{"id":1459,"date":"2020-08-19T00:49:29","date_gmt":"2020-08-19T00:49:29","guid":{"rendered":"https:\/\/www.pbmv.com\/blog\/?p=1459"},"modified":"2020-08-19T00:49:29","modified_gmt":"2020-08-19T00:49:29","slug":"stop-panicking-about-the-post-office-but-do-fund-them-asap","status":"publish","type":"post","link":"https:\/\/www.pbmv.com\/blog\/?p=1459","title":{"rendered":"Stop Panicking about the Post Office; But Do Fund Them ASAP"},"content":{"rendered":"

written by Nick Harper<\/a><\/p>\n

\"mail_truck.jpg\"<\/p>\n

A lot of fear and misinformation has been spreading throughout social media the past few days about the post office. People seem to think the sky is falling. But they\u2019re missing a lot of important context.<\/p>\n

I am here to tell you that yes, you should be concerned about the future of the United States Postal Service (USPS), but the whole sky isn\u2019t falling quite yet.<\/p>\n

So, stop panicking!<\/em> Being concerned and taking specific, practical action is good; panicking on social media is bad.<\/p>\n

Let\u2019s check some facts, shall we? I know this is long, but please stay with me.<\/p>\n

False.<\/h3>\n

Several people seem to be under the belief that the Constitution mandates the existence or funding of the United States Postal Service. The U.S. Constitution does mention the postal system in a sense, but doesn\u2019t create the post office or require its funding. Article I, section 8, clause 7<\/a> of the Constitution gives Congress \u201cthe Power [\u2026] To establish Post Offices and Post Roads.\u201d<\/p>\n

It requires nothing; it merely permits Congress to act, if Congress so chooses. The clause gives Congress the ability to create post offices and the implied authority to create and provide services through the United States Postal Service. And Congress has.<\/p>\n

False.<\/h3>\n

USPS is an independent agency that is almost exclusively self-funded since 1971. It may receive some small appropriations for \u201cpublic service costs\u201d and \u201crevenue forgone.\u201d<\/p>\n

Public service costs are \u201creimbursement to the Postal Service for public service costs incurred by it in providing a maximum degree of effective and regular postal service nationwide, in communities where post offices may not be deemed self-sustaining.\u201d 39 U.S.C. 2401<\/a>. USPS may request an appropriation for public service costs for up to $460 million annually. However, USPS has not requested or received this reimbursement since 1982<\/a>.<\/p>\n

Revenue forgone is funding provided to subsidize the mailing costs of groups such as the blind and overseas absentee voters. Under the Revenue Forgone Reform Act of 1993, USPS was supposed to receive about $29 million in appropriations every year from 1994 through 2035, but for most years, that funding has not actually been appropriated<\/a>.<\/p>\n

For context, USPS\u2019s revenue for the fiscal year ending in 2019 was $71.1 billion<\/a>. So these payments would make up less than 7% of USPS revenues even if the agency did receive the payments.<\/p>\n

But USPS has asked this year for an emergency appropriation from Congress. Read the next bit on that.<\/p>\n

True about the distress; insolvency is off by 10 months.<\/h3>\n

USPS is in a financial bind<\/a>. The agency has had a net loss for most of the last several years. This is because the demand for shipping letters and flats (large envelopes, newsletters, magazines) has declined steadily for over two decades. Costs for shipping letters and flats, however, have not declined as much. Less revenue with the same costs has resulted in USPS taking financial losses.<\/p>\n

COVID-19 has exacerbated these issues even further. Mail volume dropped, while expenses, like for PPE, increased. So much so that USPS sought a $50 billion emergency funding and the authority to borrow another $25 billion from the Treasury<\/a>. This was contemplated for the CARES Act<\/a> that addresses so many other COVID-19-induced financial crises. USPS estimated in the spring that they would have an estimated $13 billion budget shortfall (compared to a $9 billion shortfall in fiscal year 2019).<\/p>\n

But we now know that USPS will survive at least a little longer. While their income is still not what it needs to be, the increase in online shopping during COVID-19 has helped it stay above water. And the Treasury made a $10 billion loan available<\/a>.<\/p>\n

In its fiscal quarter report<\/a> filed June 30, 2020, USPS indicated that it has \u201csufficient liquidity to continue operating through at least August 2021.\u201d<\/p>\n

So USPS is in a critical condition, but it does not appear that it will shut down before the November election.<\/p>\n

Mostly true, but that\u2019s not the only reason.<\/h3>\n

This is a pervasive half-truth<\/a>. The Postal Accountability and Enhancement Act of 2006<\/a> required USPS to pre-fund future retiree health benefits (not pensions though). Previously, like most agencies, it funded these benefits on a pay as you go basis: the benefit is claimed, then they pay the bill. Instead, USPS was supposed to pay $5\u20136 billion per year from 2007 until 2017 into a retiree health benefit fund (RHBF) that is supposed to cover retiree health benefits for over 50 years. The idea is that pre-funding these benefits ensures that the benefits get paid even if USPS does go into crisis.<\/p>\n

