Why is the Postmaster General Understating Postal Revenue Gains?

By David Yao

In a May 9, 2014 press release, the Postal Service issued another quarterly press release turning an operating profit (of $261 million) into a loss. The supposed loss, an accounting fiction, was caused entirely by the 2006 law which generates a long-term loan to the Federal treasury, under the guise of “pre-funding” employee benefits.

In fact, the Postal Service is making a $1 billion operating profit in the first six months of its fiscal year. In their own press release in response, the National Association of Letter Carriers pointed out that the Postal Service has been turning an operating profit since October of 2012.

But the USPS release included this apparent misstatement: “’revenue…was up $379 million over the same period last year — the third straight quarter of revenue increase,’ said Postmaster General and Chief Executive Officer Patrick Donahoe” (underlining added).

The Postal Service has actually been reporting revenue increases for five straight quarters, dating back to January 1, 2013 (see below). So why is Postmaster General Donahoe minimizing that winning streak? Perhaps someone in Postal HQ’s statistics department was snoozing that day.

But there is a more disturbing explanation, that is consistent with the Postal Service’s “doom and gloom” reporting of its finances.

Over the last few years, faced with falling revenue, postal management has closed post offices, slashed rural office hours, sold historic buildings, cut jobs, and consolidated processing plants. It continues to seek closings and service cuts, such as eliminating Saturday delivery; but some of these moves have been delayed or curtailed by pushback from the public, from employees, and from legislators.

More recently however, postal finances have improved. Cash on hand increased from $2.3 billion to $3.7 billion over the last two quarters. Despite that, postal management has continued its campaign to impose austerity on the public (e.g., ending door-to-door delivery), and its employees (such as current efforts to privatize its trucking arm and shift retail work to Staples). Its biggest weapon has been the persistent “we’re losing billions” message.

So it appears more than suspicious that the PMG’s press release minimizes postal management’s own reports of increasing revenue over the past five quarters.

The persistent and misleading press releases about losses in the billions has also allowed right-wing commentators to paint a picture of the Postal Service as a failing business, even going so far as to call for privatization. But more importantly, they have the effect of drumming into the public, as well as employees, that drastic measures are called for, and there is no use in resisting.

In fact, postal reform is needed, but not the slash-and-burn kind. Postmaster General Donahoe is apparently marching to the tune of big mailers, who want a streamlined network of postal facilities, without the costs imposed by the postal mandate of prompt and efficient universal service.

A postal management that took social values to heart, instead of corporate ones, would look to strengthen the Postal Service, not shrink it. Postal banking, for example, with a long history here and overseas, could provide valuable financial services to underserved areas and populations, as well as generate substantial revenue.

The U.S. government – or more specifically, a lame-duck Congress – is to blame for the Postal Accountability and Enhancement Act of 2006, which required that the Postal Service pump over $55 billion into a federal treasury account, ostensibly for future retiree benefits – pre-funding.

A history of pre-funding on savethepostoffice.com cites an analysis by the Inspector General of the USPS OIG: “The aggressive payment schedule appears to have been set based on byzantine ‘budget scoring’ considerations rather than actuarial assumptions or an evaluation of the Postal service’s ability to make the payments.” In other words, pumping money into the federal budget was the motivator, not future needs, and regardless of ability to pay.

So the USPS cannot pay the $5.5 billion per year now, previous payments having drained its credit line – so, what? No actual  money changes hands, but it still counts as an asset in the federal budget, and it still counts as a debt in the postal budget. And thus, the phony losses that are reported by the postal press releases, and dutifully, if misleadingly, parroted by the media.

Equally important is that Congress does not want to eliminate the unneeded pre-funding requirement, in this climate of budget fights. But what would be the harm in ignoring the annual $5.5 billion dollar demand, “defaulting” as the Postal Service has done for several years, and carrying on as usual? Well, the harm is that this fanciful debt is being used as a battering ram to fool the public into thinking that postal finances are in such bad shape that a drastic overhaul is needed, as Representative Darrell Issa, the postal Voldemort, has been attempting to do.

It is in this context that a seemingly harmless error takes on a meaning of sinister proportions, as at least an echo of the larger campaign that uses an accounting fiction to persuade the public and the media that postal finances are in much worse shape than the factual reality: rising revenue, and operating profits.

Revenue Increases over Same Period Last Year (dollar amounts represent thousands):

1.  Jan-Mar 2014 – (P.3)- Quarter II of FY 2014 $ 16,727  up from$ 16,348 Quarter II of FY 2013

2. Oct-Dec 2013 -P.3)- Quarter I of FY 2014 $ 17,994 up from $ 17,660 Quarter I of FY 2013

2013 10K Report, page 105 shows:

3. Jul-Sep 2013 – Quarter IV Of FY 2013 $17,133, up from $ 15,706 Quarter IV of FY 2012

4. Apr-Jun 2013  – Quarter III of FY 2013$ 16,177 up from $ 15,613 Apr-Jun 2012

5. Jan-Mar 2013 – Quarter II of FY 2013 $ 16,348 up from $ 16,227 Jan-Mar 2012

David C. Yao is a local officer of the American Postal Workers Union and a founding member of Communities and Postal Workers United. Any opinions are his own, and do not necessarily reflect organizational positions.

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