Understand the big picture
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| Published: | 2013-Feb-04 |
| Last Updated: | 2020-Sep-01 |
| Principal Writer: | Barry Shatzman |
 | Understanding The Issue |
Postal Accountability and Enhancement
2006 (HR-6407)
Postal Reorganization Act1970 (HR-17070)
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What is the United States Postal Service
The postal service is both the oldest federal agency and the only one specifically mentioned in the U.S. Constitution. Article 1, Section 8 gives Congress the power "To establish Post Offices and post Roads".
Yet it is not a federal agency in the traditional sense. Its operations are not funded by tax dollars, and the Senate doesn't have to approve its chief executive.
The U.S. Post Office Department used to be a full federal agency. But in 1970, the Postal Reorganization Act converted it into the United States Postal Service (USPS) we know today. It is governed by an 11-member Board of Governors. The postmaster general - rather than being a presidential appointee approved by the Senate - is hired by the board's other 10 members.
The USPS operates much like a private corporation. Its operations (delivering mail) are funded by revenues (postage).
It is mandated to deliver mail at a low cost. To compensate for the high cost of regularly delivering mail to even the most remote addresses in America, the USPS was given a monopoly on all low-cost mail delivery.
Why is the USPS losing money?
This chart shows USPS revenue and expenses from 2004 - 2011.
It's clear that revenues have been decreasing since 2008 (though not as dramatically as the chart makes it appear, since it isn't starting at $0). Many point to the rise in email and other electronic substitutes for physical mail as the main cause. Most of the losses, however, were covered by postage increases, according to a 2012 report by the Congressional Research Service (CRS).
Two other things stand out from the chart. The first is that, until 2006, the USPS was bringing in more money than it was spending. The second is the huge spike in expenses that occurred after 2006.
The 2006 Postal Accountability and Enhancement Act
In 2006 Congress passed the Postal Accountability and Enhancement Act. The law called for the USPS to pre-fund health benefits for employees who would retire during the next 75 years. And they had 10 years to do it - amounting to about $5.5 billion a year until 2016.
"No other government agency or private company bears this burden," the American Postal Workers Union stated.
That expense accounted for about 95 percent of the postal service's losses. In 2009, Congress passed legislation allowing the USPS to delay some of the required payments, as it was about to run out of operating cash.
Pension Issues
USPS employees participate in the Federal Employee Retirement System. The USPS has contended that it overpaid into the system by almost $7 billion. It likely would require action by Congress to refund the overpayment.
The USPS also contends that the formula used to calculate its required pension contributions for employees who were working for the agency before 1971 - when the Postal Reorganization Act took effect - has incorrectly cost the USPS $75 billion.
Postal employees have best of all worlds
The USPS has more than 500,000 employees, who enjoy a special place in the workforce. The law requires the USPS to offer compensation and benefits comparable to the private sector. Yet USPS employees also negotiate wages and conditions with collective bargaining. Employees are protected from layoffs.
They also contribute less toward their health insurance premiums than other federal employees. The Obama administration calculated that the difference is costing the USPS more than $750 million a year, and had proposed requiring them to pay the same amount, the CRS report stated.
Board of Governors entirely Trump appointees
The USPS Board of Governors oversees major USPS operations - including determining what products the postal service will offer, and at what rates.
For the last two years of the Barack Obama administration, the Board did not have a quorum of six members. From December 2016 through August 2018 it had no governors.
Obama had sent seven nominations to the Senate during that time. The Senate did not vote on any of them.
Two governors nominated by President Donald Trump - Robert Duncan and David Williams - were approved to the then-empty board in August 2018.
Three more Trump nominees were approved in August 2019 - giving the board a quorum for the first time since December 2014.
Added business can be part of USPS viability plan
On Feb. 7, 2013, then Postmaster General Patrick Donahoe proposed eliminating Saturday mail delivery. The proposal was nixed a few months later.
In recent years, the USPS has considered shutting down several thousand post offices and increasing the number of days it takes for a first-class letter to reach its destination.
Various ideas to increase revenue also have been discussed, including...
o Becoming a store for cell phones.
o Providing notary services
o Low-fee banking - providing federally insured accounts.
Should the USPS have to support itself?
Discussing why the USPS is losing money, or how it can become profitable, assumes the premise that the function of delivering letters and packages at a low cost should pay for itself. This is unlike other government services, which are paid for by public tax dollars and typically cost more to operate than any revenue they might take in (for example by userfees or other charges).
There are tradeoffs that need to be considered...
o Keeping first-class mail delivery to the most remote places, six days a week, will require higher postage rates or the use of public tax dollars.
o If the USPS's 500,000 employee workforce is reduced by layoffs, the labor market would be affected.
More information
Click here to read the Congressional Research Service report on the USPS financial situation.