Recently I had the pleasure of hearing our current US Postmaster General & CEO of the US Postal Service, Pat Donahoe, give an update on the state of the Postal Service. He noted that the shrinkage of First-Class Mail is driving the continuing trend of operating losses, and even though the USPS shipping & packages segment is growing, it’s not sufficient to replace the previous First-Class profits. Additional operational cuts, efficiency improvements and legislative action are needed to help shrink the gap between expenses and revenue. $19.7 billion in savings from proposed operations and workforce incentives, along with aggressive benefit changes, are on the table to combat the 79% of the total USPS cost base dedicated to labor today.
$11.1 billion of the proposed savings require legislative action that will give the Postal Service authority to generate new revenue and adapt to changing business conditions.
A key legislative point is allowing the USPS to manage their own health care plan which is facing resistance as people on the hill are concerned that health care costs to all other government employees will significantly rise as a result of the USPS’ departure. Items such as refunding the Federal Employee Retirement System (FERS) overpayment and controversial 5-day delivery debate are also crucial to the USPS Business Plan financial projections that show a debt-free entity by fiscal year-end, 2017.
Getting the current group in Washington to act on these points will be a challenge to say the least. The economic and structural hurdles that the USPS faces can be cleared with action from Washington. All of our businesses rely on the USPS’ mission to provide secure, reliable and affordable universal delivery services, and our Representatives must stop stonewalling this imperative legislation and take action now.
US Post Master General, Pat Donahoe
Pat Donahoe (US Postmaster General) announced that a 5-day delivery mail schedule would begin in August, saving approximately $2 billion a year. Packages will continue to deliver 6-days a week and post offices will continue to be open on Saturdays. Other countries such as Canada, Sweden and Australia have reduced their Saturday services with positive impact.
The bold move raised immediate legal questions in Washington as some lawmakers claim that Congressional approval is required. Earlier attempts to change the current law have been met with objections and delays from Congress driving the USPS to make the change on their own.
Washington’s mandate, imposed solely on the USPS, to pay over $5 billion a year for health benefits to future retirees remains a central point of contention and a driving factor to make radical change.
USPMG Donahoe continues to push his long-term plan to return the US Postal Service to profitability. The plan calls for closing some of the small, rural post offices and the reconstruction of the postal logistical network by reducing the number of its regional processing plants to gain greater efficiency.
The USPS has conducted studies surrounding the reduction of delivery days and has received surprisingly positive response. The USPS is a reliable and intricate part of our economy and direct mail marketing continues to be successfully drive sales to businesses in an affordable and measurable way.
The decision to end Saturday delivery may ultimately be blocked by an act of Congress, however, the announcement moves postal overhaul legislation to the forefront.
We’ll keep you posted on the latest as it happens.