The real culprit in the Postal Service’s woes

From Phillip M. Kridel of Charlotte, who retired from the U.S. Postal Service after more than 35 years:

Sen. Richard Burr’s commentary in Sunday’s Observer on the U.S. Postal Service was much more a political document than a realistic portrayal of USPS’s position. The Postal Service, founded in 1775 by Benjamin Franklin and mandated by the U.S. Constitution, is in a financial crisis for multiple reasons, but there is one primary driver of its difficulty:

The 2006 legislative requirement to pre-fund the retirement health care costs of its retirees for the next 75 years in only 10 years costs USPS $5.5 billion in each of those 10 years. USPS is being required to fund the retirement health care costs for some employees not only not yet on the payroll, but for future employees who have not even been born. This pre-funding is not required for Sen. Burr, or for any of his staff, or in fact for any other federal worker. In fact, only about a third of Fortune 1000 companies pre-fund retiree health benefits, and then at a median level of 31 percent, far below the Postal Service’s current level of 48 percent.

In the fiscal years 2007-2010, the Postal Service paid $21 billion into this Trust Fund, while posting an operating loss of $20.2 billion. In the absence of this pre-funding mandate, the USPS would have been moderately profitable over this period despite the worst recession in 80 years and it would still have borrowing authority left to weather the bad economy. The Postal Service achieved these results while downsizing its workforce by 110,000 employees (without layoffs and in cooperation with its employees and their unions), increasing productivity each year, and maintaining record high standards of service.

In 2005, the Postal Service did not even have to use its borrowing authority. It had no outstanding debt; today it has $13.2 billion in debt. Virtually all this debt has been used to finance the prefunding of retiree health benefits – not to restructure the Postal Service’s network of facilities, or to replace its old vehicle fleet, or to invest in new products and services to meet the emerging needs of the nation’s economy. Clearly this is not in the best interest of the American people, tens of millions of whom depend on the Postal Service’s “last mile” delivery network for the delivery of everything from their business communications to their medicines to their latest purchase. .

Can’t compare to private companies

Critics complain that labor costs make up a higher percentage of total USPS costs (80 percent) than they do in the private delivery companies (50 percent to 65 percent). But the comparison is misleading. The USPS is a universal service provider of basic services that requires daily delivery to 7-8 times as many addresses each day than the private companies, which focus on parcels and freight services targeted to a much narrower range of recipients. The USPS function is inherently more labor intensive. Indeed, the Postal Service’s last mile delivery network is so efficient that the private companies rely on it to reach places they don’t serve.

The USPS is a national treasure that binds the nation together. Its unmatchable universal networks provide an essential infrastructure service that is worth preserving.