The problem is that USPS hasn\u2019t been paying into the fund since 2012, and didn\u2019t even make full payments in every year before that. It was supposed to have completely funded the RHBF by 2017, yet less than 44% is actually funded. It has become clear the current RHBF requirement is not sustainable and is harming USPS\u2019s financial survival<\/a>.<\/p>\n

But despite the dour situation surrounding the RHBF, the payments are not the sole cause of USPS\u2019s net losses. Remember, the payments were less than $6 billion each year, and payments were supposed to stop in 2017. A table<\/a> from the Task Force on the United States Postal System \u2014 a group put together by an executive order of President Trump \u2014 can help us uncover the truth.<\/p>\n

\"usps_stats.jpg\"USPS Revenue and Expenditures table, FY 2010 through FY 2018<\/i><\/b><\/p>\n

The third row of the table demonstrates what USPS\u2019s net income or loss would have been without the RHBF. USPS would have only reported losses in 2010\u20132012, but would have not lost money through 2018. Payments for RHBF have stopped, but USPS is still accruing new costs of $3\u20134 billion per year. On the other hand, USPS had a loss of $8.8 billion for fiscal year 2019, and will likely have at least an $11 billion shortfall for fiscal year 2020. These losses are greater than the annual accrual for the RHBF. So without the RBHF, USPS would have still had losses for 2010, 2011, 2012, 2019, and 2020\u2013five of the last ten years.<\/p>\n

This means that while a significant portion of the financial trouble can be attributed to the RHBF, USPS is still incurring other losses that would result in a net loss in some fiscal years even if the RHBF mandate did not exist.<\/p>\n

Probably false. Sorry.<\/h3>\n

Don\u2019t get me wrong. Definitely shop at the USPS gift store<\/a>. There\u2019s some cool stuff in there (like this crop top<\/a>, which is currently sold out, but maybe your dog needs a postal carrier costume<\/a>).<\/p>\n

But the billions of dollars USPS needs to become financially stable is probably not going to come from profits on USPS merchandise, assuming there\u2019s even enough stock of that merchandise to begin with.<\/p>\n

And buying stamps is nice. But unless you\u2019re throwing those stamps away and buying new stamps when you actually need them, you\u2019re not actually increasing USPS\u2019s revenue. You\u2019re just shifting when they receive the money. Rather than pay for a stamp when you need it in the future, you\u2019ve paid for it now. So USPS has more income now, but less later.<\/p>\n

I know this one\u2019s a real Debbie Downer, but it\u2019s good to be realistic about what actually will help and what won\u2019t.<\/p>\n

True.<\/h3>\n

Louis DeJoy is a large donor to President Trump and the Republican National Committee. But Trump is not the first president to put a large donor in a key position. It is also worth noting that DeJoy is the first postmaster general in two decades who has not risen through the ranks of USPS<\/a> in some other capacity before being appointed to the position. To DeJoy\u2019s credit, he does have a long career in logistics and operations, which is the key area of expertise needed for managing the expansive, complex network of our mailing system.<\/p>\n

False.<\/h3>\n

The Postmaster General is selected by the Board of Governors<\/a>. The Board of Governors is appointed by the president with advice and consent of the senate. No more than 5 of the 10 Governors may be from the same party. There are currently multiple vacancies on the board. At the time that DeJoy was appointed, three were Republican and one was Democrat. DeJoy was unanimously selected by that board<\/a>. DeJoy was appointed in early May, and did not fully transition into his position until June. An additional Democrat and an additional Republican have been appointed since then.<\/p>\n

Half-true.<\/h3>\n

First, I want to be clear: I do not deny that there are service delays. USPS has definitely been experiencing some problems with service lately. And below I get into some specific allegations. And I do not deny that service delays can be very worrisome, and possibly life threatening, for some individuals, including folks who rely on timely USPS deliveries for medicine. The point of this post isn\u2019t to argue whether the service delays are good or bad (I think most people agree they\u2019re bad), but to discuss when they started and why.<\/p>\n

But USPS\u2019s service woes cannot be entirely attributed to DeJoy and his policies. Many communities, for example, experienced significant delays and even some non-deliveries<\/a> during their primary elections this year, long before DeJoy took his role. Issues have ranged from changing operations to avoid COVID-19 spread, workforce shortage due to COVID-19 quarantines and illness, working out kinks of handling mail voting where it\u2019s new or increased substantially, and managing the influx of packages due to increased online shopping.<\/p>\n

There also have been some changes to delivery policies<\/a> since July that have slowed service. These changes were put into place by DeJoy. However, they generally fall into a few categories:<\/p>\n