WASHINGTON - The U.S. Postal Service reported a $3.9-billion surplus for 2003 despite declining mail volume, and officials renewed their pledge to keep rates steady until 2006.
The agency had suffered losses the past two years as mail volume dwindled in the wake of the terror attacks, the anthrax scare and a weak economy. That led to a rate increase last year to the current 37 cents for first-class mail.
The Postal Service was $676-million in the red last year and lost $1.7-billion the year before.
Postal chief financial officer Richard J. Strasser said the positive 2003 results were achieved despite a decline in volume of 600-million pieces. Particularly troubling was a drop of 3.3-billion pieces of first-class mail, the agency's largest moneymaker.
The post office's financial plan predicts a surplus of $2.1-billion in 2004 and to break even in 2005, depending on the performance of the economy, Strasser said. Signs of recovery have appeared in the economy, he noted, but growth in mail volume usually trails other indicators.
Under the complex process currently required, if the agency is to raise rates in 2006 it will have to begin the process late next year or early in 2005.
For 2003, the post office had a net income from operations of $900-million, Strasser said. A change in the law that allowed the agency to stop overpaying into retirement accounts increased its net income by $3-billion. That brought the total net for the year to $3.9-billion.
Strasser said the bottom line was $300-million better than had been expected for the 2003 fiscal year, which ended Sept. 30. Nearly all the surplus was used to reduce the agency's outstanding debt, from $11.1-billion to $7.3-billion as of Sept. 30.
Overall, the Postal Service had revenues of $68.5-billion for the year and expenses of $63.9-billion, Strasser said. After deducting interest and emergency preparedness spending, the final net was $3.868-billion.
Strasser said that although postal finances look good for the near term, "continued declines in first-class mail volumes, continued growth in delivery addresses" and changes in the marketplace threaten the ability to finance the agency in the future.
He noted, for example, that although mail volume declined in the year, the post office added 1.8-million new addresses to which it must deliver. The Postal Service also has been hampered by limits on its ability to change prices and add services in the marketplace and has sought more flexibility by seeking changes in the law under which it operates.
A presidential commission recommended several changes in a report issued in the summer, and on Monday the Bush administration urged Congress to take up the issue and rewrite the postal operating law.
"This year's increase in advertising mail and packages did not provide us with as much revenue as the same amount of first-class mail would have," Strasser said.
The agency was able to cut costs sharply, lowering transportation spending and reducing staff by about 24,000 full-time workers, Strasser said. The cuts were made without layoffs, and further reductions of as many 11,000 are expected, he said.
"The way in which management has turned around the Postal Service in the last few years has been remarkable," said David E. Fineman, chairman of the postal governing board.
Postmaster General John E. Potter told the board that the financial result will help hold postal rates constant until 2006, a pledge he has made previously.
Currently the Postal Service has 729,000 career employees, its smallest total since 1994, Strasser said, despite delivering 24-billion more pieces of mail than in 1994.
