On Feb. 5 the U.S. House of Representatives voted to pass the USPS Fairness Act, which would end the mail carrier’s obligation to save in advance for the pensions and healthcare of its retirees. The task of finding money for retiring postal workers’ compensation will be left to future leaders of the postal service, who will need to sort out the mess should postal profits fail to offset long-term expenses. But finding money for retiree benefits isn’t the postal service’s only problem. The USPS recently released its finances for the first quarter of FY2020—traditionally its peak season—and they paint a bleak picture.

Overall postal revenues declined $363 million from the first quarter of FY2019. This breaks from a trend of increasing total postal revenues in recent years. On the bright side, the agency’s loss narrowed as its operating costs declined $1.1 billion from the same time the previous year. Together, the postal service lost $748 million this quarter, just under half the amount it lost in Q1 2019.

But this comparison masks the real picture. Workers’ compensation costs can vary wildly from year to year, and the report shows they decreased more than $1 billion from the beginning of the last fiscal year. In workers’ compensation and retirement costs alone, the USPS spent $15.348 billion this quarter compared to $15.459 billion in Q4 2019. The agency should be lauded for this improvement. Saving $100 million in compensation expenses doesn’t happen without substantial efforts to improve efficiency.

In light of ongoing losses, it’s unsurprising that the USPS’ financial state deteriorated in FY2019. On Sept. 30 it had $8.795 billion in cash. By Dec. 31 its reserves had dwindled down to $7.869 billion. The agency covered almost all of its quarterly loss with cash. Net receivables declined nearly $100 million, widening the financial gap.

The report’s breakdown of USPS expenses portrays mixed results. Compensation costs declined $356 million from the previous quarter, but were more than offset by an increase in retirement costs of about $1.862 billion.

(United States Postal Service Report 10-Q, First Quarter 2020 p. 31)

The report’s inclusion of current and noncurrent USPS lease assets and liabilities is particularly notable. This addition helps us understand which expenses related to post office leases weigh on the agency. The more post offices leased, the greater the agency can expect this line item to be. Combining these categories, the USPS booked a new $151 million loss from the accounting change.

Meanwhile, the USPS’ retirement funding picture continues to darken. In Q1 2020, the postal service booked a $7.241 billion traunch to add to its total unfunded retirement liability. That figure now stands at $55.433 billion.

Moving on to postal product revenues and volumes, it gets even worse. Total revenues from operations decreased nearly $350 million in this quarter. Revenue declined for all postal products except package shipping from Q1 2019 to Q1 2020. First-class mail volume declined by 571 million letters. Marketing mail volume decreased by 1.7 billion units, while Americans received 88 million fewer magazines and periodicals.

And not all types of packages earned more than the previous year; standard package revenues declined in the period. The USPS moved fewer packages during its FY 2020 peak season than its FY 2019 peak season across all categories. Despite an economic boom and continued growth in e-commerce deliveries, the agency has been unable to leverage its network and brand to reliably increase the number of packages it moves.

(United States Postal Service Report 10-Q, First Quarter 2020 p. 33)

A final note from the USPS’ quarterly financial report relates to the investment needed to maintain compliance with the agency’s universal service obligation. The agency invested $418 million dollars this quarter in property and equipment. It needs to invest another $1.9 billion in the remaining three quarters to continue to perform this duty. Beyond this, it estimates that it will need another $11 billion for new postal vehicles in the coming years. The report admits that future cash flow from operations “may not be sufficient” to cover these investments with postal revenues alone. As with the USPS Fairness Act’s proposal to suspend postal retirement savings, the specter of the end of a self-financing postal agency continues to rise.