USPS Losses Deepening; Bold Postal Reform Wallows | Citizens Against Government Waste

USPS Losses Deepening; Bold Postal Reform Wallows

The WasteWatcher

The United States Postal Service (USPS) today released its fiscal year (FY) 2019 2nd quarter financial statement and the news is both predictable and alarming. 

The agency posted a net loss of $2.1 billion, but it is $747 million more than the same quarter last year ($1.3 billion).  In case anyone is keeping score, that's $70 billion in losses since 2007.      

First class mail revenue dropped by $217 million (3.3 percent) and marketing mail revenue dipped by $155 million (3.9 percent).  And while parcel delivery continues to grow (revenue increased by $253 million, or 4.9 percent), even the USPS recognizes that package growth is expected to slow in the coming years.   

USPS management once again stated that it is losing money even after excluding items that are “outside of management’s control,” such as its retirees’ health and pension expenses.  Controllable losses for the quarter were $806 million, $150 million higher than in the second quarter of fiscal year 2018.

USPS management continues to state, as recently as April 30, 2019, in testimony before the House Committee on Oversight and Reform that the agency would be profitable if it were not for its legal mandate to pre-fund retiree health and pension liabilities.  In fact, USPS has defaulted on $6.9 billion in pre-funding payments to its retiree health and pension benefits obligations. 

Postal management also seeks to shift some retiree healthcare costs to the already financially stressed Medicare program, bump up the price of a first-class mail stamp, gain more pricing flexibility, and the freedom to enter new lines of business. 

During the hearing and also in statements accompanying the release of its financial statements, Postmaster General (PMG) Megan Brennan routinely claims that postal management is applying rigorous management techniques to tamp down costs and realize efficiencies, but recent IG reports state that several of the USPS most highly-touted cost-saving initiatives have failed to meet their marks, in some cases by very wide margins.  Furthermore, the agency has stated that operating losses have been largely driven by “increases in compensation and benefits.”  In the most recent round of labor negotiations, postal unions were able to extract generous wages and benefits increases, largely because postal arbitrators are prohibited from taking the postal service’s financial situation into account during negotiations, a concept that makes no sense given the USPS’s dire fiscal straits and which no private sector company would tolerate.  USPS management also doesn’t take full advantage of efficiencies offered by work sharing agreements, wherein private-sector partners step in to handle more of the mail value chain, such as sorting, transporting, and distribution. 

USPS continues to be on shaky financial ground.  But the solutions being sought in the immediate term by postal management, postal unions, and some members of Congress do not stress private-sector solutions; they only seek to shift massive cost burdens to the taxpayers and to postal customers and do nothing to address what the PMG herself acknowledges is the USPS’s “broken business model.”  If the USPS wants Congress to liberate it to behave like a private-sector business, then it’s time for the postal logistics system to be opened to full-fledged competition.  When Congress finally does move to take on postal reform, it must fully safeguard taxpayers from having to bail the agency out.  The best way to achieve that is to move the USPS away from its current obsolete state sponsorship regime, which rewards waste and inefficiency, toward a more innovative, flexible free-market future.

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