The United States Postal Service (USPS) is currently under intense scrutiny. The political firestorm and rhetoric are contributing daily to the spread of misinformation, partial details and just plain falsehoods.
The intensity of the scrutiny was ramped up to a fever pitch when the USPS Board of
Governors, all appointed by Donald Trump, appointed Louis DeJoy as Postmaster General
who was approved by the Senate.
Despite the way DeJoy became the Postmaster General, the reality is that the USPS has had serious financial and efficiency issues for more than 15 years and many of the ‘reasons’ he is being attacked were initiatives or actions that had been going on long before his appointment:
USPS is sabotaging mail delivery time by eliminating and disassembling processing equipment
The USPS has experienced devastating losses in letter mail volumes since 2006 due to the adoption of electronic communications by businesses and individuals. When is the last time you mailed a letter or a Christmas card through the USPS? https://about.usps.com/who-we-are/postal-history/first-class-mail-since-1926.htm
First Class Mail volume in Millions:
2000- 103,523
2020- 52,624
In 2011 the USPS announced the Network Rationalization Initiatives to consider the consolidation of half of all mail processing facilities. In 2014 the postmaster announced that eighty-two processing facilities would be consolidated into other facilities. The consolidation has continued as analysis and cost assessments have been conducted for impacted services.
The reality is that the overwhelming loss of revenue and volume of letter mail does not support the existing equipment and facilities. Conversely the USPS is investing in equipment and facilities to become more competitive and efficient in processing packages as volumes increase.
USPS is purposely delaying letter mail
The USPS announced late in 2021 that it was implementing new service standards for First Class Mail and Periodicals. The standard was adjusted from 1-3 days to 1-5 days. The reality is that under the existing circumstances the previous standard was not practical and consistently not met. The new standard is a ‘right sizing’ of the standard to meet reality.
The plan also includes reducing the use of air transportation in favor of ground transportation significantly reducing cost and reliance on reduced air traffic during the ongoing pandemic which has contributed to delays.
The United States Postal Service does not maintain their own fleet of airplanes,
instead contracting out their air mail with FedEx Express airline, as well as
commercial airlines
Service performance for the fourth quarter of 2021 exceeded expectations and was the highest since third quarter 2020. https://postandparcel.info/139266/news/e-commerce/q3-uspss-strongest-quarterly-service-performance-for-all-mail-categories/
The USPS Financial issues are self-inflicted
The USPS has continually operated a significant deficit in revenue to expenses since the collapse of First-Class Mail volumes, but there are factors beyond loss of volume that have contributed to the sea of red ink.
The 2006 Postal Accountability and Enhancement Act (PAEA) passed without objection by the Senate reorganizing the Postal Rate Commission compelling the USPS:
- To pay in advance the health and retirement benefits of all its employees for at least 50 years
- Stipulated that the price of postage could not increase faster than the rate of inflation
- Mandates the USPS to deliver six days of the week
At the time that PAEA was enacted, the USPS was operating on a very strong financial footing and the government itself was attempting to offload expenses, so requiring health and retirement benefits to be pre-funded, shifted that expense to the USPS. The impending collapse of letter volume significantly contributed to the USPs financial issues, costing an estimated $5.5 billion annually.
While this mandate does not wholly contribute to the USPS financial issues, as
in reality, the USPS has defaulted on these payments for a number of years,
it is a factor that hangs over the financial health of the USPS.
The implementation of the requirement to tie annual price increases to the annual rate of inflation (CPI) prohibits the USPS from establishing pricing to ensure the price charged meets or exceeds the cost of the service provided, continually contributing to the deficit with each piece of mail delivered. With the PRC approval of rate change requirements, the USPS 10-year plan, called Delivering for America, will utilize additional rate changes to target unprofitable services that will help move towards financial stability. With pricing enacted in August 2021 the USPS rates are far more affordable than other countries.
Requiring the USPS to deliver six days a week further stretches resources and consumes revenue to no benefit of the USPS. Eliminating Saturday delivery has been suggested for a number of years to help reduce the financial burdens.
USPS Services Summary
The issue of the USPS financial status is a complicated one with 50 years of decisions, policies and technology advancements contributing in different ways to today’s deficits. Foremost in contributing to the problem is the mandate that the USPS must, and rightfully so, delivers to every home and business every day in the United States to ensure the continued connection of the people. However, competitors can continue to only provide products and services that are profitable eroding the USPS access to additional revenue.
Postage reform may eventually be the only solution but politicking and hiding our heads in the sand while efforts are being made to improve services, increase revenue and efficiencies, continues to erode the public’s confidence, and make matters worse.
OMG has over 30 years in helping our customers save postage and improve efficiencies regardless of the status of the industry. We can help your organization separate fact from fiction and make solid decisions regarding your communications between your business and the USPS.
This USPS Services content was created by
Mark Hale, EMCM, MDP, CMDSS, CMDSM
Account Executive, OMG, LLC — markh@omgservices.com
