On April 18, 2016 the United States Postal Service (USPS) Office of the Inspector General (OIG) released a report positing a rosy future for the USPS.  The report, “Peeling the Onion,” concluded that USPS is “doing better financially than sometimes reported in the press.”  Postal IG David Williams seems to view the agency’s prospects through rose-colored glasses, but the fiscal realities contained in its financial statements, congressional oversight and Government Accountability Office (GAO) reports indicate that the agency is running on empty and in need of transformative change. 

The biggest reality check?  USPS has racked up $46 billion in losses since 2007 and there is no end in sight to the fiscal hemorrhaging.  In 2015, USPS posted $5.1 billion in losses for the year.  Declining mail volume, increased labor costs (even as its workforce is shrinking), anemic productivity gains (productivity at USPS has only grown by 0.7 percent per year versus 2.5 percent for its competitors), and a sclerotic business model, and even congressional malaise plague the agency.    

One of the claims contained in the IG’s report is that labor expenses have been lowered by five percent of USPS’ total expenses from $54.8 billion in 2006 to $44.6 billion (adjusted for inflation) in 2015.  However, even as the USPS has decreased its workforce between 2006 through 2013 from 796,000 to 618,000 employees, or by about 22 percent…USPS’s total expenses over this same time period did not decline. This is because average hourly wage and benefits costs have increased due to (1) cost-of-living allowances, (2) rising health benefit costs, and (3) wage increases negotiated in collective-bargaining agreements. Also, USPS was required to prefund retiree health benefits through 2016, and other non-personnel expenses, such as those for transportation, increased. According to USPS officials, personnel costs will continue to rise and are estimated to be $2 billion more in fiscal year 2015 compared to fiscal year 2014.”

The USPS is broke and going broker.  At the end of FY 2013, USPS faced about $100 billion in unfunded liabilities: $48 billion for retiree health, $19 billion for pensions, $17 billion for workers’ compensation (the fund is 100 percent unfunded, according to GAO), and another $15 billion owed to the U.S. Treasury.  And USPS has exhausted its borrowing authority.  The Postal Regulatory Commission just rejected the USPS’s bid to maintain an emergency rate increase for first class stamps that went into effect in 2014.  USPS claims that allowing the 4.3 percent emergency rate hike to expire will cost them an additional $2 billion in revenues.  It will be the first time in 97 years that mailers will get a break in first-class mail costs.        

The USPS’s fiscal woes continue to deepen despite the fact that, because of its government-granted monopoly over first-class mail delivery and raft of other special privileges, the USPS has an $18 billion advantage over other private sector companies. 

While the externalities of the digital age of communications have taken a toll on “snail mail,” many of the USPS’s problems stem from its structural rigidity, huge labor costs, and decades of sub-par management, which have hamstrung the agency. 

Yet, as in previous reports, IG David Williams and his team continue to dream big, convinced that if Congress and its regulator would simply unleash this USPS, hobbled with its analog-era management style and its elephantine workforce, to dabble against competitive, new-age industries in the areas of banking, grocery delivery (they are already engaged in pilot projects), logistics, even 3-D digital printing, all will be well.  Dream on.