With the May preliminary financial results now out, the Postal Service appears likely to complete this year in better financial shape than expected when forecasts were made last September. Volume remains stronger than expected for the full year and even the slowdown in the economy this Spring appears to have done little more than push volumes and revenue back to original expectations. Given that the next two quarters should see growth double-digit growth in parcel volumes and an unprecedented level of political campaign spending on mail, the Postal Service faces the challenge of improving service quality while adjusting its staffing operating plans to handle higher volumes than it expected when current operating strategies were approved.
The financial results continue to show that there is no need for maintaining the accelerated payment schedule for retiree health benefit obligations. The Postal Service’s business is not going away and a rational payment schedule combined with other changes allowing the Postal Service to cut its costs and increase its revenue would ensure that these obligations are covered before they are incurred.
The financial results also provide further support for repatriating the excess assets in the FERS and CSRS accounts to the Postal Service and adjusting the funding formula used to calculate the annual contribution to FERS and CSRS to cover the annual change in liability for benefits of Postal Service employees. Repatriating the current overfunding would provide the Postal Service with a significant cash cushion to make capital investments needed to improve serve and handle the rapid growth in its parcel business. Adjusting the funding formula to acutal changes in liability will reduce annual operating costs, improve the bottom line and eliminate the need for repatriation of overfunding in the future.
The USPS Preliminary Financial Information – May 2012 is available on the Postal Regulatory Commission website.