WASHINGTON—Yesterday, the Subcommittee on Government Operations held a hearing on “Oversight of the U.S. Postal Service: The Financial Future Under Postmaster General Steiner.” During the hearing, members examined the U.S. Postal Service’s (USPS) troubled financial situation after it lost billions of dollars. Members also assessed the initiatives Postmaster General David Steiner is taking to reform USPS and whether the agency will be reliable enough for Congress to increase its borrowing authority from the Department of the Treasury.
Key Takeaways:
The Postal Service’s already-troubled financial situation is getting worse. The Subcommittee needs to know how Postmaster General Steiner intends to course correct.
- Postmaster General of the U.S. Postal Service David Steiner testified that “[USPS] got here because of the drastic reduction in the use of the mail, from historic peak volume of 213 billion pieces per year to today at 109 billion pieces per year. [USPS] lost over 104 billion pieces per year in [its] system. For perspective, if all of that lost volume was paid at the current price of a stamp, which is $0.78, that’s about $81 billion of lost revenue. No company could weather that much revenue loss, so it’s not hard to see how we got here.”
- Director of Physical Infrastructure at the U.S. Government Accountability Office David Marroni testified that “There are no easy solutions. However, it is better to make those choices now rather than wait until crisis hits. To be clear, USPS and Congress have taken significant actions. In the past five years, USPS has implemented a wide-ranging ten-year plan with the aim of fixing its finances, and Congress has passed major postal legislation to provide financial relief. However, those actions have not been enough. While USPS has been able to increase its revenue and cut some costs, its overall expenses have grown at a faster rate, while its service performance has declined. This pattern is not sustainable.”
USPS must grow revenue, not the agency itself, to fix its broken finances.
- Postmaster General Steiner testified that “We’re taking steps to fight our way back above water on pricing. We need higher prices on both our package and mail products. At $0.78, the us first class stamp is the lowest in the industrialized world. Compare it to France at almost $3 and England at $2.50, and the longest distance those letters have to travel is about 600 miles smaller than the state of Texas. We deliver from the tip of Puerto Rico to the tip of Alaska for $0.78. That’s a distance of 5000 miles. So we sell the stamp at less than half the cost to travel eight times farther. If we were to change the stamp price to $0.95, which is still less than half of the cost of foreign posts, that would largely solve our controllable loss, and the stamp would still be the lowest in the industrialized world by a lot. And on the cost side, the Postal Service has undertaken a transformation of our network and operating practices to reduce costs.”
If USPS is going to ask to borrow more money, Congress needs confidence it can pay it back.
- Postmaster General Steiner further testified that “[T]here’s one thing we can’t do, and that is the status quo. And we don’t have a lot of time. One easy action increasing our borrowing authority buys us time, time that we can use to best determine what the postal service should do to best serve the American public. We stand ready to continue serving all Americans. We just ask that you take away the anchors and let us operate like a truly independent agency, free from requirements that weigh us down, or that you compensate us for the cost of those anchors. If we can do either of those, I can promise unparalleled service for the next 250 years.”
- Mr. Marroni also testified that “[USPS] should develop long term financial projections that will help communicate its outlook and progress to Congress and identify actions to help put it on a financially viable path. That said, it is highly unlikely that USPS will be able to fix its poor financial condition on its own. Congress will need to act. Indeed, congress may need to provide some short-term financial relief to help USPS avoid running out of cash. At the same time, it’s essential that congress also address the long-term issues with USPS business model. If those underlying issues aren’t addressed now, USPS will likely continue to struggle financially, and its service performance may decline further. Indeed, within five years, USPS will be responsible for an additional $6 billion a year in retiree health care costs, on top of other expenses that are likely to continue to grow. To fix USPS business model for the long term, Congress will need to decide on the level of postal service the nation requires and determine a balanced approach to funding those services.”
The Subcommittee on Government Operations is committed to working in a bipartisan basis on discovering and analyzing solutions that ensure USPS operates efficiently.
- Subcommittee Chairman Pete Sessions (R-Texas) stated in his closing remarks that “I believe us working together can accomplish this. And I’m talking about the Postal Service, I’m talking about some their vendors, and people back and forth. I think the system is better when it works together. I think the system is better when it views each other as complementary to that system. I think that there are people that do certain things out of their own, either best interest or that’s the way their route is, so to speak. There are things that you have as an advantage with the Postal Service that seemingly could be a disadvantage, but that we can turn into an advantage. But I think that when we try and move that needle too far one way or another, I think it works adversely against the best interest of the whole.”
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