USPS racks up USD 5.4 B deficits in 2007
The U.S. Postal Service anticipates a USD 600 million deficit in the next fiscal year, thanks to a new law that requires the agency to fully fund its retiree health benefits out of its operating budget.
The projected 2008 deficit will be a big improvement, however, from the fiscal year that ends Sept. 30, in which the Postal Service racked up an estimated USD 5.4 billion deficit. The Postal Service was hit with a double whammy this year, having to pay out its 2006 obligations toward the retiree health program in 2007 along with the current year’s payment.
The fiscal 2008 budget, approved Wednesday by the Postal Service Board of Governors, includes a 4.3 percent increase in operating revenue, due largely to the 2-cent rate hike that took effect in May. No additional rate increase was included in the 2008 budget.
Expenses will increase 1.8 percent, below the projected 2 percent increase in the cost of goods and services. Overall, the operating budget totals USD 78.8 billion.
The 2008 budget predicts a record ninth consecutive year of productivity growth. Board member Lou Giuliano said that’s especially impressive, given that there have been no significant automation enhancements. “This was just blocking and tackling, getting the mail delivered on time more often using the automated process,” he said.
The board also approved a capital budget of USD 3.0 billion for 2008, up from USD 2.8 billion this year. The budget includes USD 107.2 million to design and build a new 479,000-square-foot mail processing facility in Miami. The new facility will house five large letter-sorting machines and allow the agency to handle significant growth in the region for the next 20 years.
The Postal Service will lease the property from a developer for 40 years for USD 69 million. Board member Jim Bilbray questioned why the Postal Service would lease the property instead of purchase land for the new building, but officials said they were unable to find another site with appropriate interstate access.
Once complete, the new building will generate an annual return on investment of 6.7 percent by allowing the Postal Service to close two nearby structures and reduce the work force by nearly 100 employees. When productivity enhancements from the new sorting machines are factored in, the annual return on investment is projected at 19.5 percent.
