Can the U.S. Postal Service Be Saved?
Saturday, June 11th, 2016 @ 7:38PM
by Jim Adams
The answer is a resounding YES! The oldest Government entity has been through a great deal over the last 239 years. And the worst time in its storied history has been the last seven years, largely through no fault of its own.
A bi-partisan piece of legislation called the Postal Accountability and Enhancement Act of 2006 (PAEA) was passed in the wee hours of the morning in December 2006. Its design was to level the playing field for the United States Postal Service (USPS) with its competitors. The result of just one paragraph in that legislation has nearly destroyed the Service. That paragraph is the $54 billion requirement to prefund retiree’s health benefits at the rate of $5.4 billion per year for 10 years. This is not a scoring issue or a paper chase. The Service must write a check for approximately $450 million per month to the federal government to pay down the debt. Everyone has read about the billion dollar losses and current lack of borrowing power of the Postal Service as a result of a well-intentioned bill that had unintended consequences which could mean the demise of the USPS.
It is not fair to blame all of the USPS issues on Congress. The Postal Service management and its unions deserve some of the blame as well. Poor management decisions over the years and some unrealistic union demands have also been responsible for a portion of this very serious problem.
The present Congress has an opportunity with bi-partisan cooperation to change some of the elements of the 2006 PAEA and return the Service to a solvent entity once again. It is worthy to note that in the period from 1994 to 2006, the USPS retired nearly $13 billion in debt and saved the postal rate payers nearly $14 billion in costs while maintaining the best service and safety in its history. With some dynamic changes, the USPS can help our economy and ensure the Service’s integrity for years to come.
Some of what should be included in the Postal Reform Act of 2013 is as follows:
First and foremost Senate Bill 1486, the Postal Reform Act of 2013, could allow the Postal Service to use overpayment in the Federal Employees Retirement System to retire debt obligations. And it would also allow the USPS to modify its obligation regarding the Civil Service Retirement System annual payment of $5.4 billion per year to a change of approximately $1 billion per year until 2054. It would also allow the Board of Governors to change rates prior to Postal Regulatory Commission approval. This aspect of the law is very important.
The present First Class rate is out of balance. The single piece First Class rate is now 46 cents for stamps bought by the average consumer. The presort rate for volume customers, such as utility companies, credit card companies, and other high volume mailing companies, is 36 cents per piece. What few people not in the business realize is that a large industry exists in this nation that sorts the large volume mailers’ letters into walk sequence order. They receive a First Class rate of 36 cents per letter. That is a full 10 cents lower than the average consumer. The genesis for this much lower rate was to help the Postal Service more efficiently sort the billions of pieces of mail it handled each year. During the period from 1988 until the mid-2000’s, when the USPS automation was in its infancy and still improving, the discount was very helpful. Now that the Postal Service has its automation process running very efficiently, these large volume discounts are not necessary. The fact that the Postal Service is granting a 10 cent per piece discount that is no longer necessary for the productive, efficient sortation of the mail is a real concern. It is also very important to realize that every penny on the First Class rate equates to $1 billion. If Congress would pass a bill that would allow the Postal Service to reduce that 10 cent discount to 5 cents, it would increase USPS revenue by $5 billion per year. By taking only half of the present discount, it would be less harmful to the companies processing the mail as well as the companies the mail is being prepared for. This effort, in conjunction with tweaking the rates of bulk business mail, could increase revenue by another 1.5 to 2 billion dollars a year. Such bold action would allow the Postal Service to forgo future rate increases similar to the January 26, 2014 scheduled increase and possibly for the first time it is history, even lower the 1st Class rate in the future.
All of these changes are going to be hard for special interests to swallow. The choice is simple. Allow the Postal Service to fail and be put back on budget or make these changes as well as others being discussed in the Postal Reform Act of 2013 and allow the Postal Service to serve the nation as a productive part of the economy. The legislation must have bi-partisan buy in and cooperation. And to that end, Congress and the citizens that depend on the Postal Service should know the following fact. In FY2013 operations (the collection, processing, and delivery of mail), the Postal Service broke even. The huge losses mentioned in the media are a result of the $5.4 billion per year over the last 6 years. It is time for action.
Jim Adams is former Chief of Staff for 3 Postmaster Generals