Postal Service Responds To The Hill Op-ed On PRC 10-Year Review

USPS – 3/23/17 – 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.

2 Responses to "Postal Service Responds To The Hill Op-ed On PRC 10-Year Review"

  1. Postal Joe   March 25, 2017 at 10:01 am

    Postal Management would have you believe that they are totally broke, sound familiar?? They are using the same tactic that they’ve used for years, with the reform bill pending they’ll go out of their way to sound like they don’t have any $$, the same thing they do when negotiating a contract with the unions! They closed a lot of P+DC’s in all parts of the country to save money and paid out more OT to the employees at the remaining P+DCs (it was like the month of Dec. year round!) and then a couple of years later they rebuilt a some new P+DCs nearby?? (Good Planning)
    According to the USPS OIG, The Postal Service has set aside cash totals of more than $335 BILLION for it’s pensions and retiree healthcare, exceeding 83% of estimated future payouts. It’s pension plans are nearly completely funded AND it’s retiree healthcare liability is 50% ($50 Billion)* funded which by the way is much better THAN THE REST OF THE FEDERAL GOVERNMENT!!
    So please don’t give me this BS about needing the Medicare Mandate of our retirees healthcare when that will only amount to a savings of a little more that $2 Billion OVER TEN YEARS!! The $50 billion* (mentioned earlier) by the way, was set aside for our healthcare funds as part of the 2006 PAEA bill and if invested right would cover the 75 years of funding that the bill mandated (not to be used for management’s discretionary spending)!
    Postal Management wants to get this bill passed so that it can default on its promises to the postal retirees and get their hands on OUR RETIREMENT HEALTHCARE FUND! What do they care, they’ll still get their same FEHB plans!!!
    So, please people, get involved! Call Washington, NARFE (National Active and Retired Federal Employee Association) has a toll free number and instructions on their website!! It’s under the “Take action” heading!! Let them know what you think about H.R. 756 Postal Reform Bill!!! Thank You in advance for your help!!!

  2. Postal Joe   March 25, 2017 at 10:26 am

    I left out a few steps for calling NARFE!! Please go to their website “NARFE.org.” Click on “legislation” then “take action” and choose “Call Congress” then follow instructions and tell your Representative what you think of H.R.756 (Postal Reform Bill) Thanks, our financially secure retirements are depending on our participation to get the Medicare Mandate (and Postal only Healthcare plan)” section “thrown out of the bill!!!! Thank You in advance!!

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