Alliance Report – October 7, 2014.

Part of the reason the Governors were able to make the announcement they did on October 1 maintaining current prices through the next few months is that their financial results and liquidity are doing quite well. The latest Monthly Treasury Statement dated August 31, 2014 shows the Postal Service Fund with $5.1 billion in liquid assets. The USPS income statement through August 31 has a year-to-date controllable operating income of $1.465 billion versus a loss of $711 million at the same point last year, a $2.176 billion year-over-year improvement. It is safe to say that the financial and liquidity crisis that USPS management declared a couple of years ago is over for now.

The large losses that the Postal Service reports are caused by two non-cash accounting adjustments to the controllable operating income. Through August, they deducted $5.225 billion for payments they are not making to the Postal Service Retiree Health Benefits Fund (PSRHBF) per the 2006 reform legislation. And they subtracted $1.338 billion for a calculated increase in their Workers Compensation (WC) liability. PSRHBF payments will be re-amortized over 40 years starting after 2016, and the WC estimated liability will come down and add to reported income as interest rates rise from their historic lows as the Federal Reserve tapers its quantitative easing.