USPS retreats from dire financial forecast

Washington Postal Scene by Bill McAllister
June 25, 2020
The United States Postal Service has officially retreated from its dire financial forecast saying that it would be out of cash by June.

The new forecast, given to mailer associations June 22, is actually two forecasts, according to Stephen Kearney, executive director of the Alliance of Nonprofit Mailers.

One calls for the USPS to run out of gas in March 2021 and the other in October 2021.

Both are a far cry from the predictions of Democrats in the House of Representatives who warned that the Postal Service’s financial demise was imminent, as soon as June.

Kearney disclosed the new forecast in an alert bulletin to his members, saying the USPS “essentially said ‘never mind’ ” about its earlier projections of financial doom this summer.

However he noted that “The finance leaders of USPS today said several times that, ‘It’s a question of when, not if, we will run out of cash.”

House Republicans had begun warning that the USPS forecast was wrong and urged their Democratic colleagues to seek a revision.

That appears to be what the USPS offered, saying that the key issue is how mail and package volumes recover from the COVID-19 pandemic, which has caused a 25 percent to 30 percent decline in letter mail.

Package volume had soared as much as 80 percent ahead of levels a year ago, much to the amazement of postal officials, but more recently has been around 60 percent, according to Kearney.

Financial officials at USPS headquarters at L’Enfant Plaza in Washington, D.C., now expect mail volumes to remain 20 percent to 25 percent below pre-coronavirus levels, Kearney said.

The Postal Service’s team “Forecast 1,” which calls for cash to be exhausted in March 2021, assumes packages will go back to pre-COVID-19 levels and the agency’s pandemic-related losses will amount to $17 billion in 2020 and 2021.

“Forecast 2,” which assumes USPS cash will last until October 2021, assumes the pandemic-related losses in 2020-21 will be limited to $7 billion.

“So the optimistic forecast assumes USPS will retain only plus-15 percent increase in package volume,” Kearney wrote.

“Under that projection cash would become a problem in 15 months and only if the agency does not use its $10 billion new line of credit with Treasury,” he said.

“Under the even more unlikely scenario that package shipments with USPS rather quickly return to pre-pandemic levels, cash might run out in 8 months.”

Kearney, who was once one of the most senior financial officials at the Postal Service, said the agency created its own credibility problem by its “forecasting malpractice in April by predicting that the agency would run out of cash by now.”

“It has been forced to revise that forecast with one that gives more breathing room for real reform to be implemented,” he said.

“We agree with them, however, that forecasting now is very unreliable.”

Stephen Kearney’s Alert to Mailers

Source: LINN’S Stamp News

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