Patrick Therriault, Columnist.
Ideology: Republican | Writing from: Connecticut
“Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.”
Last fall, the United States Postal Service (USPS) announced that for the fiscal year ending September 2010, it had a post-revenue loss of $8.0 billion. This was a record operational windfall for the USPS, and attributed to both the steep decline in customer patronage as well as mounting employee benefits costs. This coming year looks little different, as the USPS anticipates not only posting a $7.0 billion loss, but also maxing-out its $15.0 billion debt allowance with the US Treasury Department. Despite shedding nearly $9.0 billion in costs over the past two years, these figures have become unsustainable, and the USPS — as well as its overseers on Capitol Hill — have begun announcing more drastic measures to fill in this money pit.
The latest news out of the U.S. Postmaster General’s office may merit the greatest attention, as its plan will affect the lives of millions of Americans who both work and are customers of this unique federal agency. Newly-instated Postmaster General Patrick Donahoe announced recently that in the coming year, the USPS will be undergoing some large changes, including the closure of thousands of post office locations and transfer stations, as well as participate in a critical round of labor negotiations. USPS officials have stated that they will work with postal employee unions to rein in the existing generous benefits currently received. These negotiations are critically important, as simply by virtue of its size, USPS personnel account for nearly one-quarter of the entire federal payroll.
Historically, the USPS is a complicated federal institution, striking bizarrely patriotic chords with some Americans, while screaming of public sector waste and inefficiency to others. Postal service for all American citizens was actually written into the U.S. Constitution by the founding fathers, and Benjamin Franklin was the first person in history to pad a resume with “Postmaster General.” The postal service grew in tandem with the nation itself, with the agency’s imfamous “pony express” bringing mail and federal service outposts to every citizen. However, in very recent years, digital efficiencies have outpaced the services provided by the USPS. The number of parcels delivered by the USPS has fallen by 20 percent in the past four years alone, and while some of that drop is attributable to the recession, the majority reflects a broader conversion to services such as electronic bill pay and a preference for email.
As patronage has fallen, the USPS has been unable to achieve the structural contraction necessary to keep revenues in line with expenditures. Though its mandate is derived from the Constitution, contrary to popular belief, the USPS’s revenue is derived entirely from its customer sales. Per federal legislation, the agency is allowed to borrow up to $15.0 billion from the Treasury, but that lifeline will be expended completely by the end of this fiscal year.
To right the ship, Mr. Donahoe and numerous members of Congress are looking to a list of painful measures that embody what is becoming an annoyingly common theme for public sphere deliverables: more money for less services at the current rate of efficiency. Mr. Donahoe plans include amending a long-standing law that would allow for the closure of thousands of rural and under-performing USPS locations on the basis of unprofitably — a reason for closure that has not been legally valid in the past. This plan is unattractive to, unsurprisingly, the millions of Americans who would be inconvenienced by the closures. Affected folks cite numerous troubles that will result form their town being stripped of a post office, such as reduced snow plowing service. Mr. Donahoe counters these gripes by suggesting that postal services could be built into existing supermarkets and letter carriers could sell stamps to customers along their routes. Reducing mail delivery to five days per week has also been suggested, though, to an equally-unreceptive audience.
Historically, there has been an argument that the USPS is a defunct agency burdening the public purse ever since the formation of companies such as Federal Express and United Parcel Service. If the private sector can deliver packages in a competitive market, then why have federal mail service? The naysayers to this intuitive idea remind us that physical post offices act as more than just places to pick up and send mail. They also serve as a direct link for the majority of citizens to a variety of federal transactions, including filing taxes and requesting a US passport.
If one assumes that a national postal service is in fact necessary, then it must be sustainable. With customer usage trending downwards, structural efficiencies must be found to prevent what Representative Darrell Issa (R-CA) referred to as, the USPS’ “fiscal meltdown.” The most obvious, if not the easiest way to achieve these efficiencies is a restructuring of employee benefits. To provide mail delivery to every citizen six days per week — a task of such size that, prior to the founding fathers, was attempted only by Santa Claus — the USPS must toe a hard line with the unions representing its employees. Each year, the USPS is required by a 2006 law to prepay its employee retirement fund with $5.4 billion. While this may be averting future funding crises, it is an annual charge that is not required of any other federal agency, as salaries and benefits drain the USPS of billions of dollars more each year.
This is a common theme that will be played out in various government arenas in the coming three to five years. The largest single expense of any public sector entity is typically its employee salary and benefits. From New York City’s nearly-bankrupt MTA to the entire State of California (which is quickly being followed by New York, New Jersey, Michigan, and several others), the weight of generous labor contracts are stifling services and have outpaced revenues for some time now. Including the USPS, a tipping point has been reached for many public entities to make some very difficult choices. Whether these shake out with positive results for users of public services remains to be seen, but I remain confident in the entrepreneurial private sector to pick up the slack.