Voodoo economics: USPS turns a profit in May thanks to PAEATuesday, June 25th, 2013
In the bizarro world of postal accounting post-PAEA, it was probably bound to happen. Most readers know that since 2006, when PAEA was enacted, the USPS has been running close to break-even from operations, but falling deeply into debt after the $5.5 billion annual charge for future retiree health benefits.
Last month, however, the tables were turned. The US Postal Service reported a profit of $202 million in May. Yes, you read that right- a profit. It seems absurd, which may explain the lack of any news coverage of the report- if it doesn’t fit the standard “USPS hemorrhaging money” template, reporters apparently can’t figure out what to write!
There is of course, more to the story. The USPS really didn’t take in more money than it spent in May, which is how you make a profit in the real world. In terms of real cash, the USPS actually lost $135 million in May. What turned that into a profit was a whopping $817 million “non-cash adjustment” for “the impact of discount and inflation rate changes and the actuarial revaluation of existing [workers comp] cases”. The workers comp adjustments are another byproduct of the 2006 PAEA law.
It will be interesting to see how the politicians and postal brass spin the slightly inconvenient news- if they acknowledge it at all!
Aside from the voodoo department, there was some good news in the real numbers too. Revenue for the month was up 1.4% from May 2012. The increase came despite the continued decline in total mail volume, which was down 2.3% from last year. Shipping and package services continued to show growth, with volume up 4.6%, and revenue up 8.6%. The increased revenue from packages was enough to more than make up for the drop in other mail.
Meanwhile, on the expense side, excluding PAEA charges, total salaries and benefits dropped by 3.0% from last year. The decrease came despite the fact that total workhours increased slightly, and probably reflects the USPS’s increased use of lower paid and part time workers.
In May 2012 the total cost of salaries and benefits for bargaining unit employees came to $43.19 an hour- in May 2013 the number is $41.06, a drop of 5%.