USPS down $329 million so far in fiscal 2011

The U.S. Postal Service lost $329 million in the first quarter of fiscal 2011, but will continue efforts to cut costs and restructure its workforce, officials said Wednesday.

During a board meeting on Wednesday, Postal Service leaders reported large losses in the first quarter, generally the agency's strongest quarter each year. USPS lost $297 million in that same period in fiscal 2010. The agency continues to face long-term financial challenges and aims to reduce costs faster than revenue declines, officials said.

"It's a difficult environment for employees who have worked so hard," said USPS Board of Governors Chairman Louis Giuliano. "Unfortunately, it's not going to go away soon."

Chief Financial Officer Joseph Corbett said the Postal Service does not expect to meet its cash obligations this year, including a $5.5 billion prepayment to its retiree health benefits fund, due Sept. 30. The agency will meet its statutory borrowing limit by the end of the fiscal year. USPS is projecting $2 billion in savings in 2011, which includes the expected reduction of 40 million work hours.

The Postal Service reduced work hours by 6.4 million in the first quarter of fiscal 2011 -- the equivalent of 3,600 full-time employees. City delivery hours dropped 1.5 percent, while processing and customer service hours declined by 4.1 percent and 5.8 percent, respectively. The agency has cut nearly 103,000 career positions, or 15.1 percent of its workforce, since 2007.

Despite a 2.1 percent decline in work hours last quarter, compensation costs remained stable due to a contractual 1.6 percent pay increase for employees, Corbett said. The Postal Service also had to increase its Federal Employees Retirement System contribution despite a $6.8 billion overpayment, along with a $1.4 billion prefunding obligation to retiree health benefits and a $700 million workers' compensation liability, according to Corbett.

The Postal Service is planning a massive workforce restructuring this year and will slash 7,500 jobs, including 20 percent of the administrative workforce and 10 percent of the postmaster jobs, Postmaster General Patrick Donahoe said in January. Thirty percent of employees in those positions already are eligible for retirement, and USPS will offer early voluntary retirement with possible financial incentives to meet its staffing goals. The agency also will continue to look for ways to close or consolidate 2,000 post office locations, he said.

"There's no such thing as going too fast," Donahoe said Wednesday. "It's not just an across-the-board reduction … we're setting up for the future."