You’ve Got (Less) Mail!

Posted on February 18, 2016
It’s been more than 200 years since President George Washington signed the Postal Service Act, creating what would become the U.S. Postal Service. A lot has changed since then. As we approach its 224th birthday, today’s WatchBlog shares how the Postal Service has grown over the years, and what might be next. The check’s no longer in the mail Unlike most federal entities, the Postal Service is self-funded. Its revenue comes from selling stamps and services, not from taxpayer dollars. And, for a while, the Postal Service did pretty well. But then, e-mail and digital advertising—among other things—began to erode mail volume. On top of that, the Postal Service’s expenses continued to grow. Employee compensation and benefits account for close to 80% of the Postal Service’s expenses, and could continue increasing due to factors such as salaries and labor-intensive services. And while the Postal Service is looking to grow business through package delivery, that service comes with not just increased labor costs but with the need to make sure it’s coming out ahead on its specialized package delivery contracts.

Figure 1: USPS Revenue and Expenses, Fiscal Years 1972-2015 (Excerpted from GAO-16-268T)

Moreover, in 2006—just before expenses started outpacing revenues—a law was passed requiring USPS to prefund the costs of its retirees’ health benefits, which is a multi-billion-dollar annual commitment. Listen to our Chief Actuary, Frank Todisco, and Lorelei St. James, a former director in our Physical Infrastructure team (now retired), explain in our 2013 podcast:
USPS's Funding of Retiree Health Benefits
  So, despite delivering 154 billion pieces of mail last fiscal year, the Postal Service can’t make ends meet. Delivering the future To its credit, the Postal Service has demonstrated a willingness to adjust course. For example, it has made attempts to reduce the size of its workforce and has increased revenues from package delivery. But despite its efforts, USPS’s financial condition continues to deteriorate and remains on our High Risk list. It urgently needs to bring costs in line with revenues and generate enough money for capital investments, such as replacing some of its aging delivery fleet. However, the Postal Service needs help to make these changes. As we’ve reported, Congress and the Postal Service need to agree on a comprehensive package of actions. A major consideration is how to manage the costs of salary and benefits for USPS employees and retirees. Part and parcel of this is how to balance the costs of providing mail delivery and other services to all parts of the country with keeping those services affordable. The Postal Service has weathered over two centuries of change while working to provide prompt, reliable, and efficient service throughout the nation. To overcome these latest challenges, USPS management, unions, the public, community leaders, and Members of Congress need to take a hard look at what level of postal services residents and businesses need and can afford. As we’ve testified, the status quo is not sustainable.