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chapter 3
financial highlights

2. Expenses

Compensation and benefits dominate Postal Service expenses, comprising nearly 80 percent of total expenses. These costs are detailed in Table 3-4. In 2004, management continued to control personnel costs aggressively, cutting workhours by over 21 million and reducing career complement by approximately

21,000. These actions, coupled with the Civil Service Retirement System (CSRS) funding reform legislation, held the increase in compensation and benefits expenses to 3.4 percent. However, over the two-year period beginning in 2002, the increase has been only 1.1 percent. Still, higher costs per workhour and rising health benefit premiums continued to exert upward pressure on expenses. The Postal Service's primary
Table 3-4 Analysis of Expenses
blank 2004
($ millions) 		2003
($ millions) 		Variance % Change
Personnel
Compensation 38,876 37,144 732 2.0
Benefits 14,258 13,284 974 7.3
Compensation and Benefits 52,134 50,428 1,706 3.4
Non-personnel
Transportation 4,969 4,989 (20) (0.4)
Supplies and Services 2,419 2,413 6 0.2
Building Occupancy 1,771 1,687 84 5.0
Depreciation 2,218 2,295 (77) (3.4)
Other Costs 2,340 2,274 66 2.9
Non-Personnel 13,717 13,658 59 0.4
Interest Expense
Interest Expense - Deferred Retirement 103 116 (13) (11.2)
Interest Expense - Borrowing 10 694* (684) (98.6)
Total Expenses
blank $65,964 $64,896 $1,068 1.6

*Includes $360 million in debt repurchase expense.

Table 3-5 Workers' Compensation Expense and Cash Payments
blank Estimated Annual
Liability for Active Claims		 Administrative
Charge (DOL)		 Total Annual
Expense		 Payments to DOL for Postal
Service Active Claims and
Admin. Charges*
($ millions)
1993 928 17 945 487
1994 311 16 327 501
1995 860 17 877 520
1996 718 19 737 531
1997 187 19 206 538
1998 739 21 760    567**
1999 583 20 603 585
2000 891 20 911 671
2001 937 33 970     694***
2002 1,474 37 1,524      818****
2003 1,412 45 1,473        892*****
2004 1,187 44 1,239 897

*Payments in this table are on a cash basis by year in which the payments were made. Listed payments include payments for active Postal Service claims and for associated Department of Labor administrative charges. Payments exclude all payments for Post Office Department (POD) claimants.

**Previously-reported number changed to exclude POD portion of payment from Postal Service total payments.

***Excludes contested and unpaid administrative expense of $37 million.

****Includes $32 million paid for 2002 administrative expenses and $27 million paid for 2003 administrative expenses.

*****Includes $6 million paid for 2002 administrative expenses, $18 million for 2003 and $45 million for 2004.