Saving the U.S. Postal Service from ‘deliberate crippling’ requires ‘a pretty easy fix’
Editor’s note: This column has been updated to reflect that the 2006 mandate to pay into the retiree health care trust fund expired two years ago, but the Postal Service has continued to pay into it.
Did you know the U.S. Postal Service is sitting on about $47 billion that could be tapped to add employees, improve service, pay overtime and otherwise make its operations more efficient?
Did you also know that the U.S. Postal Service is paying about $6.5 billion every year into that pot of money?
The Postal Service is doing that because a 2006 federal law requires the Postal Service to pay for health care benefits for retirees for the next 75 years.
“So these are people not only who haven’t yet been hired by the post office, many of them haven’t yet been born,” James O’Rourke, professor of management at the University of Notre Dame’s Mendoza College of Business, told me in a phone interview Monday. “No other federal agency or private corporation has ever been saddled with a massive prefunding mandate like this.”
Even though the order expired in 2017, the Postal Service continues to make payments into the fund, and the estimate now is that the Postal Service must pay out $6.9 billion by Sept. 30.
However, “there’s a pretty easy fix there,” according to O’Rourke: Introduce legislation that permits Postal Service retirees to join Medicare, just as military veterans do, instead of relying on the prefunded retiree health care trust fund. The Postal Service could still use some of the health care fund to pay health care costs of current retirees and then use some of it to make up shortfalls in the budget.
O’Rourke speculates that the 2006 Postal Accountability and Enhancement Act was passed intentionally to cripple the Postal Service and speed privatization.
Postal Service finances have been in the spotlight lately, as new cuts under new Postmaster General Louis DeJoy, a campaign donor to President Trump appointed by Trump, have raised questions about whether the Trump administration is trying to slow the mail to delegitimize voting by mail ahead of the November election.
The Postal Service received a $10 billion loan in the first round of federal coronavirus relief money, and Congress is debating whether to add another $25 billion to the Postal Service in a second round of relief funding.
Meanwhile, reports of the Postal Service removing collection boxes, disabling 10% of automated sorting machines and cutting carriers’ overtime is raising alarms, particularly at a time when many people are calling for increased mail-in voting during the coronavirus pandemic.
DeJoy announced Tuesday that he was suspending the cuts until after the November election.
“The Postal Service is ready today to handle whatever volume of election mail it receives this fall,” DeJoy said in a statement released Tuesday. “Even with the challenges of keeping our employees and customers safe and healthy as they operate amid a pandemic, we will deliver the nation’s election mail on time and within our well-established service standards.”
Cuts at the Postal Service are not new and have been going on for several years, in part due to that $6.5 billion annual requirement to prefund retiree health care as well as decreased mail volume and increased costs.
Idaho has not been immune to the cuts.
“In Pocatello alone, they shut down the mail processing plant and sent that to Salt Lake City,” according to John Paige, of Pocatello, who is now retired but is the past president of the Idaho State Association of Letter Carriers, the letter carriers’ union.
That move in 2015 slowed mail delivery dramatically, Paige said. The sorting center in Boise is the only such center left in Idaho, he said.
“The Postal Service is consolidating a lot of things or scaling down a lot of services and everything right now is to save money,” Paige said.
But the cuts in the past three months under DeJoy are accelerated and concerning, according to O’Rourke.
“At this point, I’ve been following this 15 years, and I have been, in all of those years, scrupulously independent, nonjudgmental and a nonadvocate,” O’Rourke said. “I simply pointed to the numbers, looked at revenues, looked at costs, looked at the legislation. And I’ve left that neutral territory. What’s happening right now is a program of deliberate crippling. The Postal Service is being defunded brick by brick.”
The U.S. Postal Service had revenues of about $71 billion last fiscal year, according to its most recent annual report in November, and expenses of about $80 billion, a shortfall of about $9 billion. Adding back in the $6.5 billion being paid to the retiree health care fund would go a long way to reducing that deficit, and other tweaks to operations could close the gap.
Further, tapping into that $47 billion fund would allow the Postal Service to actually add carriers and increase services. O’Rourke pointed out that there are about 18 million people unemployed in the United States right now. The Postal Service could have its pick of new employees.
In defense of DeJoy, O’Rourke said he doesn’t believe DeJoy is just a political appointee.
“A CEO like Louis DeJoy comes from the logistics industry,” O’Rourke said. “He’s perfectly qualified for the job. He knows what he’s doing.”
However, “If he comes into a turnaround situation, CEOs always look at cost first and revenues second,” O’Rourke said. And the cuts he’s making are damaging to the basic operations and the public’s trust of the Postal Service.
Saving the Postal Service is not only relatively easy, it’s worth doing.
“Every nation on Earth takes pride in its postal service; I can’t imagine the United States without one,” O’Rourke said. “It’s affordable, they will deliver to the last house in Idaho. They will deliver wherever people have an address. The Postal Service touches every American. Every business day. And it’s crucial.”
Further, fixing the problem should be a bipartisan issue, according to O’Rourke.
“The reason the post office exists is to provide service to all Americans, and I would say there are just as many Republicans being harmed by this as Democrats,” O’Rourke said. “If you think that this is somehow punishing Democrats and rewarding Republicans, you haven’t spoken to either. They’re all unhappy.”
O’Rourke said making structural changes would bring the Postal Service very close to break-even, adding that the Postal Service carries more in a month than UPS or FedEx carry in a year, and, he argues, some services are essential and cannot be profitably performed by the private sector.
U.S. Sen. Mike Crapo, R-Idaho, sent out a guest opinion piece this week that touched on the Postal Service’s challenges during the pandemic. He didn’t offer specific solutions, but he voiced his support for the Postal Service in general.
“Any reforms to the USPS need to be thoroughly and transparently debated before Congress,” he wrote. “I remain committed to ensuring the USPS remains an organization synonymous with efficiency, reliability and financial responsibility and am working with my colleagues on policies that achieve that end.”
I hope the issue is debated in Congress and that legislators, Republican and Democrat, reach the conclusion that the Postal Service not only can be fixed but should be fixed.
This story was originally published August 19, 2020 at 4:00 AM.
