DeJoy to lead USPS as stakeholders try to reform business model ‘in peril’

Louis, DeJoy, the next postmaster general, will have to come up with a long-term business plan for an agency that's long been in dire financial straits.

The Postal Service’s next postmaster general, supply-chain and logistics executive Louis DeJoy, will lead the agency at a critical time — just months before it expects to run out of cash.

While Congress looks to inject emergency funding into the Postal Service in the next round of coronavirus spending, and urges the Trump administration to disburse a $10 billion loan to USPS guaranteed under the CARES Act, DeJoy will also have to come up with a long-term business plan for the agency, which has been in dire financial straits well before the pandemic.

However, it remains unclear whether DeJoy will have any better luck than outgoing Postmaster General Megan Brennan in building the broad coalition among USPS stakeholders that’s needed for long-term postal reform.

American Postal Workers Union president Mark Dimondstein said DeJoy will face major decisions about how the Postal Service operates.

“He can choose to be a postmaster general who implements the destructive plans of this White House: raising postal rates, cutting services, undermining stable union and family-sustaining jobs and selling the public Postal Service to corporations for their private profit,” Dimondstein said in a statement Thursday. “And if that is his choice, Mr. DeJoy will be met with stiff resistance from postal workers and the people of this country.”

National Association of Letter Carriers President Fredric Rolando said the union “is committed to working in good faith with him to build a relationship based on mutual trust and a shared vision for the future of the Postal Service, a beloved and essential national institution based in the Constitution.”

“At a time when hundreds of thousands of letter carriers and other postal employees are bravely demonstrating once again why the Postal Service is the country’s most popular federal agency by serving heroically during this pandemic — delivering public health alerts, medical supplies, tests, prescriptions, relief checks and online purchases to households sheltering in place — the Postal Service needs sound and innovative leadership.”

However, Gerry Connolly (D-Va.), the House Oversight and Reform Committee’s government operations subcommittee chairman and co-founder of the Postal Preservation Caucus, expressed some concern that DeJoy will be the first postmaster general in more than 20 years to lead USPS without prior experience working there.

“Postal Service is in crisis and needs real leadership and someone with knowledge of the issues,” Connolly said in a statement.

USPS business model ‘in peril’ but GAO sees no consensus from stakeholders

While the Postal Service’s financial troubles started long before the coronavirus, the pandemic has only worsened conditions that the agency and Congress have mostly failed to address for more than a decade.

That’s because the House and Senate, the Trump administration, unions, government watchdogs, the mailing and shipping industry and the Postal Service itself have all laid out plans to reform the agency’s business model, but have found little common ground on where to begin.

The Government Accountability Office, in a report released Thursday, reached the same conclusion that USPS and its stakeholders have made for more than a decade: a decline in mail volume and rising costs that outpace its revenue mean the agency can’t continue with business as usual.

“Absent congressional action on critical foundational elements of the USPS business model, USPS’s mission and financial solvency are increasingly in peril,” GAO wrote.

In the near-term, members of Congress have pushed to include emergency funding for the Postal Service in the next round of coronavirus spending.

But House Oversight and Reform Committee Ranking Member Jim Jordan (R-Ohio) said the GAO report shows that emergency funding for the Postal Service “won’t fix their problems.”

“The USPS needs to be a self-sufficient, competitive enterprise, and a legislative overhaul for the long-term is the only way to make it one,” Jordan said in a statement Thursday.

Government operations subcommittee chairman Jody Hice (R-Ga.) said the Postal Service’s yearly net losses “are a clear indication that there is a dire and long overdue need for fundamental reforms.”

“The coronavirus pandemic has exacerbated these pre-existing problems, but the Postal Service’s mission is far too important for Congress to allow it to fall victim to its own structural flaws and failures by senior leadership,” Hice said in a statement.

Broadly speaking, GAO recommends rolling back how often the Postal Service delivers mail and packages to every address in the U.S., restructuring it so that it’s funded like other federal agencies or giving the private sector a greater stake in its operations.

The Postal Service has taken some steps to cut costs, but the agency has limits on what it can achieve on its own.

GAO projects that USPS could up to $1.8 billion annually if it reduced mail delivery to five days a week, but members of Congress have pushed back on that idea multiple times.

USPS estimates that more than a third of its nearly 35,000 retail facilities in 2018 didn’t make a profit. But because of pushback from Congress, unions and local community members, USPS only closed a few hundred sites in 2009 and 2011, instead of several thousand.

In reviewing the business models of postal offices in other countries, GAO found that the majority made cost reduction a top priority, especially in compensation and benefits, while several receive government funding.

Among the options to restructure the Postal Service, Congress could once again make it a cabinet-level agency that receives annual appropriations, as was the case before the 1970 Postal Reorganization Act.

A majority of experts that spoke to GAO recommended reshaping the Postal Service as a government-owned corporation, like the Tennessee Valley Authority, or a federally sponsored but privately owned entity, like the mortgage companies Fannie May or Freddie Mac.

The report also notes that lawmakers could fully privatize the Postal Service, an option proposed by the Trump administration in 2018 as part of a broader government reorganization plan.

GAO also sought input from the National Bankruptcy Conference, but the non-profit determined that the Postal Service probably can’t file for chapter 9 or 11 bankruptcy to shake its debts.

“Although the bankruptcy process and bankruptcy tools raise interesting ideas for restructuring USPS’s existing and future obligations,” the non-profit told GAO, “all roads for doing so lead back to Congress.”

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