The U.S. Postal Service reported Wednesday that it lost $329 million in the first quarter of its fiscal year from Oct. 1 to Dec. 31, 2010. The loss was expected. The service has been operating in the red for years, and increasing use of the Internet and other means of communication continue to reduce Postal Service revenues sharply. The agency will have to make difficult choices if it is to balance its books. Those actions likely will be painful to postal employees and to the public they serve.
There is a compelling need for the Postal Service to cut costs. It lost $8.5 billion last year and is on track to lose billions more in the current fiscal year. The service has few ways to increase revenue. It already has cut staff, improved productivity and reduced operating expenses. Those most familiar with the post office's fiscal woes agree that closing some post office branches or reducing days of service from six to five are the only ways left to balance the books. That's easier said than done.
Many individuals and businesses still depend on daily delivery of mail. In addition, many people, especially in small towns, rightly regard the post office as a town center that is indispensable to community life. Reduction in service or closure of a branch would prompt lifestyle and social changes that many say are unacceptable. Those concerns are understandable.
Still, the Postal Service must operate within its means. Doing so in the current climate will be hard.
Part of the service's fiscal woes are caused by a requirement that it make advance payment to cover expected health care costs for future retirees. The Postal Service is the only federal agency required to do so. Those payments are onerous. Officials say the agency would have reported a net profit of $226 million rather than a loss of $329 million for the quarter if the advance payment was not required.
There is an effort in Congress to reduce or eliminate those payments. That would help the post office in the short term, but do little to change the agency's bleak long-term prognosis.
The Postal Service continues to be slammed by the switch from traditional mail to Internet and by a mandated fee system that favors mass mailers over retail customers. The agency --which receives no tax subsidy -- will have to find a way to operate profitably on the sale of postage, products and services.
Doing so will require major changes. Rumors of impending closures of some post office branches here and around the nation are rampant, but apparently groundless. "There is no list and no real plans to close offices right now," Beth Barnett, a spokeswoman for the agency said Thursday. "We are looking, however, for ways to save money and to redesign infrastructure."
That's the right approach. There is little doubt that the Postal Service must save money, but the way the agency goes about doing so should balance public need with the realities of the marketplace.