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Alaska Bypass: Risk Without the Reward for Taxpayers
June 30, 2014
For the average consumer, a 12 pack of Coke may cost around $12. For some Alaskans, a 12 pack costs $15.15. But for postage stamp buying taxpayers, the cost for a 12 pack to get to an Alaskan consumer is $21. How can this be? The answer: the Alaska Bypass.
The Alaska Bypass is a program delegating responsibility for shipping over 100 million pounds a year in consumer items—mostly groceries—to off-road Alaskan villages to the United States Postal Service. Since it’s origins in 1972, the program has cost taxpayers $2.5 Billion.
Though rural Alaskans are paying around $3 more for a can of Coke than consumers in, say, Boston, many Alaskans believe the Alaska Bypass is the only program keeping isolated villages afloat. Postmaster General Patrick R. Donahoe told the Washington Post on Saturday “If you talk to people in Alaska, they’re very satisfied with this service.”
And why wouldn’t they be? One pallet that cost the Postal Service nearly $3,200, cost Alaska Commercial only about $485 in postage. The Washington Post explained that “not only is this well below commercial rates, it’s even less expensive—about 20 percent less per pound, postal regulators say—than customers anywhere else in the country pay to send a package via parcel post.”
But the Alaska Bypass isn’t just a treat for hungry Alaskans. The program has also been extremely beneficial to retailers as well. Retailers such as Coke are able to mark up their products by 30 percent or more. This is because the subsidy allows the retailers to pay the USPS roughly half of what it would cost to ship the goods commercially.
While this is all fine and dandy for Alaska and many retailers, the United States Postal Service is clearly suffering from the costs. Last year alone, the Alaska Bypass cost the USPS $77.4 Million.
With insufficient revenues, unfunded liabilities of nearly $99.3 Billion and debt to the U.S. Treasury of $15 Billion, the Postal Service may ask taxpayers to deliver relief if they can’t cut down on expenses like the Bypass.
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