Both houses of Congress are finally moving ahead in a substantive, bipartisan manner to reform the U.S. Postal Service, which the independent U.S. Government Accountability Office has been imploringsince 2009.
Through the Postal Service Reform Act (PSRA), USPS will substantially reduce its retiree health care obligations. There will be greater transparency and public reporting of mail delivery, and USPS will be able to increase its revenues through programs with other federal agencies and state governments.
There is much in the package that is difficult for both sides of the aisle to swallow. Republicans are weary of $46 billion in healthcare bailout provisions over the coming decade. For Democrats, it means temporarily tabling a long wish list of changes at USPS, like postal banking.
The PSRA has a major flaw: a wholly unnecessary provision that will degrade if not eliminate sound accounting and cost management practices.
Section 202 of the PSRA calls for USPS to “maintain an integrated network for the delivery of market-dominant and competitive products.” That sounds harmless enough, as USPS is already delivering both mail and packages.
The practical effect of the legislation is that it eviscerates attempts to price mail products based on mail costs and package products based on package costs. It eliminates cost and pricing distinctions between mail – a public service which only the USPS can provide – and packages, a service that is competitive and for which consumers have many different options.
First-class mail has long been USPS’s most profitable product. As such, the winners from the obscure language will be package companies and large retailers. The losers will be those who prefer to use USPS for personal correspondence, and those dependent on it, particularly the elderly, those in rural America, and the disabled.
Such far-ranging language will interfere in USPS’s operations and impede efficiency. The specified system-wide integration is often not practical or cost effective, particularly as mail volume is 16 times package volume.
Package-only delivery routes would be counter to this proposed law. USPS’s plans to open 45 package-only annexes at the holiday season and avoid last year’s bottlenecks would similarly be prohibited. The language, while embraced by and benefitting package-shipping special interests, is unnecessary and harmful.
USPS has tried to replace declining mail revenues and volumes by chasing after packages. It has been a devil’s bargain. This led to a marginal increase in USPS revenues. Yet the quality of mail service has declined consistently since 2012, especially over the past 12-months as package volume has spiked. And declining service has accelerated the mail decline.
The last time Congress enacted major postal reform legislation, the Postal Accountability and Enhancement Act of 2006, it specified that mail should not be used to subsidize packages. This common-sense provision should be retained and reiterated.
Furthermore, the Office of Inspector General (OIG) has called for USPS to enact better cost accounting systems and practices to both address fairness issues and to help USPS function more effectively.
A 2014 OIG study, whose recommendations still have not been implemented, found a “modern bottom-up costing system would provide substantial and numerous benefits to the Postal Service, like those enjoyed by companies of comparable sizes. This costing system will provide Postal Service executives with common and accepted views of costs and profitability.”
Understanding costs for USPS products is a prerequisite for reform. It is imperative to charge customers what they should be charged and avoid benefits to special interests.
Furthermore, without this accounting and cost management discipline, it will be easier to implement new postal programs outside of USPS’s core mission as the costs will be obfuscated. Democrats continue to push for these, like postal banking.
USPS does need reform and substantive change. What it, and the American people cannot afford, is a pricing system that helps a few businesses at the expense of the rest of us.
