Services

Another Nail in Post Office Coffin as First-Class Becomes Less Expensive

Douglas A. McIntyre

Published: April 11, 2016 6:42 am

Last Updated: January 13, 2020 10:57 am

The U.S. Postal Service (USPS) loses billions of dollars. Management and the rank-and-file workers at the organization believe this is due to funding of retiree benefits. Otherwise, they say the USPS could make a profit. That goal is now nearly impossible, as the price of a First-Class stamp falls by two cents. The potential viability of the USPS in its current form finally has gone away.

When management released the results from the past fiscal year, it explained:

The U.S. Postal Service reported a net loss of $5.1 billion for fiscal year 2015 (October 1, 2014 – September 30, 2015). The net loss is largely due to certain statutorily mandated payments over which the Postal Service has no control. Notwithstanding the loss, total revenue was $68.9 billion for the year, an increase of approximately $1.1 billion from 2014.

“We achieved controllable income in excess of $1 billion for the second consecutive fiscal year giving us some limited flexibility to make critical investments in the future of the organization,” said Postmaster General and CEO Megan J. Brennan. “To maintain this success we will need to continue our efforts to grow the business and drive operational efficiencies. However, we will also need the enactment of legislation that makes our retiree health benefit system affordable and that provides increased pricing and product flexibility.”

As the price of First-Class service dropped, management made another argument:

The Postal Service will lose approximately $2 billion in annual revenue resulting from a price reduction mandated by the Postal Regulatory Commission (PRC) — which will go into effect on Sunday, April 10.

The PRC granted an exigent surcharge beginning in January 2014 on mailing products and services totaling $4.6 billion to recover for the massive volume and revenue losses resulting from the Great Recession. However, this amount only partially offsets Postal Service revenue losses — which the Postal Service estimates exceeded $7 billion in 2009 alone.

“Given our precarious financial condition and ongoing business needs, the price reduction required by the PRC exacerbates our losses,” said Megan J. Brennan, Postmaster General and CEO.  “This unfortunate decision heightens the importance of the review of our ratemaking system which our regulator is required to conduct later this year.”

Blame the Postal Regulatory Commission.

USPS management has argued that retirement costs and its ability to close a number of locations, and even change the number of days on which mail is delivered, would make it a financially viable business. That matters little now. The drop in stamp prices pushes the USPS in the direction of falling to pieces, and the possibility layoffs and shuttered offices could become a brutal and necessary action.

The dismantling of the USPS won’t be the fault of management, but ultimately that does not matter.