pursue a five-day delivery schedule and workforce reductions, according to the agency's highest official.

In a Friday briefing, Postmaster General John Potter said USPS generated $68 billion in revenue and processed 170 billion pieces of mail last year, but still is looking for ways to increase income and drive down cost. In addition to expanding retail options and revamping USPS.com, the Postal Service must continue to reduce its labor costs, which are 80 percent of its overall expenses.

"Anytime someone makes a suggestion that would improve our costs, we go after it," Potter said.

USPS has eliminated more than 100,000 jobs since 2007 through attrition and deliberate work hour reductions, according to Potter. The agency has consolidated delivery routes and limited processing plant operation hours to reduce staffing and overhead costs and to meet the new demand for lower mail volume. The Postal Service also has cut administrative work hours by 15 percent and processing work hours by 30 percent between fiscal 2008 and fiscal 2010. Cutting delivery days from six to five would trigger the need to make further reductions in work hours, Potter said.

USPS also is working to rectify overpayments to its Civil Service Retirement System and Federal Employees Retirement System accounts. Reports from the USPS inspector general issued earlier this year identified $75 billion and $6.8 billion in overpayments to those funds, respectively. The law doesn't allow a refund, so the agency simply is looking to halt more overpayments, Potter said.

The Postal Service faced several challenges with the close of fiscal 2010. It was seeking relief from a $5.5 billion obligation to its retiree health benefits, but lawmakers did not include a bailout provision in its temporary spending bill. According to Potter, the Postal Service paid its obligation using extra cash and borrowing authority, but in 2011 could max out its options.

"2011 going to be risky," he said. "We would prefer a deferral so we're not running into liquidity problems. The projection is cash will be tight going into the beginning of the year, but if things go as expected we will perhaps be able to get through the year and literally run out of cash in September 2011, because we will have exhausted all of our borrowing authority."

The Postal Regulatory Commission on Thursday denied a USPS request for a 5.6 percent postal rate increase, saying the agency failed to justify the proposal. Potter said the Postal Service will continue to explore opportunities to boost rates.

"We are studying, carefully studying the decision by PRC," he said. "We are looking at options that we have going forward when it comes to pricing. We are going to be very careful in terms of assessing their decision and will be revisiting with board of governors options that we have going forward."

Potter said the Postal Service will continue to follow its 10-year strategic plan, outlined in March, which included proposals to reduce delivery days and to increase workforce flexibility. The agency still is committed to saving $120 billion over that time, he added.