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Holiday Mail and a Season of U.S. Postal Service Challenges

By Mark White

Tuesday, December 15, 2015

‘Tis the season for mailing. The holiday season marks the busiest time of year for the United States Postal Service (USPS) and also draws greater attention to the agency’s operations. One particular area of postal policy receiving close scrutiny from Congress: service standards. These are essentially the delivery timelines that USPS commits to meeting for different types of mail.

The challenges around service standards must be viewed in the context of the current operating environment for USPS. Among other financial issues, its most profitable product, First Class mail, has experienced a precipitous drop in volume over the past 10 years as consumers and businesses shift to Internet-based options.

USPS is limited in its ability to address these financial challenges, in part, because of congressional requirements for pricing, employee benefits, and other aspects of the agency’s operations. For example, USPS cannot close post offices simply because they operate at a loss.

In response, the agency has looked to other ways to raise revenues, including closing operations and providing other government services, such as passport applications and package delivery. These business decisions involve trade-offs, ones that require a renewed policy debate over what should be the main priorities of USPS and how should it best meet those goals.

USPS does have the freedom to manage its delivery network. As a result, USPS has closed several Processing and Distribution Centers (P&DCs), along with other facilities, over the past several years. The agency justified these decisions by virtue of the significant savings in both personnel costs and increased efficiency that the closures would bring.

Consolidating delivery operations, however, came with a price—diminishing service standards. In a series of policy changes in 2012, USPS reduced its delivery standards for First Class and other types of mail products. Under the new regulations, letters had more time to reach their destination while still being considered “on time.” For example, overnight delivery was eliminated entirely for retail customers, meaning that even letters mailed across town would no longer arrive the next day. For longer distances, the change was even greater.

USPS alleged that customers would not be greatly affected, but anecdotal evidence suggests otherwise. Customers, especially those from rural areas, are increasingly complaining about missed bill payments and late deliveries. Congressional concern has grown, as well, with the House Appropriations Committee passing an amendment to the Financial Services and General Government Appropriations bill for Fiscal Year 2016 that would restore higher service standards and ensure overnight delivery of in-town mail. Several rural-state senators are also supporting legislation aimed at protecting rural communities from postal facility closures and reductions in delivery service.

Anecdotes aren’t the only reason to doubt USPS’s claims about service standards. Reports from the Government Accountability Office (GAO), the Postal Regulatory Commission, and the USPS Office of the Inspector General have all noted that USPS may be unable to meet even its new, lower service standards.

Furthermore, in October, GAO published a report contending that USPS’s data tracking was so unreliable that the agency’s reporting on its service standards was suspect at best and useless at worst. USPS only manages to track 55 percent of its mail, meaning that nearly half of all items delivered are not included in the agency’s reports about service standards. While this is a vast improvement from the situation 10 years ago, when 84 percent of mail volume went untracked, it is still concerning that USPS is basing major policy decisions (such as P&DC closures and eliminating overnight delivery) on such suspect data. How can the agency claim that those changes are not harming customers when it does not have the data to support that statement?

The fact of the matter is that USPS has been caught in a “hair on fire” situation for several years. Left with few policy options and deep cash-flow issues, the agency has been forced to grab whatever savings it can, even if those solutions may hurt customers (or USPS itself, in the long-run).

One example is its recent emphasis on package delivery, and the agency’s latest announcement that it will deliver packages seven days a week during the holiday season. While packages are a rapidly expanding (and potentially lucrative) business for USPS, this emphasis deserves scrutiny at a time when Americans are bombarding policymakers with complaints about delayed mail.

Congress clearly has a role to play here to ensure that the American public still receives quality service from USPS. But policymakers must also ask themselves: Given the agency’s troubled financial state, what should its future be? If it is to continue to be self-sufficient (as it has been since 1970), Congress may be forced to give USPS more freedom in terms of pricing, products, and other aspects of its business. But giving USPS more freedom to operate, as evidenced, may result in lower levels of customer service. Balancing the agency’s interests against those of the public at large will be the test of any postal reform legislation.

Congress may again consider a major bill with reforms to USPS in the near future, as the Senate did in 2012. Senator Tom Carper (D-DE), for example, has introduced the Improving Postal Operations, Service, and Transparency Act, which would address a number of USPS’s ongoing areas of concern. For now, however, it’s best to send your holiday cards early.

KEYWORDS: GOVERNMENT ACCOUNTABILITY OFFICE, TOM CARPER, UNITED STATES POSTAL SERVICE