Making the Postal Service financially sustainable
While the Postal Service welcomes constructive dialogue surrounding the Postal Regulatory Commission’s review of our pricing regulations, we feel the need to correct some misconceptions stated in the article, “A balanced approach to postal rates is critical,” that appeared in the June 23-July 6 NH Business Review.
Although we remain optimistic about our future, the Postal Service is not currently in a financially sustainable position. Rather, we continue to face very serious, but solvable, financial challenges. First-class mail has declined by 36 percent since 2007 and is expected to continue declining as a result of digital communications and the increase in online transactions. The consequence of this loss, combined with continued growth of delivery points, and legally-mandated payments, has been a decade of net losses, and our liabilities exceeding our assets by more than $95 billion.
The author points to our controllable net income over the last three years, but neglects to mention that it can almost exclusively be attributed to the exigent surcharge (an above-inflation rate increase), which has now expired.
As for the amount of cash the Postal Service has on hand, it was generated only by exhausting our borrowing authority, and defaulting on $33.9 billion in legally mandated payments for retiree health benefits.
As for not seeing “any evidence of sustained cost control and modernization efforts,” our efforts and cost control measures have been significant.
In response to the changes in our marketplace, we acted to right-size our network and infrastructure. We aggressively pursued cost cutting and efficiency improvements that resulted in approximately $14 billion in annual savings by consolidating 360 mail processing facilities and 20,000 delivery routes while reducing the total workforce by more than 150,000 through attrition and increased workforce flexibility.
Despite these achievements, we cannot overcome systemic financial imbalances. For instance, the Postal Service’s ability to adjust prices of our products is restrained by a price cap that does not allow an increase more than the rate of inflation. The current cap does not take changes in our volumes and costs into account. Without reform, our net losses will continue and our financial position will worsen — threatening our ability to meet America’s evolving mailing and shipping needs.
We have proposed an alternative pricing system that does not include a price cap. We are not seeking unchecked power to set our own rates, with no oversight by the PRC. Instead, we have suggested that the PRC would be responsible for monitoring the Postal Service’s costs, rates, initiatives to reduce costs and increase efficiency, and service performance, which will ensure that the rates we charge are just and reasonable.
America deserves a financially stable Postal Service that can continue to play a vital role in our society. There is a path forward that depends upon the passage of provisions in H.R. 756 postal reform bill, combined with a favorable outcome of the PRC’s 10-year pricing system review.
Once enacted, and together with aggressive management actions, the Postal Service can meet all of our obligations and continue to improve the way we serve the American public.
Steve Doherty is a Boston-based communications specialist with the Northeast Area of the U.S. Postal Service.