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Our Annual Report
2000 Highlights
Letter from
the Postmaster General/CEO
2000 Year
in Review
Delivering
the Future
The Governors
of the Postal Service
Audit Committee
Financial
Section
How to Read
Our Financial Statements
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2000 Annual Report
- page 32 of 70
Compensation and Benefits
Our personnel compensation and benefits grew $2.2 billion or 4.6%
over 1999 due to overtime and premiums, and health and other benefits,
in spite of the reduction of 6,200 work years. This compares to
growth of 3.8% in 1999 and 4.0% in 1998. Base salaries alone increased
more than $897 million in 2000, while overtime and premiums increased
by $419 million or 10%. Our health benefits expenses were $265 million
greater than last year, driven by premium increases of 8.7% for
active employees and 11.3% for annuitants. We expect our health
benefits expense to continue to grow for the foreseeable future.
Since January 2000, all of our employees have been covered by the
new health benefits formula that shifted about 2% of the insurance
premium expense from employee to employer.
Our total retirement expenses grew by $428
million, and workers' compensation expense totaled $925 million,
which is $311 million or 51% higher than last year.
Based on a wage
reopener clause in their 1995 agreement, the National Rural Letter
Carriers' Association (NRLCA) agreed to accept the first-year 2.0%
general increase specified in the American Postal Workers Union's
and Mail Handlers' agreements as well as the continuation of the
semi-annual cost of living adjustments. Our agreement with the NRLCA
expired in November 1999, but in April 2000 the agreement was extended
until November 20, 2000. Under the agreement there is a 1.4% pay
increase and two cost of living adjustments. Beginning in 2001,
the carriers will make the same contributions for health benefits
as the other unions.
Our cost of living (COLA) payment in 2000 was $58 million higher
than we had anticipated. We had planned on a March COLA increase
of 11¢ per hour when in fact it was 17¢. Another COLA occurred in
September, so it had little effect on our 2000 results, but it will
affect next year's results.
As a result of binding arbitration, all letter carrier craft employees
will be upgraded from Grade 5 to Grade 6 while maintaining the salary
differential between the grades. We estimate that these salary upgrades
will cost $267 million in 2001.
Most of our professional and management staff participate in the
Postal Service's variable pay program. Next year, our nonbargaining
employees are again eligible to participate in the merit pay and
variable pay programs that base compensation on individual and group
corporate performance aligned with the CustomerPerfect! process.
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GROWTH IN COMPENSATION
AND BENEFITS |
Transportation
Transportation expenses soared in 2000 due primarily to higher fuel
prices. We estimate that higher fuel prices cost us approximately
$275 million more than anticipated. This was in stark contrast to
the declining rate of growth in transportation expenses for the
prior three years. From 1998 to 1999, transportation expenses grew
at a slower rate due to lower fuel prices and two service initiatives.
First, the transportation of Priority Mail was increasingly handled
by a contractor, thus shifting some expenses to the Other category.
Second, to improve ontime delivery to our customers, we moved some
mail from commercial air transportation to dedicated surface transportation.
This change increased our control over the timeliness of mail transportation
and reduced costs. In 2000 we continued these initiatives and changed
more mail to dedicated surface transportation to increase our transportation
timeliness even further.
We think that transportation costs in 2001 will remain in line with
our costs for 2000. This forecast depends on several factors that
are not under our control, such as the price of fuel, change in
mail volume and change in mail weight. This forecast also depends
on our continued efforts to increase productivity.
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GROWTH IN TRANSPORTATION
EXPENSES |
Retirement Expenses
Total retirement expense this year was $8.5 billion, an increase
of $428 million or 5.3% compared to 1999. This
follows increases of $405 million in 1999 and $241 million in 1998
compared to the previous years. Of this year's increase, $260 million
resulted primarily from the settlement of collective bargaining
agreements and labor arbitration settlements. Over $90 million of
this year's increase was the result of the rising ceiling on maximum
earnings subject to social security tax. Over $77 million of this
year's increase was due to the cost of living adjustments (COLA)
increasing based on the Consumer Price Index (CPI).
Most of our employees participate in one of three retirement programs,
under the auspices of the federal government's Office of Personnel
Management (OPM), based on the starting date of their employment.
(Please see Note 6 of the Notes to Financial Statements for details.)
These three programs are the Civil Service Retirement System (CSRS),
the Dual CSRS/Social Security System (Dual) and the Federal Employees
Retirement System (FERS). The CSRS and the Dual systems are now
closed to new participants with all employees hired since 1983 participating
in FERS.
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