USPS stakeholders consider postal reform amid congressional inaction

With USPS on course to run out of cash by 2024, stakeholders say the status quo won’t be enough. But despite the urgency, Congress appears no closer to a comp...

With email and digital communications eating into the Postal Service’s business model, Congress passed a landmark bill in 2006 that reshaped USPS for the 21st century. But more than 13 years later, after the 2008 recession and the boom in e-commerce, current and former lawmakers say it’s time to revisit postal reform.

And with the Postal Service on course to run out of cash by 2024, stakeholders say the status quo won’t be enough. But despite the urgency of the situation, members of Congress appear no closer to a compromise with the Trump administration on a postal reform solution.

Faced with the reality that postal reform legislation hasn’t gained momentum in Congress, USPS stakeholders have outlined what they can do without Congress to keep the country’s mail and package business afloat.

Former USPS Inspector General David Williams, currently one of two confirmed members on the USPS Board of Governors, said Postal Service remains at work on a long-term business plan aimed at turning annual net losses into profits over the next 10 years.

“We’ve tried to identify every possible lever we could pull to meet the challenges that present themselves each year,” Williams said at the recent PostalVision 2020 conference. “We are busy, and we can’t wait for the legislation, but there’s plenty to do until then.”

Those improvements include making the Postal Service more of a data-driven enterprise that can help USPS streamline its operations and simplify its pricing structure.

“That’s not a legislative task. That’s going to help us go faster, cheaper, better and then we need to continuously review and continuously improve our business processes,” Williams said.

 While the 2006 Postal Accountability and Enhancement Act (PAEA) helped put the Postal Service on a path to downsize for the digital age amid a decrease in mail volume, USPS is still managing that drawdown.

Former House postal subcommittee chair and Army Secretary John McHugh, now chairman of the Package Coalition, said major business decisions still remain under the control of Congress, not USPS leadership.

“Obviously the budgetary issues are significant. I feel for the Postal Service because much of that’s placed beyond their control. How many post offices are in the United States? Thirty thousand? Try to close one,” McHugh said.

But while PAEA may have aimed to put the Postal Service on a path toward financial recovery, Williams noted that even some of the “virtuous aspects” of the 2006 law have become problematic. Williams said limitations on its postal retirement fund can invest in have prevented it from succeeding.

The Postal Service has invested $330 billion in Treasury bonds, but those low-risk, low-reward investments have only yielded about 2% return on average, Williams previously told members of the Senate Homeland Security and Governmental Affairs Committee.

If USPS had permission to invest the fund in the Thrift Savings Plan, for example, “it would be fully funded, when we combine the contributions we made with the money that it ought to have been making all this time,” Williams said. “It’s actually making so little that it’s dying. Not only are we not making money, we’re losing some of the money that we put in there.”

In addition, the Postal Service can borrow up to $3 billion a year from the Treasury Department, up to $15 billion total. But because of this annual cap, Williams said the Postal Service has had to over-borrow from Treasury each year.

“We’re borrowing more than we need for fear that there will be a bad year … something that’ll throw us for a loop and $3 billion won’t be enough. So we have this unfortunate cash-hoard solution as a result,” he said.

The Postal Regulatory Commission remains in the middle in a 10-year review of a price cap on the Postal Service’s “market dominant” products such as letters. The cap prevents mail rates from increasing beyond the rate of inflation. This comes amid the Postal Service’s decision to raise the price of a first-class postage stamp to 55 cents in January — a 10% increase, and the largest one-time increase on postage rates.

PRC Chairman Robert Taub has called for the Postal Service to take a closer look a redefining its universal service obligation, calling it one of the single-most important recommendations from White House postal task force. Depending on the outcome of the Postal Service’s reassessment of the USO, Congress may have to reconsider whether the USPS can operate solely on its own sales revenue.

“Maybe we all have to come to grips with, do we have to go back to some kind of appropriated dollars if that’s what Americans need, but that requires Congress to act,” Taub said.

But despite repeated calls for Congress to pass postal reform legislation, Taub said USPS and its stakeholders can’t wait for lawmakers to pass anything soon.

“We have to start coming to terms, it seems to me, with the reality that Congress will likely not get 218 votes and 51 [votes] in the Senate and a presidential signature to do what everyone hopes, and so that means the onus is on what do we do in the absence of that,” he said.

President Donald Trump’s latest postal governor nominee, John Barger, the director on the Investment and Retirement Boards of the Los Angeles County Employees Retirement Association, told Senate HSGAC members last week that redefining the USO, “to determine the best, most viable economic model” for the Postal Service, stands out as a top priority if confirmed.

To reach a quorum, the USPS board of governors needs five confirmed members, and would reach the requisite count if the Senate approves Barger’s nominations and Trump’s other two picks — investment banker Ron Bloom and Cigna Corporation board member Roman Martinez IV.

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