Up FrontHow is the U.S. Postal business governed and funded?Tyler Powell and David WesselWednesday, august 26, 2020


David Wessel

Director - The Hutchins facility on Fiscal and Monetary Policy

Senior other - financial Studies

The United states Postal company (USPS) is big. The employs over 600,000; only two personal employers (Amazon and also Walmart) employ more people. It offer 160 million homes, businesses, and also other shipment points. That would have ranked number 44 on the 2019 luck 500 if it to be included. The COVID-19 pandemic has actually severely intimidated demand and also revenue for USPS, straining its already fragile finances. As the financial stand of the Postal service makes headlines, us examine just how it is set up, what financial difficulties it faces, and how the is regulating these obstacles during a an international pandemic.

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How is the Postal organization governed?

The second Continental conference appointed Benjamin Franklin together the first Postmaster general in 1775. The short article Office department was produced in 1792 and also became a Cabinet room in 1872. In 1971, Congress replaced the Department v the United claims Postal Service, an independent reality within the executive branch. USPS is activate by a 11-person plank of Governors (which resembles the plank of director of a public corporation)—the Postmaster General, his deputy (currently vacant), and nine governors appointed by the President and approved by the Senate for seven-year terms. All 6 of the current independent governors to be appointed by president Trump; three slots are empty. The plank appoints the Postmaster General, that acts together the CEO.

A different Postal regulation Commission with 5 members appointed by the President and also confirmed by the Senate monitor the USPS, including the rates it charges.

How is the Postal service financed?

The Postal service receives no straight taxpayer funds. It depends on revenues from stamps and other service fees. Back COVID-19 has choked turn off the USPS revenue in current months, components that arose well prior to coronavirus have added to the unsustainability the the Postal Service’s financial case for years.

What room the long-term troubles with how the Postal service is financed?

The basic problem is that while the USPS generates enough revenue come cover its operation costs, its pension and also retiree health treatment liabilities press its bottom line right into the red. The USPS has actually operated at a loss since 2007. Native 2008 to 2018, it reported $69 billion in losses. Because that the 2019 fiscal year, it shed $8.8 billion on $71.1 billion of operation revenue.

Because the the climb of email and also digital communication, USPS has seen the volume the First-Class Mail decline from a height of 103.5 billion pieces in 2000 to just shy of 55 billion piece in 2019. USPS has actually tried to increase the shipment of marketing mail and has tried to compete with UPS and FedEx in the parcel delivery sector, consisting of by forging a delivery address Amazon. (This has provoked criticism from president Trump.) together of 2017, the USPS hosted a sector share of over 19 percent in U.S. Package delivery. By law, the Postal business has an responsibility to provide universal service—that is, to supply mail come “as practically as practicable the entire populace of the unified States.” This pressures USPS to deliver to much more addresses every year, even as fewer piece of mail room being delivered.

As First-Class letter volumes have declined, the USPS has been reducing the number of blue mailboxes for years. It right now has 140,837 the them, down from 164,099 in 2013.

What is the issue with USPS retiree health and wellness benefits?

Beyond to work challenges, the various other drag top top the finances that the USPS is the Postal organization Retiree wellness Benefits Fund. Like plenty of employers, the Postal company provides pensions because that its retired employees—and it is required, as personal companies are, to set aside money from existing income come cover that pension promises.

In addition, USPS provides health services to that is retirees, together other federal government employers—but not all large private employers—do. Unlike other employers, though, the USPS is required by the Postal Accountability and Enhancement plot (PAEA) of 2006 to pre-fund retiree health costs out of current income. The distinct drag top top the Postal organization comes indigenous this congressional requirement.

In 2002, the Office the Personnel Management uncovered that the Postal service had been considerably over-paying right into its pension fund, leave it v cash past what was required to fulfill its employee retirement liabilities. Linked with solid performance in the beforehand 2000s, this unanticipated windfall positioned USPS to record up on the pre-funding that its retirement health benefit obligations after years of a “pay-as-you-go” method before the passage of PAEA. In that law, conference instructed USPS to contribute around $5.6 billion per year from 2007 come 2016 and also to stretch any added obligations over the practically 40 year from 2017 to 2056.

Shortly after the needs were passed, the economic climate sank into the great Recession and digital compete intensified, driving down revenues. Together a result, USPS has missed $42.6 billion of forced payments on its health benefits because 2010 and also $5.6 exchange rate in compelled contributions to its pension setup since 2014.

What strains has the COVID-19 pandemic placed on the finances that the Postal Service?

Provisions of personal protective tools to employees, a to decrease in the capacity to use air transport for deliveries, increased paid sick leave, and low customer demand have all contributed to rise costs and also declining revenues. Parcel shipping revenues in the second quarter surged by 53.6 percent over the 2nd quarter that 2019, which maintained the USPS network loss come $2.2 billion because that the quarter contrasted to a ns of $2.3 billion a year earlier. Boosts in volume because that packages space not meant to consist of for continued weakness in marketing letter volume (down 37.2 percent, year end year) and also First-Class letter volume (down 6.4 percent) together the pandemic continues.

What has actually Congress done to assistance the Postal Service?

In the cares Act, Congress listed a $10 billion emergency loan to the USPS. The loan is enough to cover immediate cash demands for the Postal Service, follow to the agency’s 2020Q3 budget Report. The conditions that the Treasury enforced on the loan led the angry chairman of the USPS board, David Williams, a previous USPS inspector general, to resign, alleging the the Treasury demands threatened to turn the agency into a “political tool.”

The loan postpones, fairly than solves, the USPS looming liquidity crisis. The home of to represent passed a bill on august 22 to carry out $25 billion in added government resources to the Postal Service. In addition, the bill—which is unlikely to happen the Senate—mandates that the USPS have to reverse any type of policy changes that have actually led come delays in letter delivery and also refrain indigenous any brand-new policies that would minimize its mail shipment performance till the finish of the COVID-19 public wellness emergency.

What steps has Postmaster general Louis DeJoy taken since taking office in June 2020?

In April 2018, chairman Trump created the Task force on the United states Postal Service, chaired by Treasury Secretary Steve Mnuchin. The job Force created a report in December 2018, urging cost-cutting and price increases. The new York times reported the Mnuchin to be unusually connected in the Postmaster general recruitment process, through Postal organization Board Chairman Robert M. Duncan, a former chairman that the Republican nationwide Committee, suggesting Louis DeJoy, who has actually a lift in the logistics business.

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Cost-cutting efforts at the USPS were already underway once DeJoy to be sworn in together Postmaster basic in June 2020. However, linked with chairman Trump’s comments questioning the protection of mail-in voting, changes to Postal service operation—some the which were in train prior to DeJoy’s appointment—have been particularly controversial. Internal memos outline brand-new policies to avoid late departures and extra distribution trips, also if it method that “we may see mail left behind or mail on the workroom floor or docks.”

In respectable 2020 testimony to the residence Committee ~ above Oversight and Reform, DeJoy claimed he didn’t clearly order the practices that have produced criticism: “First, i did not straight the removal of blue collection boxes or the removed of mail handling equipment. Second, i did not direct the cut ago on hours at any of our write-up offices. Finally, ns did not straight the elimination or any type of cutback in overtime.” Nevertheless, on respectable 18, DeJoy cursed to suspending his permanent reform initiatives until ~ the November election. He promised that there would be no alters to Postal service retail hours, that repertoire boxes and processing devices will continue to be where they room (though no commitment was made to return boxes and equipment already removed), and also that overtime hrs would it is in granted to employees as necessary.