Less than three years after Congress passed legislation to reform the postal service and help it alleviate its financial woes, lawmakers are again considering how to remake the agency and end its chronic budget shortfalls. This is a clear indication that the reforms of 2006 didn’t go far enough and that serious consideration needs to be given to more radical changes.
In late July, the Government Accountability Office again put the U.S. Postal Service on its “high risk” list because of its increasingly shaky financial footing. The service lost nearly $3 billion last year and is projected to lose $7 billion this year.
Part of the problem is that the service is handling less mail as businesses and individuals increasingly switch to electronic communications. This year, the postal service projects it will handle 27 billion fewer pieces of mail than in 2008, when mail volume dropped by 9 billion pieces.
A larger problem is that the service, which does not get tax money but is expected to use the revenue it raises to run its operation, is locked into union contracts it can no longer afford. The contracts, for example, forbid layoffs; any downsizing in personnel comes through attrition. Postal employees also get more generous benefits than other federal workers.
Eighty percent of the service’s budget is devoted to personnel costs. Clearly, this is where cost-cutting efforts must be focused.
In part to address the budget shortfall, the postal service is considering closing 1,000 post offices across the country. The only post office in Maine on the list is a station in downtown Portland. Closing post offices is a problematic proposition for lawmakers because their constituents are usually up-set about losing a local office. But, it’s not just parochialism that augers against this solution. The nonpersonnel costs associated with the post offices on the closure list account for less than 1 percent of the service’s budget. Another consideration: closing post offices could further erode demand for postal services, widening the budget hole.
The 2006 reforms included a more flexible postal rate system and changes in the system’s civil service retirement payments to get the agency off the GAO’s “high risk” list.
At a Senate Homeland Security and Governmental Affairs subcommittee hearing last week, Sen. Susan Collins said “it is most disappointing to once again be discussing the dire financial condition of the U.S. Postal Service.”
Lawmakers are again proposing changes in retirement and health care payments. While these changes are necessary, they are a tiny piece of the larger, more difficult problem.
To solve that problem, significant changes — such as a different rate structure, fewer employees with smaller benefits — must be part of the discussion.