Demanding Answers from the Postal Service

The Taxpayers Protection Alliance (TPA) has been a major advocate of reforming the practices of federal agencies that are wasting taxpayer money on wasteful projects and endeavors, and the United States Postal Service (USPS) has been a major concern as they continue to lose billions and yet keep expanding into services they have no business at even attempting. TPA also released a video in December of 2014 highlighting these issues (watch here). Now, with Postal Regulatory Commission’s (PRC) open docket to consider the U.S. Postal Service’s Proposal Thirteen regarding the City Carrier Street Time Model (Docket No. RM2015-7), TPA is weighing in calling for transparency and full accounting of how the agency is working to do their best to ensure that the best service at the greatest value to taxpayers is being provided.

As the business of Washington progresses in typical fashion with a new Congress, there is a real need for elected officials on both sides of the aisle to look into the activities of all federal entities in order to ensure a more effective and efficient government that works for all taxpayers.  In particular, the Taxpayers Protection Alliance has been keeping a keen eye on the United States Postal Service as it tries to figure out its financial and managerial future.

One noteworthy area where this process is underway is the thorough examination of the U.S. Postal Service. Hundreds of millions of folks across country depend on the service the USPS provides and expect that the cornerstone institution will continue to be self-sustaining as it offers a widely accessible product.

Regrettably, this belief in the Postal Service is in serious doubt as the agency is failing to grasp matters of what it truly costs to execute all that it is attempting. While USPS management proudly parades the cursory detail of how it generates record revenue streams at seemingly every turn, an honest look down the balance sheet instead shows tremendous financial disorder.

The agency’s recent loss of $5.5 billion in fiscal year 2014 is no aberration. The USPS has posted a net loss of similar magnitude for eight consecutive years. Now, they find themselves with more than $45 billion in unfunded liabilities and are also unable to access further financing from the Treasury after exhausting a $15 billion borrowing limit.

Understanding cost matters are hugely important and that is why the USPS lead regulator, the Postal Regulatory Commission (PRC), is looking into all that the agency puts forth.  Most notably, the USPS annual compliance report displays an apparent lack of detail to surmise a full picture of how their current financial position came to be. Absent data that is being requested by Chairman Taub includes information about cost attribution for specific products, explanations for not meeting cost projections, and reasons for lagging performance.  This is all information that must be known by any business operation, let alone a federally-chartered entity.

This issue of cost attribution by product is of particularly concern to ratepayers and taxpayers, and of high consequence in light of USPS’ woefully insufficient reporting. By assigning only 55 percent of costs in this manner and leaving the rest ambiguously parsed across the agency’s institutional overhead, the risk of downstream complication grows.  By neglecting to seek accurate knowledge of how much money it loses in relation to how much it earns for each item, they are left to make indefinite projections on the prices that they set.  This enables potential accounting structures in which gains from some monopoly products may help disguise weaker results for other products, like competitive ones.

These critical matters were emphasized in comments the Taxpayers Protection Alliance submitted to the Commission as they review USPS’ compliance report. In their upcoming determination due later this month, the Commission will have a chance to mandate further accounting transparency that our organization and several other interested parties found to be lacking.

Further, the Commission is also in the process of considering a proposal by the Postal Service to change part of its cost attribution practices for one of its largest segments – City Carriers Street Time. This area has had significantly higher labor costs per delivery and greater difficulty in supervising routes.  There is also further evidence the agency needs greater understanding of the resources needed to accomplish everything that it does.

In all, it is important to address these issues, not to undermine the Postal Service itself, but to recall the USPS’s original mission.  The agency was created to deliver letters efficiently and at accessible prices for the public. As they continue to deliver more than 300 million letters a day, it is unfortunate that this profitable product has suffered declining service in the form of slower expected delivery times in 2015, and rate increases each of the last 3 years.

Given the positive returns on letter mail and the agency’s growing losses, it’s clear that something doesn’t add up. Let’s hope that the Commission will compel the Postal Service to get the math right. Only then will we be able to truly assess each of the agency’s offerings.