How the USPS Can Save $75 Billion Without Cutting Services

Insight-on-how-the-USPS-can-save-lots-of-cash-without-cutting-costs-blog

The U.S. Postal Service recently announced it will resume its previously delayed plan to close more processing plants in an ongoing effort to streamline postal operations and reduce costs. But this is only a small portion of what needs to be done to achieve meaningful postal reform.

As you may be aware, the concept of comprehensive reform came about because the USPS was dangerously close to defaulting on their payroll. This, coupled with a bloated infrastructure and ridiculous Congressional mandates, put the USPS’ cost structure out of whack with the realities of today’s marketplace. And then there is always the fear that Congress will resort to exorbitant rate increases – and has!

The longer it takes Congress to act on meaningful reform, the more desperate the USPS is getting to fix its budget woes via higher postage rates. If some sort of reform is not passed, the USPS will continue to cry “poverty” and say that because Congress won’t act, it has no other option but to increase rates. We should do everything we can to avoid a long-term price increase and oppose every effort that will lead to that outcome.

While no reform scenario is ideal, there are options that will benefit everyone and ensure the long-term financial stability of the USPS.

First, significant savings – approximately $47 billion – can be achieved if the USPS is allowed to manage its own healthcare plan separate from the federal government, including ensuring that retirees are eligible for healthcare coverage under Medicare Parts A and B. This solution would save the Postal Service significant amounts of money and treat USPS employees and retirees the same as every other federal employee – and most of America, too. Postal employees currently pay Medicare taxes but, inexplicably, are not able to enjoy the benefits they help pay for. Rather than artificially increasing costs for the mailing community by maintaining retirees on the USPS’ healthcare plan, Congress should make this common sense reform: switch retirees to Medicare and, in the process, take a huge step toward financial sustainability through a fundamental but logical change in the Postal Service’s operations. 

An additional $20 billion in savings could be realized if the USPS were permitted to be more aggressive with its retirement investments. Right now the federal government oversees the USPS’ retirement investments and limits the amount of investment risk it undertakes. If the USPS were allowed to manage its own retirement investments like any other private entity, the investments would more than likely result in a much larger return on investment.

Savings from a reformed healthcare plan and more aggressive retirement investments coupled with a one-time refund from the Federal Employee Retirement System of $8 billion for overpayment into the retirement fund, and $11 billion in additional income from rate increases, would save the postal service more than $75 billion over the next 10 years.

If recognized, these savings would allow the USPS to become financially stable, including paying off all its debt to the U.S. Treasury, completely replacing its fleet of vehicles, and ending up with $3 billion cash in the bank by 2024. This will remove the ability for the USPS to cry poverty and should stop future exigency postage rate increase requests in their tracks.

But, unfortunately, it’s all coming down to the number of days of delivery. Some members of Congress are drawing the line in the sand on the most controversial part of this debate and ignoring the potential $75 billion in savings garnered from all the other reforms. The House of Representatives appears to be desperate to move to five-day delivery to achieve additional savings for the USPS, but the Senate doesn’t want the USPS to cut services that the mailing industry depends upon. The Senate and others are concerned that delivering mail 6 days per week is a competitive advantage for the Postal Service and believe that a shorter delivery schedule will significantly affect rural communities. In many of these communities the post office is not only a central part of the local culture but also the connection to the rest of the country. Also, once delivery service is cut back, it becomes a slippery slope for additional cutbacks.

The fact is, at least for now, 6-day delivery is almost certainly here to stay. Every appropriation bill that sets the actual amount of spending for the USPS mandates 6-day delivery and this does not look likely to change any time soon. As a mailer and business that supports the mailing industry, we continue to push Congress to enact meaningful reforms. The solution explained above has the support of not only our industry but that of the Postal Employee Unions.

Congress must step up and pass the meaningful reforms that the mailing industry has been advocating to ensure the long-term sustainability of the USPS. Not all problems will be solved, but these reforms will get the USPS on the track to financial stability and it will protect an industry that employs more than 8 million people and accounts for $1.2 trillion of economic activity.

 Patrick Henderson is Quad/Graphics Director of Government Affairs. His work focuses on the public policy goals of the company regarding the USPS, environmental compliance and tax policy. Pat formerly served as the Legislative Director for Wisconsin Governor Jim Doyle as well as Deputy Secretary for the Wisconsin Department of Natural Resources and as policy director for two Wisconsin state senators.


Popular Tags :

Related Posts

Understanding USPS Delivery Performance
PRC Special Report Details Dire Financial Status of the USPS
New USPS Load Leveling Changes - Will They Affect Your Marketing Mix?