September 28, 2020

Postal Service financial performance through August

The Postal Service filed its 11-month fiscal results through August.  The rotation out of mail and into packages is stark.  Year-to-date, Market Dominant mail volume was down 11.5 percent, and revenue declined 8.8 percent.  Competitive packages, on the other hand, were up 20.8 percent in volume and 24.0 percent in revenue.  The monthly data for August were even more striking: mail volume down 18.3 percent and revenue off 14.4 percent.  Packages in August rose 39.4 percent in volume and 40 percent in revenue.

Year-to-date USPS revenue is up 2.0 percent to $66.961 billion.  But the 11-month operating expenses rose more at 2.5 percent to $75.632 billion.  Including net interest expense, the Postal Service reported an accounting loss of $8.782 billion.

In the category that matters more to a government agency than accounting results, USPS cash continues to be strong.  Postal Service cash invested in Treasury securities for operating and capital purposes totaled $15.078 billion on August 31, 2020, versus $8.992 billion on August 31, 2019.    It’s important to note that some of the reported accounting losses are non-cash adjustments, such as the $1.877 billion adjustment to the workers’ compensation liability, that is caused primarily by lower interest rates.

In its latest balance sheet report, USPS had $14.4 billion in borrowings from the Federal Financing Bank.  That leaves $600 million capacity under its longstanding $15 billion ceiling, plus the extra $10 billion granted by the CARES Act.

Total USPS available liquidity comes to $15.078 billion cash plus $10.6 billion borrowing capacity, equaling $25.678 billion.  There is no need for mailers to be concerned about the Postal Service running out of cash anytime soon.  There will be plenty of time after the election to work on much-needed reforms, both internal to the agency and in the laws that govern it.  

More immediate concerns include:

• Adequate human capital to perform the critical functions of USPS during a pandemic.
• Adjustment to 40 percent more packages and 20 percent less regular mail.
• Procurement of thousands of new vehicles to replace a fleet well past its useful, safe life.
• Addressing over $5 billion in overtime expense, and other operational inefficiencies.
• Overcoming intervention by Congress and Federal Courts in USPS operations.
• Making it through the politicization of mail service for the elections on November 3.