Yesterday the U.S. Postal Service (USPS) issued a legally required five-year strategic plan. Key information in the report and related observations are below.
This is the most candid the Postal Service has ever been about its financial challenges. On page 12 USPS says, “We have an underfunded balance sheet, significant debt, and insufficient cash to weather unforeseen cyclicality or changes in business conditions.” Page 17 reads, “…we expect to run out of liquidity by 2021 if we pay all our financial obligations – and by 2024 even if we continue to default on our year-end, lump sum retiree health-benefit and pension related payments.”
Yet, the Postal Service should have gone further, discussing its loan situation with the U.S. Treasury and how it pertains to liquidity. Are they content with the status quo? If not, what should change?
USPS also projects (on page 29), a $4.0 billion controllable loss in Fiscal Year 2020. This exceeds last year’s loss and USPS does not provide projections for Fiscal Year 2021 and future years. Such projections would be helpful to bringing urgency to the postal reform discussion. The $4.0 billion figure initially came out in the Postal Service’s annual report to Congress issued December 27.
An intriguing revelation: mail volume is projected to decline 18 percent over the next five years. This figure, on page 15, suggests that USPS will still have a large monopoly business in the area of $40 billion five years from now. More information would be helpful to determine the reliability of the number and related planning.
Conspicuously absent is mention of the December 2018 Presidential Task Force report. Given the many recommendations in the December 2018 U.S. Treasury Department report, and the wide number of diverse stakeholders who weighed in with comments, it would be a helpful catalyst for Postal Reform legislation to see what common ground can be found between USPS and Treasury on important issues.
Cost issues should have been addressed more. In a September 17 USPS OIG report, Costing Best Practices, the Office of Inspector General urged the Postal Service to take a more granular approach to understanding its costs on a per product basis. While it remains to be seen whether this important, basic recommendation will be adopted, the report misses an opportunity to directly and enthusiastically embrace this sensible business principle.
There are several other issues on which the public and Congress need to hear more. What is the Postal Service’s plan for getting opioids out of the mail? Senator Peters and Senator Romney are among those who want to know, and they have introduced sensible legislation asking USPS for its plan. Will USPS adopt the practices of a high-end importer to make sure it can best detect opioids entering the U.S. from China and elsewhere? How and when will it start to replace tens of thousands of vehicles that are more than 20 years old?
This report should be the beginning of a fuller conversation and legislative dialogue about Postal Reform in 2020. After all, it is the Postal Service that has warned that without action a financial crisis is a question of when and not if.
About the Author: Paul Steidler is a Senior Fellow with the Lexington Institute, a public policy think tank based in Arlington, Virginia.
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