Richmond (VA) Times-Dispatch
The U.S. Postal Service has announced that it would raise stamp prices by a penny, to 45 cents, in January 2012.
USPS is in dire need of cash. It lost approximately $5 billion in FY 2011 — and would’ve lost $10.6 billion if Congress hadn’t allowed it to postpone a legally required payment to a retiree health benefits fund. Postmaster General Patrick Donahoe recently told Congress that his agency is on track to run out of money in 2012.
Hiking stamp prices may give a temporary boost to USPS’s bottom line. But that won’t be enough to save the Service. The agency’s leaders and its congressional overseers must implement radical changes to its structure if they’re to have any hope of avoiding a multibillion-dollar taxpayer bailout.
The Service has offered several proposals for paring back the $75 billion it spends each year. Paramount among them is a switch to five-day-a-week delivery.
But eliminating one day of delivery will have hardly any impact on the Service’s big-picture finances. USPS optimistically estimates that the change would save $3.5 billion each year. The Postal Regulatory Commission pegs the annual savings at just $1.7 billion. Either way, that’s less than 5 percent of the agency’s operating expenses — and less than the losses it has posted in each of the last two years.
The Postal Service is also asking Congress for a reprieve on its financial obligations to retirees.
USPS must pay about $5.5 billion each year to pre-fund the health benefits of future retirees through 2016. The agency wasn’t able to make the full payment required in each of the last two years.
Congress may grant USPS a partial reprieve by allowing it to access about $7 billion in purported overpayments to the Federal Employees Retirement System (FERS) pension fund.
But this one-time payment won’t be enough to repay the agency’s $15-billion debt. Further, the Postal Service expects annual losses to reach $20 billion by 2015. It can’t raid a pension fund every year to balance its budget.
What to do instead? First, legislators should empower USPS to radically realign its delivery network. The Service currently operates more than 32,000 post offices. Many of them are under-utilized or extremely expensive to maintain — and should be closed.
Congress has consistently interfered with efforts to shutter excess post offices. Even now, with the Postal Service’s calamitous financial condition front and center, many Congressmen are doing everything they can to obstruct closures.
Many post offices sit in prime locations and could command considerable sums if sold smartly on the open market. The total purchase price of the Postal Service’s real-estate empire amounts to $27 billion. The potential sale price of that portfolio is likely many times that.
To aid in the realignment effort, postal leaders should consider separating delivery functions from retail services. The Postal Inspector General calculates that nearly 22,000 post offices house both delivery and retail operations. Postal officials could consolidate delivery functions in cheaper, less trafficked locations and move retail operations into contract postal units where consumers already shop — at drug stores, shopping malls, and the like.
That’s what Germany, Sweden, Canada, and Australia have done, as the OIG pointed out in a recent paper. Consumers enjoy more convenient locations with better hours. Meanwhile, the posts are spending less — and even profiting on their retail networks.
Decoupling retail and delivery functions would also hasten the opening of the U.S. mail market to competition — and USPS’s eventual privatization. Sweden, Germany, and the United Kingdom have gone down this road. America should, too.
Lawmakers could also dictate that the Postal Service devote its profits from competitive products — like Priority and Express Mail — toward servicing its sizeable debt.
Income from these products — minus a small contribution toward the agency’s overhead and other obligations — goes into a “Competitive Products Fund” housed at the U.S. Treasury. Between 2006, when it was established, and 2010, the fund has accumulated nearly a billion dollars.
And with revenue from competitive products projected to grow, the current and future proceeds of the fund could significantly ease the debt burden.
The Postal Service projects that its cumulative losses will reach $238 billion by 2020. A one-cent stamp-price increase won’t stave off that fiscal calamity. Congress and the Postal Service will have to think bigger.
Find Archived Articles: