The Postal Service hopes to withstand the financial shock of the coronavirus impact better than it anticipated a few months ago, but warns that it could still run out of cash before the end of 2021 without long-term reform of Congress.
In recent briefings with postal associations and Congressional oversight committees, Postal Service executives presented two likely scenarios for the agency’s short-term financial prospects.
USPS now estimates that it will run out of cash in April 2021, if package volumes return to pre-COVID levels. However, if package volume remains 15% above pre-COVID levels, the agency says it will run out of cash in October 2021.
USPS released the updated forecasts after Senate Committee on Homeland Security and Government Affairs Chairman Ron Johnson (R-Wis.), House Oversight, Reform Committee Rank Member Jim Jordan (R-Ohio) and Rep. Jody Hice (R-Ga.) will ask the agency to reevaluate its financial projections earlier this month.
The new forecast predicts that the Postal Service can weather the coronavirus pandemic better than what the agency first told congressional committees in April. Those forecasts predicted that the USPS would run out of cash anytime between this month and September.
Former Postmaster General Megan Brennan in April requested a $ 75 billion aid package from members of the House Oversight and Reform Committee that was based on the agency’s previous forecasts.
The USPS Board of Governors, which is now made up entirely of Trump administration appointees, approved the $ 75 billion request, which would include emergency appropriations, an additional line of credit from the Treasury Department, and project financing. “ready for the shovel” to modernize the aging of the agency. Fleet and vehicle facilities.
Despite these less severe financial predictions, top USPS financial executives said in these reports: “It is a question of when, not if, we will run out of cash.”
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Postal officials said the agency’s financial forecast as of April included just three weeks of pandemic data. They also highlighted the challenges for the USPS or other entities to get an accurate reading on future business trends due to the unpredictable nature of the pandemic.
Senior Vice President of Finance and Strategy Luke Grossman said decreases in mail volume have remained between 25% and 30%, while overall package volume has been 60% higher than levels. prior to the pandemic.
If package volume returns to pre-coronavirus levels, the USPS estimates it will see $ 17 billion in pandemic-related losses between this year and next. Under this model, the USPS expects to see $ 50 billion in pandemic-related losses over the next decade.
If the package remains 15% above pre-coronavirus levels, the USPS would see its 2020-2021 losses drop to $ 7 billion, and its decline for the next decade would drop to $ 17.3 billion.
Neither forecast considers the $ 10 billion loan guaranteed by the CARES Act. Officials from the Postal Service and the Treasury Department have negotiated the terms of the loan, but have yet to reach an agreement.
President Donald Trump has warned that his administration will not make the loan to USPS until it agrees to at least quadruple package rates for e-commerce giants like Amazon.
Meanwhile, Treasury Secretary Steven Mnuchin said earlier this month that the Postal Service may not even need the $ 10 billion due to its increased package revenue.
Chief Financial Officer Joe Corbett said the Postal Service will need Congress to pass long-term postal reform legislation to put the agency on a stronger financial footing.
The Postal Service’s ability to forecast its losses during the pandemic also emerged during a confirmation hearing for the two newest members of the USPS Board of Governors, Bill Zollars and Donald Lee Moak.
Moak told members of the Senate Committee on Government Affairs and Homeland Security that the Postal Service requires better real-time data to make more accurate business forecasts.
“What we need here in this situation with USPS is that we need to get good data in a timely manner so that Congress, the Board of Governors and the USPS administration can make timely decisions and adjust quickly when necessary,” he said.
Stephen Kearney, executive director of the Alliance of Nonprofit Mailers, told Federal News Network that the updated USPS forecast would likely ease some industry concerns about a lack of money from the Postal Service in the short term.
“I have been trying to assure you that it is not going to happen. Therefore, it has caused some disruption to the nonprofit industry at a time when other forms of fundraising and communications have been suspended due to the pandemic, ”Kearney said.
USPS spokesman Dave Partenheimer confirmed that the Postal Service updated its forecasting scenarios on the impact of the COVID-19 pandemic on the finances of the Postal Service “to reflect our actual revenue and volume performance during the pandemic to date.” .
“So far, mail volume has dropped dramatically, but not as significantly as we originally predicted based on the data we had from the first three weeks of the pandemic, and parcel volume has grown exponentially,” he said.
While recent trends suggest that the agency will perform better in 2020 than it had predicted, Partenheimer said the pandemic “will nonetheless have an extremely damaging impact on the financial condition of the Postal Service.”
Rep. Gerry Connolly (D-Va.), Chairman of the Government Operations Subcommittee of the House Oversight and Reform Committee, said package delivery has accounted for about 30% of USPS revenue over the past several years. , while the volume of mail during the pandemic has decreased by 30%.
“Package delivery volumes are falling, and even record-breaking continuous package delivery volumes will not save the Postal Service in the long run,” Connolly said. “Worse still, the president’s simple and incorrect response to raising the prices of packages they ship to customers would accelerate the Postal Service’s financial crisis.”
Linn Stamp News first reported this story on Thursday.