On Thursday morning, November 10, the U.S. Postal Service (USPS) Board of Governors will convene for a quarterly public meeting while announcing financial results for fiscal year 2022, service performance (likely including election mail performance), and many other matters. Here are three big issues likely to be addressed, and that should also be top of mind to the Board and policy makers going forward.
Impact of Inflation on USPS’s Finances. Inflation hits USPS hard with higher costs, particularly for gasoline and cost-of-living wage increases and will add to USPS’s fiscal year 2022 loss. But it has another pernicious effect: eroding USPS’s overall financial stability, including funds for investments.
USPS has a high amount of cash on hand. At the end of Fiscal Year 2021, cash and cash equivalents were $23.858 billion. For the most recent 12 months, inflation has been 8.2 percent. As such, the value of this cash declined by nearly $2 billion over the past 12 months.
Ironically, the Board of Governors meeting, at 8:30 a.m. on Thursday, is the same time when the Bureau of Labor Statistics will issue its monthly inflation announcement.
Need for Expanded Investment Options. By law, USPS is constrained in how it can invest funds to meet its pension and retiree health benefit funds. As a result, hundreds of billions of dollars can only be in government bonds. Amid sharp stock market declines in 2022, that has worked out. But over the past decade, it has been disastrous.
USPS should be able to invest these funds as state pension funds invest retirement assets for government workers and teachers: in a diversified mix of stock and bond investments. No one saving for retirement today, with a long-term investment horizon, would only invest in bonds.
Congress should re-open postal reform legislation, to provide USPS with these investment options and to make other changes so that its more than $20 billion in cash is more efficiently deployed.
Systematize Election Mail. All indications are that USPS has nailed it again on election mail, delivering ballots to and from voters in a timely manner as well as related election material (e.g., polling place notifications).
USPS should establish this as a separate class of mail so that costs can better be identified and managed. This will also institutionalize best practices for even more efficient, systematic election mail procedures. The time to make this transition is now, before the 2024 election season approaches and related potential controversies arise.
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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