Monday, November 16, 2009

Crystal Balling and Bawling: What’s ahead for the USPS?

Gazing forlornly into their crystal balls, postal prognosticators see another tough year ahead for the Postal Service. The recession may be receding for many of us, but for the USPS it is still grinding reality.

“The current business model does not work” Postmaster General John Potter commented recently. Unfortunately, he didn’t offer a model that does work. So for the USPS, it’s business as usual. And that isn’t good.

The USPS lost a staggering $3BB in FY 2009—even after bleeding off 40,000 jobs and trimming $6BB from its budget. It could have been worse. A lot worse. After making similar draconian cuts year over year—the USPS took a hint from GM, AIG, et al and went hat-in-hand to the Congress to seek relief.

On the theory that the USPS is Too Important to the Country’s Security to Fail (a logical extension of the Too Big to Fail argument) Congress voted to delay $4BB of a $5.4BB payment due to the USPS retiree’s healthcare fund. The USPS Financial Relief Act of 2009 delayed but did not eliminate that debt, thus giving the postal service a bit of a breather.

Despite the respite, there is much gloom at postal headquarters. Explaining decreased mail volume on the recession and the internet, postal management is looking for ways to fill an ever-deepening hole, while simultaneously realizing that as much as postal rate increases are needed, they will only drive mailers elsewhere. Furthermore, as postage rate increases are now pegged to the CPI rate in the previous year and that rate went deflationary in 2009, a postal increase in 2010 was nixed in October.

Putting some mail “on sale” over the summer and the fall may have helped boost mail volume—anecdotally my mailbox overflowed with catalogs—but official numbers are unavailable yet.

So USPS management continues to cut.

First on the chopping block are “underutilized” post offices. Rural areas are particularly concerned as a town without a post office can be de-listed as a legal entity. The DC area is not immune, either. Roughly 15% of our local POs are slated to close.

Next on the chopping block is Saturday mail delivery. While comprising only 11% of the weekly volume, Saturday delivery could save the USPS $3BB annually if terminated. The USPS would make exceptions for mail order prescriptions and for the high-volume holiday season. But how about making an exception for social security checks? For many seniors, getting that check is more important than getting a holiday card—even a hand drawn one—from the grandkids.

Post offices that survive the cuts would have curtailed weekend service, and no outgoing mail processing. People needing stamps or other services on Saturday would be referred to the internet. (Isn’t that ironic!) Consumers will need to plan ahead, procuring postage in advance.

Congress—acting with typical dispatch and derring do—has decided to put off any discussions until after the mid-term election. While widely seen favoring proposals to go to 5-day delivery and cut underutilized facilities, Congress realizes that closing post offices in their districts may mean losing their jobs in Washington. (Re-read the previous sentence about rural townships being de-listed as entities. Being wiped off the map does not please constituents.)

Cest la vie.

Madame LaFarge is waiting.

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