President Donald Trump tweets that the U.S. Postal Service “has failed for many decades.” Other critics predict its demise. In Congress, the future of the USPS – including its vital role this November in dealing with what is expected to be a tide of post-a-vote – has become yet another partisan firing line.
What has been lost in the political fire is this: The Postal Service is on track to have its best year in more than half a decade – that is, even after it suffered a severe financial hit, as did companies around the country, from it coronavirus.
In the first six months of 2020, USPS operations generated $ 2.3 billion in cash, an increase of $ 700 million from the year-ago period. Note that this does not save any of the costs. Expenditure over the past nine months has actually risen to $ 2 billion, or just under 3%, due in part to an increase in paid sick leave as a result of the pandemic, as well as the purchase of personal protective equipment and other services. to keep workers safe.
By comparison, FedEx raised $ 3 billion between December and May. However, the cash flow of the private shipping giant has remained less resilient, falling 12% this year as the coronavirus pandemic hit the economy. The post office has seen an increase in demand for parcel shipping, even as regular first-class mail has dropped.
To be sure, the USPS faces real challenges. A May report by the U.S. Government Accountability Office described the Financial Services Department’s financial condition as “poor.” But almost all of these losses stem from how the Postal Service fulfills its obligations for pensions and health care. Address that and their financial situation improves dramatically.
“If it weren’t for the benefits of retirement, the Postal Service would be break-even, or maybe even a little better,” Post Office historian and policy analyst Christopher Shaw told CBS MoneyWatch.
He also points out that until 1970 no one expected the Postal Service – never a for-profit enterprise – to break even. “If you follow it as a public service with a big universal mandate to deliver the mail to all citizens, the losses over time have been fairly consistent and not that big,” Shaw said.
Is the USPS profitable?
Not very much, at least not in the way that accountants normally calculate profit and loss. Last month the Postal service reported a loss of $ 2.2 billion for the second quarter of 2020. For the first nine months of its current fiscal year (ending in September), the Postal Service lost $ 7.5 billion. That was up from a loss of $ 5.9 billion in the same period last year.
The Postal Service’s net losses include retirement pensions and health care, as well as other benefits. In 2006, Congress mandated that the USPS cover the potential costs of those benefits each year, even though the agency has not spent any money to finance those future benefits since at least May 2014, according to the GAO report.
The upshot: Many of the tens of billions of dollars in net losses that the Postal Service has repaired in recent decades are paper losses – not cash expenditures.
Accounting expert Robert Willens, who runs his own advisory firm, said net income is a particularly important measure for investors as a measure of whether the bottom line of an investment has gone up or down. However, the question of whether the Postal Service is a good investment is not the problem.
Willens said a better way to measure the USPS’s financial condition is to look at its cash flow, which tracks how many dollars go in and out of a business (as in this case a semi-independent arm of government ). Based on that, the Postal Service is a cash cow, generating a total of $ 13.5 billion over the past five years.
“What financial measure you see depends on what you are looking for,” he said. “Here you are interested in solvency and whether the Postal Service generates enough money to finance its operations. The revenue statement will not tell you that.”
How much money does the Postal Service have?
A lot – and his stash is growing. The USPS had $ 13.3 billion in cash as of June 30, according to its latest financial statement. That was up from roughly $ 8.4 billion by mid-2019. However, part of the reason for that jump is that the Postal Service borrowed an additional $ 3.3 billion earlier this year.
In April, the Postal service warned that it can run with cash at the end of October. But that warning was based on a projection that USPS revenue would fall by $ 13 billion this year due to the coronavirus. If that had happened, the Post Office could – without financial adjustments – have been in danger of running out of cash. But it did not.
Instead, revenue for the Postal Service has risen more than $ 500 million in the past nine months, driven by a 20% jump, to $ 3.4 billion, in sales of parcel packages that have more than compensation for the drop in first class post.
In June, the Postal Service updated its outlook to say it could end up with money by the end of 2021. But that is also based on a projection of possible virus-related losses.
“The expected losses of the postal services this year were not as bad as people expected,” said Christopher Edwards, an economist at the Cato Institute’s libertarian think tank.
Does the USPS really need a bailout?
Despite the USPS improving its financial position this year, its long-term retirement obligations – at more than $ 60 billion – are large and growing. Most of those benefits will not last long. But the GAO notes that the money the Post Office has raised to fund its pension benefits by 2030 will run out.
If it does not spend extra money, the USPS could support its retirement benefits for a while longer. But ultimately, it should benefit or benefit from federal assistance.
Chamber member Nancy Pelosi this weekend called for a vote on legislation that would provide $ 25 billion in emergency funds for the Postal Service. But it is not clear where that figure comes from. Earlier this year, the Postal Service Board of Governors asked for $ 25 billion in additional aid, but that was based on its earlier prediction of enormous losses with coronavirus, which is demonstrably unsettling.
What’s more, the USPS was already authorized to receive an additional $ 10 billion earlier this year under the Coronavirus Aid, Relief and Economic Security Act, which it has yet to tap.
Tuesday, Postmaster General Louis DeJoy resigned what he called “long-standing operational initiatives” meant cutting costs at the USPS. In response, Pelosi told reporters Tuesday, “I think it’s really important for the American people to know this: When they talk about the Postal Service, they say ‘Oh, they’re losing money, we need to make this, this and this. ‘ That’s not the point. It’s not a business. It’s a service. “
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