USPS: We are not “in good financial shape” as Op-ed To The Hill On PRC 10-Year Review claims

uspshq23/23/17

While the U.S. Postal Service welcomes constructive dialog surrounding the Postal Regulatory Commission’s (PRC) 10-year review of the pricing system for market-dominant products, we cannot let false and irresponsible claims made by several mailing industry leaders in a recent The Hill op-ed go unchallenged.

Although we remain optimistic about our future with continued aggressive management and legislative and regulatory reform, the Postal Service is not currently “in good financial shape,” despite what the authors say.  To the contrary, we continue to face very serious, but solvable, financial challenges. First-Class Mail — our most profitable product — declined by 36 percent since 2007 and is expected to continue to decline as a result of divergence to digital communications and the increase in online transactions. The consequence of this loss of mail volume, along with continued growth of approximately 1 million delivery points every year, and unaffordable, legally-mandated payments, has been 10 consecutive years of net losses, and our liabilities exceeding our assets by more than $95 billion.  The authors point to the net income that the Postal Service generated from operations over the last three years, but neglect to mention that those results can almost exclusively be attributed to the exigent surcharge which they aggressively opposed, and which has now expired.  The authors also attempt to tout the amount of cash the Postal Service has on hand.  However, they don’t explain that such amounts are woefully inadequate for an organization of our size, are necessary to pay our ongoing operating expenses and to deal with contingencies, and were generated only by exhausting our borrowing authority, deferring capital expenditures, and defaulting on $33.9 billion in mandated payments for Retiree Health Benefits (RHB).

In another subterfuge the authors assert that they have “not seen any evidence of sustained cost control and modernization efforts…”  While our modernization efforts might not have been as robust as we would have preferred, given our need to conserve cash and to defer capital investments, they were significant, and our cost control efforts have been nothing short of massive.  In response to the changes in our marketplace and within the constraints of our existing business model, we acted to rightsize our network and infrastructure. We pursued an aggressive agenda of cost cutting, efficiency improvements, and innovation that resulted in approximately $14 billion in annual savings. We achieved these annual savings by consolidating  360 mail processing facilities and 20,000 delivery routes; modifying retail hours at more than 13,000 Post Offices; reducing the total workforce size by more than 150,000 through attrition; negotiating contracts that control wages and benefits and increase workforce flexibility; and through reductions in administrative overhead.

Despite our achievements in improving operational efficiency and growing revenue, we cannot overcome systemic financial imbalances caused by legal and other constraints. For instance, the Postal Service’s ability to adjust prices of products that produce over 70 percent of our revenue is restrained by an austere price cap that does not allow prices to increase more than the rate of inflation. The current cap does not take changes in Postal Service volumes and costs into account, and hence is wholly unsuitable to ensuring the Postal Service’s continued ability to provide prompt and reliable universal services in a self-sufficient manner. Without legislative and regulatory reform, our net losses will continue and our financial position will worsen — threatening our ability to meet America’s evolving mailing and shipping needs.

Because the current pricing system is not achieving the objectives of the 2006 postal law, including the objective to ensure that the Postal Service is financially stable, the Postal Service has proposed an alternative pricing system that does not include a price cap. Contrary to what the authors assert, we are not seeking “unchecked power to set our own rates, with little or no oversight by the PRC.” Instead, we have suggested that the PRC would be responsible for comprehensively monitoring the Postal Service’s costs, rates, initiatives to reduce costs and increase efficiency, and service performance, which will ensure that the objectives of the law are being achieved, and that the rates we charge are just and reasonable.  Given the realities of the current postal marketplace, there is simply no need for a price cap to ensure that the Postal Service has strong incentives to operate efficiently and to set reasonable prices.

America deserves a financially stable Postal Service that can continue to play this vital role in our economy and 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.

PRC 10-year pricing review for market-dominant products

3/20/17 The Postal Service filed comments today with the Postal Regulatory Commission (PRC) in connection with the PRC’s 10-year review of the pricing system for market-dominant products. Because the current system is not achieving the objectives of the postal law, including the objective to ensure that the Postal Service is financially stable, the Postal Service has proposed an alternative pricing system that does not include a price cap. Instead, the PRC would be responsible for after-the-fact regulatory monitoring to ensure that the prices being charged by the Postal Service are just and reasonable.

