USPS Debt to Treasury Hit $0 in June
The postal service's debt to the Treasury's Federal Financing Bank had reached a record $11.1 billion at the end of fiscal year 2002. It was $7.3 billion at the end of fiscal 2003.
This is the first time since postal reorganization in 1971 that the USPS owes $0 to the Treasury, said Richard Strasser, USPS chief financial officer and executive vice president.
The USPS paid off the debt in several ways.
The Postal Civil Service Retirement System Funding Reform Act of 2003 -- which lowered pension contributions the USPS must make to the CSRS after reviews found that the agency had overfunded the system -- required the postal service to reduce debt because of the lowered pension payments, Strasser said.
This contributed $6.2 billion to debt payments through fiscal 2003 and 2004.
Also, the agency's Transformation Plan, implemented in 2002 and designed to generate $5 billion through 2006 via productivity initiatives, will generate $4 billion of that total $5 billion in cost reductions by the end of this year.
Additionally, Strasser said that the USPS froze capital for facilities in fiscal year 2000.
"We had been signing contracts to build about $1.5 billion worth of facilities every year, and we froze that because we foresaw the challenge of paying the cash of those contracts when it came due," he said.
In fiscal years 2001, 2002 and 2003 combined, the USPS committed only $1 billion to new facilities. As a result, "the savings from the productivity and performance, as well as the savings in cash from not building as many facilities, is what enabled us to reduce the rest of the debt," Strasser said.
But Strasser also said the USPS likely will incur losses in certain months, including July and August.
"The USPS is delivering less mail to more households every day," he said. "I don't want the debt situation to mask the real problem, which is that the revenue line is not growing, and we don't really anticipate it to grow much next year. We still have other obligations, like the health benefits for retirees and workers' compensation costs, on our balance sheet."
Strasser said the USPS originally planned to reduce debt to $2.6 billion to $3.1 billion by the end of this year, but "we think we are going to end the year at about $2 billion in debt because of our increased productivity."
Meanwhile, the USPS published its financial and operating statements for June, FY 2004 on Wednesday. It had net income of $2.81 billion -- $853.4 million over budget -- between Oct. 1, 2003, and June 30, 2004. Mail volume was up and expenses were under plan in the period.
Revenue totaled $52.1 billion, 0.5 percent better than planned, but was down 0.1 percent compared with the year-ago period. Expenses of $49.3 billion were 1.2 percent under the planned budget, but up 2.8 percent versus the year-ago period.
Volume of 155 billion mail pieces rose 1.4 percent. International and Standard mail grew 6.7 percent and 4.9 percent, respectively. However, several mail classes experienced declines. Periodicals fell 3.3 percent; Express Mail, 3.1 percent; Priority Mail, 2.5 percent; First-Class, 1.4 percent; and Package Services, 0.7 percent.