Who Governs and Funds the U.S. Postal Service?
Similar to other public corporations, a government-approved 11-person board runs the USPS. The Board consists of up to nine governors, the Post Master General, and his/her deputy. A separate entity, the Postal Regulatory Commission, has five members who are all presidential appointees. This commission oversees USPS operations, including rates.
How Does the Postal Service Finance Its Operations?
The Postal Service is not financed directly by the taxpayer. It relies on the revenue it generates from stamps, parcel delivery, and other services. While in recent months, the effects of COVID-19 have annihilated a huge chunk of USPS’s revenue, the circumstances that have contributed to the decline of the USPS’s financial situation emerged years before coronavirus, as reported by the Wall Street Journal.
Why Is USPS in Financial Trouble?
The underlying problem is that USPS’s revenue only covers its operational costs, but it has immense retiree health care and pension liabilities, which push it into losses. The USPS has been a loss-making entity since 2007. Between 2008 and 2018, the Postal Serve had losses amounting to $69 billion. In the 2019 financial year, its losses on operating revenue of $71.1 billion amounted to $8.8 billion.
Furthermore, the USPS’s dire financial situation has been exacerbated by the rise of digital communication and email, which has led to a decline in First-Class Mail volumes. The USPS has attempted to boost revenue by increasing marketing mail delivery and competing with FedEx and UPS in parcel delivery. By 2017, the USPS had a 19% market share in US package delivery. With the drop in the volume of First-Class Mail, the Postal Service has been reducing its number of blue mailboxes over the years.
What Kind of Support Has USPS Received from Congress?
In the third quarter of 2020, USPS reported a net loss of $2.2 billion. Through the CARES Act, Congress provided the USPS with a $10 billion loan. The loan can adequately cover the Postal Service’s immediate financial needs. However, the Treasury-imposed conditions for the loan led to the resignation of the board’s vice chair, who alleged that demands made by Treasury threatened to transform the organization into a political tool.
Cost Cutting Measures
To improve its financial position, the USPS has implemented several cost-cutting measures, including some controversial ones. For instance, a leaked internal memo outlined there should be an effort to limit extra delivery trips and late departures, even if it means leaving some mail behind. The USPS projects that if its package volume gets back to pre-pandemic levels, it will exhaust its financial resources by mid of 2021, and if the package volume goes 15% above pre-pandemic levels, it will run out of funds by October 2021.
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