U.S. Postal Service expects deficit this year

Even with postage rates going up, the Postal Service expects a deficit this year as struggles with a swiftly changing communications market, Postmaster General John Potter said Tuesday.

“The dynamics of the 21st century communications market have altered – forever – the basic assumptions of postal economics,” Potter said in remarks prepared for the House Oversight and Government Reform postal subcommittee.

The rapid growth of electronics communications have resulted in declines in lucrative first-class mail, though lower-cost advertising mail continues to increase.

In addition, private companies have taken a growing share of the package and rapid delivery market.
“Competition exists for every piece of mail that we move through our system,” Potter said.

In 1970, Potter pointed out, the U.S. Postal Service’s 741,000 employees delivered 85 billion pieces of mail . Last year, with about same number of workers, the agency delivered 213 billion pieces of mail.

But, he said, “We can no longer depend on volume growing at a rate necessary to produce the revenue required to cover the costs of an ever-expanding delivery infrastructure.”

Potter said the agency is exploring expanded use of contract services to move mail and is looking for other ways to reduce costs.

This fiscal year the agency is facing a projected loss of USD 5.2 billion, Potter said, much of which results from a new requirement for advance funding of health benefits.

Postal rates go up May 14, with the price of a first-class stamp rising 2 cents to 41 cents.