Postal Service cuts USD1.1B from budget
The U.S. Postal Service Board of Governors has approved a fiscal 2007 financial plan that includes USD1.1 billion in cost reductions, including a planned decrease of 40 million work-hours and a 0.5 percent dip in overall mail volume.
The Postal Service said it will still provide universal service to an expanding delivery network, and that savings will come from automation improvements. The plan, announced late Tuesday, assumes continued slower growth in the U.S. economy and implementation of postage price adjustments in May that based rates on the shape of packages versus only the weight.
The plan also calls for a 3.2 percent increase in revenue and a 2.6 percent increase in expenses over the current year’s forecast, resulting in USD1.7 billion in net income. But an estimated USD3.3 billion escrow requirement results in a loss after escrow of USD1.6 billion.
A federal law passed in 2003 requires the Postal Service to establish a USD3.1 billion escrow account, with use of the funds to be determined by Congress at a later date.
H. Glen Walker, the Postal Service’s chief financial officer, said the plan carried greater risk than previous years’ forecasts because of the pending rate change, labor negotiations with its four largest unions, ‘and uncertainties with the economy, including fuel prices.’
Other caveats include technology advancements like e-mail and instant messaging continuing to cut into the Postal Service’s core mail delivery business, and strong competition from FedEx Corp., UPS Inc., and other package delivery companies in the express, international and bulk markets.
Through July, the agency’s income was USD1.34 billion before the escrow allocation, and is USD69 million better than planned. The year-to-date net deficiency after the escrow allocation is USD1.16 billion.
In other actions, the Board of Governors approved a recommended decision by the Postal Rate Commission to extend a negotiated service agreement with Capital One Services Inc., to Sept. 1, 2007. The agreement provides incentives for increased first-class mail volume and substitution of electronic notices for actual returns of undeliverable-as-addressed mail.
