House Democrats are pushing for a Saturday vote on a bill that is expected to include $25 billion for the flailing U.S. Postal Service (USPS). The CARES Act had already provided USPS with $10 billion in additional borrowing authority, on top of the $15 billion it had already borrowed from the Department of the Treasury, but many are calling for even more taxpayer money to be delivered to the USPS. Its Board of Governors is asking Congress for a financial lifeline of $75 billion.
Like many private businesses and households, the USPS was hit hard by the impact of the pandemic and subsequent social distancing strictures, but no one should forget that it was in extremely poor financial shape long before this year’s crisis. Instead of shoveling more money into the troubled agency, there are shovel ready reform options available that would erase some of the red ink from the USPS ledger and to help to protect taxpayers from future liabilities.
Delivering Budget Woes
There should be no doubt about the USPS’s financial troubles. Since 2009, the Government Accountability Office (GAO) has included the Postal Service on its list of High Risk government programs. GAO identified three sets of challenges the mail agency faces:
Poor Financial Condition: The USPS lost over $75 billion from 2007 through 2019.
Insufficient Cost Savings: The USPS has developed plans to reduce operating costs but they are not enough to close the gap without statutory guidance from Congress.
Unfavorable Trends: Market changes, including the rise of digital services, have steadily reduced mail volume while delivery points continue to expand.
In testimony last year before the House Committee on Government Oversight and Reform, then-Postmaster General Megan J. Brennan warned that without legislative and regulatory reforms, the agency will run out of cash in 2024. That was before this year’s year pandemic made a bad situation far worse for the USPS. It now expects a loss in 2020 of $13 billion and, over the longer term, it faces at least $54 billion in losses.
Reform Options
Centralize Business Mail Delivery
This spring, National Taxpayers Union Foundation and U.S. Public Interest Research Group Education Fund worked together on a Toward Common Ground report with a list of options to reduce spending by over $790 billion. Included was a reform proposal to require USPS to convert most business (but not residential) addresses with door delivery to sidewalk, curbside, or centralized delivery. At the time, the USPS expected this would “change the means of delivery for about 500,000 addresses in 2018 and an additional 1 million addresses annually over the 2019-2023 period.”
The proposal was included in H.R. 756, the Postal Service Reform Act of 2017, which had bipartisan cosponsors. The Congressional Budget Office (CBO) estimated that, even with the added costs related to the conversion, the USPS would see savings of nearly $2 billion over a decade from centralizing business mail delivery.
The savings could be higher: CBO’s estimate assumed that savings would gradually decline as the Postal Service “shared savings with its customers in the form of lower rates.” Given the severity of the USPS’s financial state, ceteris paribus, it does not seem likely that it would lower rates.
Centralize Business and Residential Mail Delivery
A related proposal would have extended the consolidation to residential as well. H.R. 2748, the Postal Reform Act of 2013, would have required the USPS to “convert at least 30 million addresses with door delivery … to curbside or centralized delivery” over the decade. The USPS estimated that real-world implementation would only affect nearly 14 million addresses over that period.
CBO estimated that this would have saved $8 billion over the decade.
Eliminate Saturday Mail
The USPS is mandated to provide delivery services six days a week. The Postal Reform Act of 2013 included a reform to reduce the frequency of mail delivery by one day. This reform was also included in legislation drafted by Senators Tom Carper (D-DE) and Tom Coburn (R-OK) and supported by President Obama.
Eliminating Saturday mail (packages would still be delivered under this option) would result in transportation and personnel savings of $10.9 billion over a decade, according to CBO. This estimate had also assumed that the annual savings would gradually decline as the savings are returned to mailers through reduced shipping rates.
Close Post Office Locations
The Postal Service has over 31,300 post offices around the country. Closing and consolidating some of these would significantly reduce operating and labor costs. Back in 2011, the USPS considered a plan to close 3,700 post offices, saving $200 million per year, or roughly $54 thousand per year for each office shutdown. However, Members of Congress consistently push back against efforts to close inefficient offices. Where USPS has been unable to close offices, they have reduced hours at “13,000 underutilized retail offices.”
Conclusion
Bipartisan efforts to reform postal service operations pre-date the Trump Administration, but unfortunately for taxpayers, those efforts have ultimately failed to gain traction into law. Maintaining the status quo will just allow the agency’s financial woes to compound. Reforms are desperately needed to maintain the viability of the USPS and prevent massive taxpayer bailouts.