Report: USPS considers eliminating nonprofit price caps

A task force has recommended doing away with price caps on mail products, among a number of suggestions included in a report to put the United States Postal Service (USPS) on better financial footing.

The USPS has lost $69 billion over the past decade as mail volume and revenues continued to decline. Currently, the USPS must submit rate change requests to the Postal Regulatory Commission (PRC). Rates hikes generally have been limited to the rate of inflation thanks to the last time postal reform was enacted in 2006 with the Postal Accountability and Enhancement Act (PAEA).

President Trump issued an executive order in April to establish a Task Force on the U.S. Postal System, chaired by Treasury Secretary Steven Mnuchin and included the director of the Office of Management and Budget (OMB) and the director of the Office of Personnel Management (OPM).

On Dec. 4, the Treasury released United States Postal System: A Sustainable Path Forward. The 74-page report makes a variety of recommendations, including:

• Define the Universal Service Obligation (USO) with greater specificity, distinguishing between types of mail and packages for which strong “rationale exists for government protection in the form of price caps and mandated delivery standards versus those that are commercial and would not have a basis for government protection."
• Eliminate collective bargaining over compensation
• Reform employee wages to be consistent with program reforms pertaining to the broader federal workforce
• Explore new business opportunities that allow USPS to ‘extract value from its existing assets and business lines”
• Strengthen the role of the Postal Regulatory Commission (PRC), providing it with expanded controls

USPS delivers 146 billion pieces of mail and packages to more than 159 million households and businesses each year. The number of employees is about 634,000, down from a high of 905,000 in 1999 but still accounting for three-quarters of its operating costs. There are more than 35,000 retail locations and 370 mail processing facilities.

As mail volume and revenue has declined over the past decade, package revenue specifically has grown, from $10 billion in 2010 to $21.5 billion last year, while package volume has doubled over the same time, from 3.1 billion to 6.2 billion.

Packages have not been prices with profitability in mind, according to the recommendations. The USPS “should have the authority to charge market-based prices for both mail and package items that are not deemed ‘essential services.’ This will allow the USPS to optimize its income in order to fund its operations, capital expenditures, and long-term liabilities.”

The Postal Service projects it will need to increase its average annual capital spending by approximately 70% over the next 10 years, according to the report.

The USPS has more than $126 billion in unfunded worker liabilities stemming from pensions ($43.5 billion), retiree health benefits ($66.5 billion), and federal workers’ compensation program ($16.4 billion). Future liability for retiree health benefits is only 44% funded despite contributions of $21 billion from 2007 thorough 2010. To maintain sufficient cash balances needed to continue day-to-day postal operations, USPS has not made required annual contributions since 2010.