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Op-Ed: Time to deliver on real postal reform
By Ross Marchand | Taxpayers Protection Alliance
If recent Congressional actions are any indication,
genuine postal reform is a long way away. On March 8, the U.S. Senate
voted to advance the Postal Service Reform Act (S. 1720), a misguided
piece of legislation that will let the United States Postal Service (USPS)
off the hook for much of its debt and shift retirement liabilities onto
taxpayers through the beleaguered Medicare program. One bright spot of
the bill orders the Postal Regulatory Commission (PRC) to ensure that
product prices are exceeding delivery costs, ensuring (in theory) that
traditional mail is not cross-subsidizing package delivery. The PRC must
make good on this provision by thoroughly examining the agency’s cost
attribution guidelines. The USPS can only deliver with sound finances
and pricing transparency. |
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 The passage of S. 1720 comes exactly a month after the agency reported that it
lost another $1.5 billion in the first quarter (Q1) of fiscal year (FY) 2022.
That’s on top of more than $90 billion in losses over the past 15 years. Judging
by Q1’s surge of red ink, even an influx of revenue from packages during the
last three months of the year (corresponding to the holiday season) was not
enough to offset the high fixed and variable costs associated with parcel
deliveries. While packages are far from the USPS’ only problem, changes in the
composition of the agency’s delivery haul certainly warrant some examination.
Packages have taken up an increasing share of the overall mail load, comprising
nearly 60 percent of delivery weight in FY 2021. But interestingly, real revenue
per package pound shipped has decreased in recent years.
This needn’t be a cause for concern if revenues were nonetheless covering costs
and delivery costs were declining (perhaps due to increased delivery
efficiencies). Unfortunately, it appears that revenues are not in fact covering
costs because of misguided agency cost attribution calculations. For example,
the agency only attributes 10 percent of the costs of city carriers’ street
activities to competitive products (i.e., packages) and ZERO percent of
headquarters expenses to packages. The latter figure is particularly
implausible, given that headquarters staff regularly draft reports on package
deliveries and negotiate agreements with e-commerce companies to deliver
packages.
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It's possible that recently passed postal legislation will give the PRC the
reason it needs to scrutinize this dubious cost attribution. This seems
unlikely, though, because the PRC just issued an analysis in November that
mostly sided with the agency on its cost and price assumptions. The PRC even
defended the idea that “network travel,” or the travel between delivery
addresses, shouldn’t be attributable to packages at all. To support this dubious
conclusion, the PRC and USPS assume that driving from Point A to Point B will
take a set number of minutes and consume a set amount of fuel regardless of what
is inside of mail trucks. But, if the sorting and loading of packages cause mail
carriers to begin and end their delivery routes late, then labor costs for
“network travel” will inevitably be subject to overtime compensation. And, when
mail routes are dovetailing with rush hour traffic, all bets are off.
Without any further Congressional guidance, the PRC will continue to make the
same tired points about concepts like network travel without conducting a more
thorough examination of pricing assumptions. Lawmakers should closely examine
the USPS and PRC’s arguments and require specific explanations as to why
significant cost drivers aren’t being attributed to packages. In addition,
lawmakers need to press the agency to divulge the specific formulas used to
derive their prices. The Taxpayers Protection Alliance’s recent report on postal
pricing provides a useful starting point to soberly address these questions and
build on recent legislation.
It’s time for Congress to deliver on real postal reform instead of burying their
heads in the sand and ignoring the real problems facing America’s mail carrier.
Ross Marchand is a senior fellow for the Taxpayers Protection
Alliance. |