 

 

16 thoughts on “USPS: We are not “in good financial shape” as Op-ed To The Hill On PRC 10-Year Review claims

  1. The usps is full of sh… They have made tremendous profits on the parcel boom. The waste that goes to do nothing management and bull tracking programs and the very fact that they are trying to look financially troubled during contract “negotiations” is the main reason they want to look in bad shape. Management just like when they falsify dois numbers and fudge time clock rings is misleading the public here. They should be ashamed of themselves. But those without soles feel nothing any way.

  2. and of course I’m sure as we all know, you can always believe everything postal management tells you! Wonder what it would be like to work for someone who has your best interests at heart?

  3. USPS absolutely needs to fully utilize their continued presence,in virtually”every town U.S.A.”(Even every neighborhood U.S.A.),they’re known as postal-stations. They need to make agreements with their main shipping competitors,FedEx and UPS, in which any missed retail deliveries could be picked up at the nearest POSTAL-STATION; at the customers request. Unlike USPS,FedEx and UPS,has continually scaled-back;their retail acceptance and shipping outlets. Unfortunately,such an obviously smart business deal,is likely over the HEADS of upper USPS management.

  4. This is a well prepared statement by the U.S.P.S. Unfortunately it leaves out many important factors. First-Class Mail (“our most profitable product”) certainly has declined and will continue to do so, but it is no longer the most profitable product.
    Yes, prefunding retiree healthcare for the next seventy-five years has been a disaster and a Congressional accounting stunt, but the end is in sight.
    And sorry Direct Marketers, but mass mailings of store ads and huckster car keys are no longer the bread and butter of the Postal Service.
    Among the more positive things the Postal Service has done in recent years has been to develop flat-rate Priority Mail packaging, and to market this to everyday households and small businesses. Add Amazon to the mix, and quite frankly it is nearly Christmas all year long!
    Let’s put some icing on this cake. Fuel prices (one of U.S.P.S.’s greatest expenses) have been at near historic lows for the last four years. This has had a huge positive and under-reported impact on the budget.
    And yet the policy of under-staffing has reached new lows as Employees are continually expected to do more and then AGGRESSIVELY (their words not mine) given less time. Carriers are vilified for not making formulated projected delivery times. Clerks are under extreme pressure to work parcels so that all is good to go by projected Carrier leaving times.
    In the meantime more EAS higher level management positions have been created, future vehicle fleets have been purchased and Distribution jobs have been eliminated. Attrition occurs and it proves nearly impossible to replace experienced production Employees because of a two-tier wage system in which new hires are given smaller wages and little to no benefits and then demanded to do more. They often just quit.
    And now let’s add to this mix, nearly 250,000 Carriers who have been working without a Contract for well over a year with no legal right or ability to strike.
    Doesn’t it seem likely that Postal upper-management during these new halcyon days would maintain a grim forbearance about budget and profitability until Collective Bargaining issues have been resolved?
    Unfortunately, with this new administration the L’Enfant Plaza crowd may have miscalculated. While they continue to plead impoverishment, a huge base believes them, including the current administration. The people intent on “draining the swamp” are going to look at this and say, “Look, with all this going in their favor they still can’t pull this off! Let’s Privatize!”
    While I hope this isn’t the case, I do feel the U.S.P.S. has been shooting itself in the foot. Sometimes honesty is the best policy. And when you tell the truth, you don’t have to remember what you said!

    • Short note: 1st class letter mail accounts for approximately 28% of our revenue , which makes it our number one source of income. As for ‘profitable’… Our parcel business is booming and a package costs much more than a 1st class piece of letter mail. However, you can’t process 30k pieces+/hour of parcels with two clerks. We barely break even on periodicals and lose money on marketing mail.

      I’d say the statement regarding profit is accurate. Sad, as the last 5-and-a-half years as seen the willful destruction of 1st class letter mail standards by USPS Corporate in favor of turning us into a profit mill for the largest, industrial bulk mailers…

  5. Two thing will happen this year which will show that Postal Reform is not needed. The first is the Postal Regulatory Commission 10 year pricing review, which should find that a inflation driven price cap is not appropriate and the PRC will implement a pricing system that ensures prices charged are appropriate and reasonable for a financially sound Postal Service. The second is a recalculation of health funding required to fund the Postal Service Health Benefits Fund and provide a payment schedule to amortize the amount owed over a 40 year period. Consistent with this the Quarter 1 USPS Financial Report shows the USPS expects this amortized payment to be $907 million annually. This is almost $5 billion annually less than the USPS has been obligated to pay annually for the last 10 years and takes into account all the payments the USPS has failed to make. Most interesting is that these two things, which are required by the 2006 PAEA, will make Postal Reform Legislation either unnecessary or much less needed. Congress should wait for these two things to happen before taking any further action on Postal Reform. Of course postal management does not want to wait because once the PRC 10 Year Pricing Review and OPM recalculation and amortization are completed much of their “the sky is falling” arguments will be gone, especially as they relate to health care expenses.

