In his testimony before the House this week, Postmaster General Steiner listed seven anchors that threatened to sink the ship of the Postal Service. Here’s an except from the hearing transcript.
Anchor and No Life Jacket
I like to say that in the time since peak 2006 mail volume, the Postal Service was thrown overboard and instead of tossing us a life jacket, we were thrown an anchor.
So, what does that anchor look like, and why is it weighing us down?
First, there is our regulator. We are regulated like a monopoly, though we ceased to be one long ago. There are electronic or private competitor alternatives to every piece of volume in our system. In fact, we are regulated worse than a monopoly, because even a monopoly is allowed to make money. Think about that: our regulator ensures that we won’t make money or break even – out of fear of a non-existent mail monopoly. The regulator puts pricing restrictions on us, requires we give “work share” dollars back to our customers, and places a number of other unreasonable burdens on us that cost us billions of dollars every year. Moreover, they recently enacted an order that, among other things, limits us to one price
increase per year for our mailing services, a change that by their own math could cost us up to $700 million in lost revenue in a year. The regulator characterized the $700 million hit to the Postal Service as “small.” Obviously, if they consider $700 million to be small, they are not prioritizing the financial stability or survival of the Postal Service.
Second, we are required to pay a disproportionately high share of Civil Service Retirement System (CSRS) benefits for employees that worked for both the Post Office Department, prior to our creation as an independent entity in 1971, and subsequently for the Postal Service. Virtually everyone, from our Office of Inspector General (OIG) to our labor unions, agrees that the allocation is incorrect. Because we are a self-financed independent entity, and postal ratepayers rather than Congress/taxpayers pay the cost of our employee benefits, we are closer to a private company in our employee benefit financial structure than we are to a government agency. No acquiring company in the private sector would ignore modern actuarial practices in apportioning the acquired company’s pension obligations, the way the Office of Personnel Management (OPM) has for the Postal Service.
This CSRS pension amortization payment part of the anchor costs us about $3 billion per year, on top of the other very large retirement payment obligations to which we are uniquely subjected.
Third, and most urgent to our current situation, we cannot borrow more than $15 billion, and we reached that limit years ago. The $15 billion limit was established more than three decades ago, when we were half the size—measured by revenue—that we are today. This limit is one reason we were forced to defer capital improvements for many years, leading to a deterioration in our network that we are still trying to recover from. If you applied inflation over 30 years to that borrowing limit or looked at it based on revenue, the limit should be $30 to $40 billion. Again, no private company is as limited in its credit access as the Postal Service, and certainly not one with our scope, operational complexity, and importance to the American public.
Fourth, we are only allowed to invest our retirement funds in Treasury notes. Obviously, that reduces returns. Neither private companies nor state or local governments limit their investments to Treasury notes. According to estimates by the OIG, if we had been able to use a very conservative 60–40 split of stock indexes and bonds, our retirement plans would have an additional $800 billion in them. Absent those returns, our pension funding obligations are consistently a draw on our income statement and balance sheet, and we have been forced to at least partially default on our funding payments, which would not have been the case given more reasonable returns.
Fifth, we are mandated by law to deliver to every address—more than 170 million of them—six days a week. While this is our statutory obligation as a public service entity, it is also our financial burden. This leads to 71 percent of our delivery routes being financially underwater. And fifty-eight percent of our Post Offices do not cover the cost of their operations. Each day of delivery costs billions of dollars every year. The simple financial solution would be to cut the number of days of delivery, and Post Office locations, which I don’t believe is anybody’s preference. But if we are expected to deliver six days per week, absent the volume or pricing authority to justify or afford it, some source of funding beyond postal revenue needs to pay for it.
Sixth, we are not allowed to manage our own workers’ compensation claims. That costs us anywhere from $400 million to $800 million per year because the current federal program fails to reflect private-sector best practices. As an example, we are paying workers compensation benefits to recipients who are over 100 years old because the Federal Employees Compensation Act (FECA), which the Postal Service is subject to, does not contain any provision that limits the amount of time a recipient can receive monthly benefits, nor does it enforce other best practices.
And there are other smaller parts to the anchor. Transporting cargo to the most remote parts of the U.S. costs about $150 million per year. Not being able to ship alcohol like our competitors costs us hundreds of millions of dollars in missed revenue. Keeping all Post Offices open and not being allowed to consider financial losses as a reason to replace them with alternative means of accessing our services costs another $840 million.
And the list goes on and on.
A video and the transcript of the entire hearing are here.
Image source: Gemini AI