June 24, 2018
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Postal Deja Vu

It is becoming an annual event: The U.S. Postal Service threatens to stop Saturday mail delivery, Congress says don’t do it, and the agency’s deficit grows. There has to be a better way.

The service expects to run a deficit of $7 billion this year, prompting Postmaster General John Potter to once again propose that it deliver mail five days a week instead of the current six. This would require an act of Congress because six-day delivery is written into federal law.

“The Postal Service is the only financially troubled business I know that would focus on cutting service rather than on trying to serve its customers better,” Sen. Susan Collins said of the proposal. “The Postal Service needs to increase its volume and attract more customers. It cannot expect to gain more business if it is reducing service.”

Sen. Collins is the ranking Republican on the Senate Homeland Security and Governmental Affairs Committee, which has jurisdiction over the service.

To be clear, the Postal Service is not a typical government agency. In 1971, it was reorganized as an independent government-owned agency intended to be self-sufficient, like private businesses. It receives about $75 million a year in government funding for free mail for the blind and for overseas absentee-balloting materials. It gets the bulk of its revenue by shipping packages and selling stamps and other services.

As demand for those services drops, so does its revenue.

The Postal Service projects a 15 percent decline in mail volume, largely due to the increase in electronic communications. It may attract new customers or more volume from existing customers by offering new services. Its flat-rate boxes, for example, have been popular. The Postal Service should work more closely with its large customers to see what additional services or changes would increase their mailing volume.

At the same time, the Postal Service must reduce its expenses. The service cut its expenses by more than $6 billion last year — about 10 percent of its budget — mainly by reducing work hours.

Still, it operates more retail outlets than Wal-Mart, McDonald’s and Starbucks combined.

Eighty percent of the service’s budget is devoted to personnel, and it is burdened by contracts it can no longer afford. The contracts, for example, forbid layoffs; any downsizing must come through attrition. Postal employees also get more generous benefits than other federal workers. Two of its four union contracts are up for renegotiation this fall, offering it an opportunity to push for more flexibility in areas such as cross-training and part-time work.

If Congress doesn’t like the Postal Service’s suggestions, it should consider the view of one of its consultants.

The national consulting firm McKinsey & Co., in a report released this week, suggested the Postal Service reduce mail delivery to three days a week in some areas. It should also close more post offices, the company said in the analysis requested by the postmaster general.

To bring the Postal Service budget into balance, both it and Congress are going to have to consider uncomfortable options.

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