Postal Updates

Trump’s task force on USPS report targets labor costs, corporate structure

Dec 4, 2018, 8 PM
Cover of the Dec. 4 report created by the Task Force on the United States Postal System for its report at the behest of President Trump.

By Michael Baadke

The Task Force on the United States Postal System created last April at the behest of President Donald J. Trump publicly released its report to the president on Dec. 4.

Among its recommendations are granting the U.S. Postal Service “greater flexibility for determining delivery frequency,” a potential step toward reducing the current six-days-a-week delivery cycle; eliminating collective bargaining over compensation for its employees; and restructuring (but not eliminating) retiree health benefit obligations to be paid by the Postal Service.

Pricing commercial package delivery to optimize revenue is also among the recommendations, possibly opening the door to higher costs for commercial mailers using USPS parcel delivery.

The report also describes the privatization efforts of foreign postal services in recent years, but does not specifically include a recommendation that the U.S. postal system follow suit.

It does, however, suggest “the expanded use of private sector partners in areas such as processing and sortation” to rein in operating costs.

One key recommendation is strengthening the governance and regulatory oversight of the Postal Service while reforming existing structures.

Treasury Secretary Steven T. Mnuchin, who chaired the task force, described the recommendations in the 74-page document as “the first steps forward in creating a sustainable business model under which the USPS can continue to provide necessary mail services for all Americans.”

The report states that the Postal Service has been losing money for more than a decade and “is on an unsustainable financial path.”

According to the report, technological changes in the last decade have undermined the USPS business model, including a public preference for digital communications instead of postal mail.

Trump’s original order directed the task force to evaluate the operations and finances of the U.S. Postal Service and provide recommendations for reform.

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A Treasury Department press release summarizes the report’s recommendations:

“Improving governance by strengthening the Board of Governors and developing enforcement mechanisms to ensure financial commitments and reforms are met;

“Clearly defining the Universal Service Obligation by specifying what are ‘essential postal services,’ or types of mail and packages for which a strong social or macroeconomic rationale exists for government protection;

“Developing a new pricing model that removes price caps and charges market-based prices for both mail and package items that are not deemed ‘essential postal services’;

“Modernizing the USPS’s cost standards and cost allocation methodology;

“Pursuing cost-cutting strategies that will enable it to meet the changing realities of its business model;

“Reforming USPS employee compensation in a manner consistent with proposed reforms to the broader federal workforce;

“Restructuring retiree health benefit liabilities with a new actuarial calculation that is based on employees at or near retirement age;

“Exploring new services that will allow the USPS to exact value from its existing assets and business lines, but that present no balance sheet risk.”

To achieve greater cost efficiency, the task force recommends “exercising discretion to lower service standards and to increase the use of third parties through additional work sharing and the use of third-party processing and logistics providers.”

Describing postal employees as part of the U.S. federal civil service, the task force states that “their wages and benefits should be aligned to comparable U.S. federal employee groups.”

Noting that USPS mail volumes and revenues are in persistent decline, the task force notes that “purely commercial use of package delivery services should be priced with the intent of optimizing revenue.”

The universal service obligation, which mandates delivery to all addresses in the United States, its territories and possessions, should remain, according to the report, but the task force adds that a more specific definition of what that obligation entails is needed.

Numerous other recommendations are noted throughout the report, including a suggestion that post offices could rent space to retail establishments to develop new revenue streams.

“No other domestic delivery service comes close to the comprehensive network and frequency of delivery offered by the USPS,” the report notes, before detailing the many changes it recommends.