CAGW's Leslie Paige: USPS' non-stop bleeding could impact your holiday deliveries

The frenzied holiday mailing season is fast approaching. Between Thanksgiving and New Year’s Day, tens of millions of Americans will be ordering gifts online.

A record 2.5 billion parcels filled with precious goodies for loved ones are going to be crisscrossing the country, arriving in mailboxes and being dropped on doorsteps.

Yet, one of the giants in the delivery field, the United States Postal Service (USPS) is facing huge financial challenges that could impact on-time delivery of those gifts.

The USPS announced last week that its net losses had dramatically increased from $4.8 billion in fiscal year (FY) 2018 to a whopping $8.8 billion in FY 2019. That brings total net losses since 2007 to $78 billion. The USPS’ financial downward spiral is accelerating, and it has maxed out its $15 billion borrowing limit with the U.S. Treasury and taxpayers.

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It is strapped with enormous labor costs, pension and health care liabilities and has failed to identify and cut costs on its own. And, as the busiest delivery time of the year draws nigh, the USPS continues to have trouble meeting its own delivery standards.

The Postal Service has struggled mightily to find efficiencies and carve out savings from its operations. A recent USPS Office of the Inspector General (IG) report once again exposes the agency’s persistent pattern of announcing bold initiatives to save money and then failing to achieve its objectives.

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For example, the USPS anticipated savings of $1.9 billion from fiscal years 2014 to 2018 from its "Ready Now/Future" initiative, which was designed to right-size its network and increase operating efficiency and reduce costs, but achieved only a paltry $339.1 million.

It reported no savings in 2018 from its program to consolidate postal facilities, and USPS auditors could only document $90.7 million in savings from a 2016 to 2017 Operational Window Change initiative that lowered first-class mail service standards, a negligible amount compared to the projected $1.6 billion.

The stark realities contained in multiple IG reports reveal that the USPS is a sclerotic, top-heavy government bureaucracy that cannot innovate, modernize and reposition itself to deliver competitive services in today’s swiftly evolving logistical environment.

The stark realities contained in multiple IG reports reveal that the USPS is a sclerotic, top-heavy government bureaucracy that cannot innovate, modernize and reposition itself to deliver competitive services in today’s swiftly evolving logistical environment.

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According to the IG, mail volume has decreased by 8.8 billion pieces, or 5.7 percent during the last five years, as costs for processing, transporting and delivering mail have climbed by almost $5 billion, or 13 percent. Labor costs are also still hovering at 80 percent and productivity is down by 20 percent. This occurred as the USPS also lowered its service standards by eliminating single-piece overnight first-class mail delivery and changing on-time delivery for other mail from two to three days.

Even though mail volume has dropped over the last five years, postal employees’ overtime costs in mail processing have increased by $327 million, or 43 percent; overtime and penalty overtime costs in delivery increased about $576 million, or 26 percent; mail processing delays increased by 43 percent, late trips increased by almost 60 percent and extra transportation trips have increased by 90 percent.

By a mile

The USPS isn’t missing its own savings and productivity targets by a little; it is missing them by a mile. While the agency is hamstrung by congressional mandates and statutory constraints, and Congress has been promising and failing to enact meaningful postal reform for years, it is also hard to square postal officials’ repeated claims that the agency is fully leveraging its own management tools when it consistently fails to enact cost-saving measures or productivity gains.

Tens of millions of online shoppers ordering a projected $144 to $149 billion worth of treats and gifts over the next six weeks have a real reason to be concerned about the USPS’ performance. But, beyond that, the financial security of the nation’s e-commerce and logistics system, not to mention taxpayers who could be forced to backstop a postal bailout, depend upon the USPS being pulled out of the red.

The new leadership at the helm of the USPS’s board of governors, fresh eyes at the Postal Regulatory Commission, and the installation of a new, hopefully highly skilled U.S. postmaster general in 2020 should usher in more muscular financial oversight at USPS and bring more urgency to postal reform.

Otherwise, the USPS will continue to deliver more fiscal stress than mail.

Leslie Paige has been with Citizens Against Government Waste (CAGW) since 1989. Joining the staff as Media Director, she has since served in various management roles and is currently its Vice President of Policy and Communications.

*Editor’s note: A USPS spokesperson provided Fox Business the following statement in reaction to this op-ed: The holidays are fast approaching and we are well-prepared to deliver for our customers. We will process and deliver 13 billion pieces of mail and packages to American homes and businesses between Thanksgiving and New Year’s.

We have increased our network capacity by expanding air and surface transportation — adding package sortation capability — flexing our delivery window — hiring seasonal workers — and enhancing visibility across the enterprise. We are ready to serve the mailing and shipping needs of our customers, and to go the extra mile to deliver exceptional service during the holiday season. Our customers can count on the Postal Service.

We sustain America’s mailing and shipping industry and we enable America’s e-commerce economy. Yet, we continue to face systemic financial challenges. Our costs to fulfill our universal service obligation and to fund our mandated benefits programs continue to rise at a faster rate than the revenues we are able to generate in the competitive marketplace. Legal restraints imposed upon us – which limit our ability to grow revenue – worsen this imbalance.

Three core areas of activity are necessary to restore the Postal Service to financial stability.

First, the Postal Service must continue to pursue opportunities to increase revenue and drive greater efficiency within the constraints of our current, legislatively imposed business model. We are focused on core business initiatives to achieve these goals.

Second, the Postal Regulatory Commission must create a pricing system for the Postal Service that provides greater flexibility and better reflects the needs of the organization.

Third, legislation is required to make changes to the Postal Service business model to enable us to grow revenue and to reduce our cost base by addressing some of our mandated expenses that we simply cannot afford.