A Case Of Fuzzy Math At The USPS

This week, the United States Postal Service (USPS) released its 2nd quarter financial report for 2016. Once again, the results are grim. After posting 5.1 billion in losses for 2015, the agency claimed modest controllable income gains and net income of $307 million in the first quarter (which typically is the agency’s best quarter each year). And $576 million in controllable income for the second quarter. But what we really see here is just another case of fuzzy math.

By their own admission, the USPS numbers only tell part of the story. The report issued yesterday states, “Controllable income for the quarter was $576 million compared to $313 million for the same period last year. Calculation of controllable income takes into account the impact of operational expenses including compensation, benefits and work hours; but does not reflect factors such as the legally-mandated expense to prefund retiree health benefits.”

This is an incredible omission on the part of the USPS. Without such adjustments that distort the actual financial state of the USPS, the real losses for the first quarter would have totaled approximately $700 million, followed by a $2 billion loss in the second quarter. This is up from $1.5 billion in losses from the same quarter last year. All of this adding to their already staggering $36.6 billion dollar debt that has accrued over the past 5 years – and nearly $79 billion in unfunded liabilities.

These unscrupulous accounting tactics are also admitted by the USPS in a disclaimer near the end of the press release that states that controllable income “is not calculated and presented in accordance with accounting principles generally accepted in the United States (GAAP) within the meaning of applicable SEC rules.” That’s right. By any legitimate standard, these reports are not considered accurate or acceptable.

Still, the USPS continues to seek remedies outside of itself – pointing fingers and placing blame rather than coming up with real solutions. Last year, the exigent surcharge, which was intended to be a temporary measure, put in place to combat losses as a result of the recession, expired and the U.S. Court of Appeals ruled that it could not be made permanent. Yet the USPS persists in pursuing this perceived “remedy” in Congress.

Additionally, they continue to seek the ability to diversify their business model into new industries and services like banking, same day grocery delivery, and rush package delivery at reduced cost for certain retailers. Not only have test programs in these areas proved to be ineffective and costly (with an increase of over $500 million in operating costs associated with package delivery alone noted in the report yesterday) – putting the taxpayer at even greater risk – but they present a problem for free-market advocates. We cannot allow the Postal Service to leverage its government monopoly to compete with private businesses that are already providing services efficiently and effectively.

Clearly, legislative action and substantial reform is required in order to protect the American taxpayer from a disastrous Postal Service meltdown and subsequent bailout. But greater accountability and a real assessment of the state of the US Postal Service is needed. Congress must recognize that the agency’s assessment of itself is flawed – if not dishonest – and their solutions are not the best path forward. Rather than pointing fingers, requesting special treatment, and diversifying into areas of business already provided by the private sector, the USPS should focus on their core services and figure out how to adjust to the new reality in a changing world.