  6. The truth is that there are many share holders other than the mailing companies.
    Lowering the standards is not much of a selling point. It is a quick trip to never, never
    land. The thing that has carried USPS is the public belief that at the end of the day
    they were trying to do the right thing. The end customer is what any customer
    exist for in the chain of creating any product.

  7. Until mgmt does away with their bonuses, for starters, cry me a river usps with your financial reports.

  8. If we were broke wouldn’t have bought a whole new fleet of 2 tons. Lies and propaganda. They’re making a killing don’t believe a word they say

    • And we wouldn’t continue to give overpaid EAS employees fat bonus’s rolled into their pay and increasing their numbers. It’s time Jason Chaffetz looked into this and called out Megan Brennan on this as they were cutting the number of people who actually move the mail.

  9. How much did the PO spend on high def tvs to hang on the platforms
    in the big plants that no one pays any attention to? How much did they spend
    on new vacuums for the custodians that sit idle? THE WASTE AND
    FRAUD CONTINUE> FIRE THE TOOLBAGS>ABUSE STARTS AT THE TOP>

  10. Oh, boo hoo. The USPS did consolidate plants and routes as they claimed, and “modified” business hours in many offices. Read between those lines: they reduced service standards by delaying mail from plants to offices, made city and rural routes far out of adjustment, resulting in some deliveries as late as 2:30 A.M. in one especially notorious California incident, and commonly leaving carriers out until 10:00 P.M. or later because there wasn’t enough manpower.
    The quality of delivery suffered tremendously as carriers, especially CCA’s were being forced to carry enormous amounts of mail and bullied and shoved to move as fast as possible. Many were ripped off of lunch breaks, some just did it on their own, and stupidly gave management 30 minutes of free labor because they were harassed and feared for their jobs.
    Management made no bones about emphasis on running, despite the safety concerns and violations, and would order carriers to run and then discipline them for following the orders because the carriers failed to report it to the unions or in too many cases the NALC ignored them.
    And hundreds of small offices were either reduced to half day window service or shut down altogether, making delivery of important mail like medications much less reliable, and often delivered to the wrong address. My own carrier (rural) doesn’t get in a big hurry but whomever it is, they are very sloppy and misdeliver my mail, my neighbors and others on a regular basis. They just don’t pay attention and I truly don’t think far far too many carriers out there even try to be accurate. They just don’t give damn, and only think about getting off work early or whenever.
    This is ultimately the fault of management. When I was a rookie carrier back in 1984, I was told accuracy both delivering and forwarding was tantamount, that my customers expected and were to receive the right mail every day. Carriers who got sloppy often were disciplined. Now that’s a far far ancient old timer’s story.
    The USPS is lying. They are making money hand over fist with enormous parcel growth. If they would eliminate the bloat, get rid of management that is created for good ol’ boys and relatives, quit stealing from the budget (they call it performance bonuses) and reopen plants, hire sufficient well trained craft, make it easier for CCA’s to be converted to full time positions, say full time after one year of service, adjust routes to true eight hour routes and put an emphasis on quality service, and replace those pieces of shit LLV’s that drain the budget probably of billions a year because they’re worn out death traps, the ends would justify the means and no money would be lost.
    Plus, quit kissing the ass of direct marketers and charge them more for cluttering up mailboxes with worthless crap nobody wants and nobody reads.
    I don’t think we’ll see these suggestions in the Postal Reform bill.

    • RE: “The USPS is lying. They are making money hand over fist with enormous parcel growth. If they would eliminate the bloat, get rid of management that is created for good ol’ boys and relatives, quit stealing from the budget (they call it performance bonuses) and reopen plants, hire sufficient well trained craft, make it easier for CCA’s to be converted to full time positions, say full time after one year of service, adjust routes to true eight hour routes and put an emphasis on quality service, and replace those pieces of shit LLV’s that drain the budget probably of billions a year because they’re worn out death traps, the ends would justify the means and no money would be lost.
      Plus, quit kissing the ass of direct marketers and charge them more for cluttering up mailboxes with worthless crap nobody wants and nobody reads.”

      Bingo. Yours is one of the best comments, and you know how to spell.

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