Postmaster General Louis DeJoy recently claimed in a Washington Post op-ed “We’re fixing the Postal Service.” He believes his “Delivering for America plan is the only comprehensive strategy in existence that can save the Postal Service … not just survive but thrive.” Given the complexity of the U.S. Postal Service, the variety of services it offers, the range of industries using these services, the 342 million customers at 167 million delivery points who are its recipients, as well as of the broad geography of our country, this is a complex issue.
There is more than one path forward.
Credit: USPS, DANIEL AFZAL
Credit: USPS, DANIEL AFZAL
The 1970 legislation that created USPS established the concept of being self-funded: “apportion the costs of all postal operations to all users.” The legislation also stated: “The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people. It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities.”
Despite the original claim of the Delivering for America Plan to be self-funding, even DeJoy acknowledges this will not be attained. A June 2 article in The Wall Street Journal, said, “DeJoy said he aims to improve the operations and finances of the agency to a point where losses are narrow enough for him to ask for supportive legislation for additional funding. ‘I have nice suits and I don’t want to beg,’ he joked.”
The DFA Plan predicted losses of $11.5 billion in its first two years, break-even in its third year and a $11.7 billion profit in the final seven years for a cumulative 10-year $200 million profit. The actual result in the third year was a $6.5 billion loss, not break-even. The fourth-year result to date is looking even worse. A June 21 Audit Report of the USPS Office of the Inspector General stated: “The DFA Plan and its projections no longer provide a reasonable basis for comparisons to future years’ results, and we could not link current progress on initiatives back to the DFA Plan projections.”
Credit: USPS Service Performance Data
Credit: USPS Service Performance Data
Added to financial performance is a significant decline in service. In fiscal year 2024 to date, the on-time performance for first-class mail is 85.6% compared with 91.5% in 2023, with a goal of 95%. In the USPS Atlanta District, the first-class mail performance is 72.6% compared with 89.8% in 2023. Perhaps more troubling is that local two-day service in Georgia is at 65.5% compared with 88.4% in 2023.
Credit: USPS Service Performance Data
Credit: USPS Service Performance Data
Poor financial and service performance, but the statement remains: “We can’t stop now.”
USPS continues to move forward with the DFA Plan, but just what is the focus? The same June 2024 WSJ article also said of DeJoy, “The Brooklyn native said he is trying to replicate what FedEx founder Fred Smith did, turning a ground shipping business into a formidable rival to United Parcel Service. The Postal Service competes with other carriers for parcel volume and, like the others, saw costs soar because of high inflation in recent years. It also wants to get more revenue from ferrying parcels over longer distances, not just for final-mile deliveries.”
DFA is moving away from traditional mail to instead focus upon the processing, transporting and delivery of packages.
The Pitney Bowes Parcel Shipping Index for 2023 shows USPS delivered 31% of the total domestic volume, Amazon 27%, UPS 21% and FedEx 18%, with only 3% delivered by others. Though USPS had 31% of the volume, it only had 16% of the revenue. USPS operates at a much slimmer margin, and, in turn, less income is derived from these packages.
USPS is efficient with smaller packages, delivered with minimal incremental cost along with the rest of the mail to individual delivery points. It is also more cost efficient with the delivery of packages to less-dense suburban and rural areas where it is obligated, by law, to deliver six days per week. In what other parts of the package market is USPS needed and can be effective?
With 31% of the total package volume already delivered by USPS, what is the strategic and tactical approach to shift packages away from UPS, FedEx and Amazon? Is it in the best interest of the economy and the individual consumer to shift from the private sector to a federal agency? Should the decision to shift from the private sector to a federal agency be made by the agency itself or should it be made through legislation enacted by Congress?
Congress needs to review the legislation that defines how USPS operates. Is the concept of self-funding still practical? As DeJoy stated, even with the implementation of DFA, he will “ask for supportive legislation for additional funding.” Would Congress consider modifying any of the service obligations, and, if not, is it willing to subsidize the costs of these obligations?
How should the Postal Service fulfill the mission to meet “the obligation to provide postal services to bind the Nation together.” There is more than one path forward. Congress, working with USPS and Postal Regulatory Commission, needs to evaluate these alternatives to determine what is in the best interest of our country.
Thomas G. Day is the vice chairman of the Postal Regulatory Commission. The opinions stated are his own and not those of other commissioners or the staff. Day served at the USPS for 35 years, holding a variety of senior-level executive positions. He also served as the chief financial officer at the International Post Corporation in Brussels. He is a graduate of the U.S. Military Academy at West Point and the Graduate School of Business at Stanford University.
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