USPS Expects $200M Surplus in FY99

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Postmaster general William J. Henderson told a Senate subcommittee last week that the revised U.S. Postal Service budget is estimating only a $200 million surplus next year and that he has instructed managers to increase that amount to $400 million.

"I have asked our field and headquarters managers to increase that amount by operating smarter and tapping into our employees' good ideas," Henderson told the subcommittee during its "Annual Report of the Postmaster General," which outlines the state of the USPS. "We need this additional net income to help restore our equity, continue building our infrastructure and keep next year's rates in place [for] at least two years."

The surplus is substantially less than the $1 billion-plus profits recorded in each of the three preceding years. Henderson attributed the lower amount to the $800 million not brought in because the USPS delayed the 2.9 percent rate increase until Jan. 10, instead of June, when it was originally scheduled.

"We delayed the rate increase, yet our expenses are rising," said Malcolm Harris, manager of economic analysis and forecasting at the USPS. "If you have $800 million less revenue and you earn less in 1998, you'll earn less in 1999. We obviously would have done better in [FY] 99 if we had the rate increase [in June], but we thought we should do the right thing and bite the bullet."

While industry insiders have attributed the low surplus to a possible decline in First-Class mail volume in FY99, Harris disagreed. "First-Class mail will continue to grow an average of 1 1/2 percent per year," he said.

These numbers come on the heels of Henderson's announcement earlier this fall that estimated the USPS' FY98 income figure would be $500 million to $600 million. However, this figure won't be verified until late November when a final audit of USPS' finances is made public.

Despite the low numbers, Henderson told the subcommittee that he is pleased with the postal service's progress.

Harris added, "Mr. Henderson has been real proud of the fact that we've squeezed so many costs out of the postal service in the last few years and that we've been able to keep our prices as low as we have."

Henderson told the subcommittee that the postal service will continue to deliver improvement and innovations and that technology will be key to the agency's success.

"Over the past two decades, [technology] has created a postal revolution -- automation. Automation has saved the American people billions of dollars. It has helped keep postage rates in line with inflation and given businesses and nonprofit organizations the ability to narrowly target their messages and advertisements."

Henderson said the USPS is on track for fiscal 1999, which began last month.

"Our employees are focused and ready to deliver for the holidays," he said. "We are committed to embracing technology and process management and using these tools to drive our performance to the next level."

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