Postal Updates

GAO questions sustainability of U.S. Postal Service

May 5, 2021, 4 PM

Washington Postal Scene by Bill McAllister

The Government Accountability Office has questioned whether the United States Postal Service should continue to be self-sustaining.

In an April 29 report to Congress, the GAO cited the Postal Service’s massive deficits and suggested it will need more taxpayer dollars to continue its “critical role in the nation’s communications and commerce.”

The report noted that USPS losses now total $87 billion, including another $8.1 billion in 2020.

Congress needs to determine “the extent to which USPS should be financially self-sustaining,” the GAO said.

Titled “U.S. Postal Service: Volume, Performance, and Financial Changes since the Onset of the Covid-19 Pandemic,” the GAO report attempts to put the Postal Service’s plight into perspective, noting mail volume has dropped every year but one since 2007.

Even before the pandemic hit in 2020, the year was not looking like a good one for USPS, the report said.

When COVID-19 hit, it landed a body blow on the federal agency.

In April 2020 almost 30 percent of the mail volume disappeared, the GAO said.

Even the volume of the often-derided marketing or advertising mail shrunk dramatically.

A sudden and unexpected demand for packages softened the revenue losses from letter mail.

But this demand also presented the Postal Service with a serious problem because packages are much more expensive to handle than letters.

The GAO findings are not likely to be pleasing to Postmaster General Louis DeJoy and Republicans in Congress.

They have steadfastly maintained that the USPS must remain true to the self-sustaining mission the agency assumed in 1971. At that time, Congress removed the old Post Office Department from the presidential cabinet and gave the new Postal Service a new mandate: depend on stamps and postal services for its funds.

As DeJoy has conceded, the pandemic disrupted the agency’s way of operating.

In the April 29 report, the GAO told Congress it also should decide “the level of universal postal services the nation requires” and “the most appropriate institutional structure for USPS.”

Neither Democrats nor Republicans have shown any interest in tackling either of those issues.

Other than those suggestions, there were not many surprises in the GAO document, which grew out of the $10 billion grant Congress gave the USPS to deal with its COVID-19 costs.

The Biden administration also wants to give taxpayer dollars to the USPS to fund an electric-powered mail delivery fleet.

Because of its continued losses, the Postal Service has been on the GAO’s high-risk list of federal programs since 2009.

The GAO repeatedly has warned Congress that the USPS needed “broad-based restructuring.”

Until the pandemic, Congress largely ignored the GAO’s warnings that the USPS was on an unsustainable path.

The pandemic put new attention on where the USPS was headed.

First-class mail, which historically has been a cash cow for the Postal Service, has declined 44 percent since fiscal 2006, the GAO report said.

Marketing mail, often derided as junk mail, has declined 27 percent from fiscal 2007 to fiscal 2019, the report added.

In 2020, first-class mail dropped 4 percent and marketing mail declined 14 percent from 2019 levels. Both had started the year much as they did in 2019.

But as the USPS tried to cope with the loss of letter mail, it was overwhelmed by a soaring $4.3 billion demand for package services, the GAO said.

The surge in package mail was 32 percent over 2019 levels.

As welcome as the new business was, it added costs because packages are more costly to move than letters, the GAO said.

The Postal Service had to scramble to find airlines and trucks to move the packages.

And there was another aspect to the pandemic: sick postal workers.

Overwhelmed by these events, the agency’s mail delivery scores fell nationally. On-time delivery of first-class letters dropped to 87 percent from 92 percent in 2019.

In some cities, the scores were worse. In New York on-time performance fell to 48 percent in April, and in Baltimore it hit 61 percent in September.

Both cities recorded on-time percentages in the 90s before the pandemic, the GAO said.

Revenues in 2020 rose, but not enough to avoid a net loss of $8.1 billion, the report said.

“The further deterioration of USPS’s financial position since the start of the pandemic makes the need for congressional action even more urgent,” the GAO concluded.

There was one bright spot in the 2020 mail volume: a spike from September to October that the GAO said was election mail.

Marketing mail volume collapsed, in part because businesses opted to save cash during the pandemic.

The report said that the USPS projected in November 2020 that mail volumes in 2021 would continue to decline because of COVID-19, the continued migration of first-class mail to electronic media, and the absence of census mail and government stimulus checks to boost volumes.

The USPS has said it expects package mail volume to decline this year.

The GAO noted that the USPS has taken some steps to cut its costs, but those actions were insufficient “to restore its financial stability without congressional action.”

That puts the USPS “at greater risk and potentially limiting Congress’s ability to make the most appropriate or sustainable policy decisions,” the GAO concluded.

In a letter to the GAO, two senior postal executives acknowledged that the pandemic “exacerbated our long-standing financial, operational and service performance problems.”

These problems “were allowed to persist for entirely too long,” said Isaac Cronkhite, chief logistics officer, and Luke Grossmann, senior vice president for finance.

In remarks to the National Postal Forum on May 3, DeJoy rejected suggestions that the USPS may have to depend on taxpayer support to survive.

Keeping mail service self-sustaining is one of the basic tenets of his 10-year plan for the Postal Service, he said.

The Delivering for America plan, which DeJoy announced March 23, will avoid any need for taxpayer funds, he said.

DeJoy strongly argued for his plan, saying it would save the agency from absorbing a $160 billion loss over the next 10 years and make the USPS profitable.

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