U.S. Postal Service Finances at Critical Juncture
Postal Service Finances at Critical Juncture
November 27, 2017
The U.S. Postal Service recently
announced its Fiscal Year 2017 finances and once again it showed significant
financial problems, including a $2.7 billion net loss. While down from a $5.6
billion net loss in Fiscal Year 2016, this marked the 11th consecutive
year that the Postal Service lost money. Losses from Fiscal Years 2007-17 come
to $65.1 billion.
even more disturbing, there is not a clear solution from the Postal Service for
how it will turn this around. Instead, the Postal Service is calling for
significantly higher prices on large product lines for which it not only has a
poly, but is unlikely to face any
meaningful near-term competition. There are also growing calls from the Postal
Service for taxpayers to assume tens of billions of dollars in unfunded retiree
health care costs.
In fiscal year 2017, the Postal
Service did not make any of the $6.9 billion in payments that were due to the
federal government for pension and health benefits for retirees. The Postal
Service has also defaulted on annual retiree health benefit payments of
approximately $5.6 billion annually since Fiscal Year 2012.
The Postal Service’s Strengths
With 2017 revenues of $69.6 billion,
the Postal Service would be the 38th biggest company on the Fortune
500 list of U.S. public businesses.
Most of its business is in monopoly
or near-monopoly products. As the Postal Service says in its Form 10-K report,
“Market-Dominant products account for approximately 70% of our annual operating
revenues.” This is approximately $48.7 billion annually.
The Postal Service also says in its
10-K that monopoly first-class mail is, “…our most profitable service
category”. Another market dominant product, marketing mail, is similarly
discussed positively in the 10-K, “Marketing mail has generally proven to be a
relatively resilient marketing channel, and its value to U.S. businesses
remains strong due to better data and technology integration.”
The Postal Service’s Turnaround Plan
Clearly, the Postal Service needs a
business turnaround plan. First, though, it needs to institute basic
The law requires an eleven-member
board of governors, including nine independent governors, the Postmaster
General and the Deputy Postmaster General. Currently, the only board members
are the Postmaster General and Deputy Postmaster General. President Trump made
three nominations of governors on October 30 and they are being considered by
In the absence of a turnaround plan
that is properly executed, Congress will face increasing pressure to bailout
the Postal Service with taxpayer dollars, without any fundamental operational
improvements likely to be made. There may also be pressure on Congress to allow
the Postal Service to raise prices for monopoly products above the maximum amount
in the Consumer Price Index. Both measures would harm consumers.
To protect consumers and to
strengthen the Postal System, it is essential that new governors be appointed
as soon as possible and that all avenues be explored to promptly implement an
effective business turnaround plan.
U.S. Postal Service Reports Fiscal Year 2017 Results
(November 14, 2017 news release)
U.S. Postal Service 2017 Form 10-K (November 14,
Postal Board Finally Receives Three Nominees to Fill Vacant
Posts (Linn’s Stamp News, October 27, 2017)