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Final Myth vs Fact

Final Myth vs Fact

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Published by: House Oversight Committee on Aug 10, 2011
Copyright:Attribution Non-commercial


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2309, the Postal Reform Act of 2011 Myths/Facts
Myth #1: The crisis at the United States Postal Service (USPS) is temporary, caused by the recession. Fact: Increasing use of electronic, paper-free technology has caused a permanent decline in mail usage. USPS has no business model to cope with this reality.
A recent Businessweek cover story illustrated USPS’s failed business model: “Paul Vogel, a former letter carrier who is now the postal service's chief marketing sales officer…. his job is to persuade banks to keep sending paper statements in the mail. It's a losing battle, and Vogel knows it. "Inevitably, it's going to go to those new technologies," he sighs.” According to the same story, Phillip Herr, the Government Accountability Office’s expert on the Postal Service, “is struck by how many USPS executives started out as letter carriers or clerks. He finds them so consumed with delivering mail that they have been slow to grasp how swiftly the service's financial condition is deteriorating. "We said, 'What's your 10-year plan?'" Herr recalls. They didn't have one.’” In 2001, 80% of household bill payments were made by mail, by 2009 that number dropped to 54% and today it is almost certainly below 50%. First-Class Mail, which is three times more profitable than Standard Mail, is more than 25% off its peak volume and is no longer a majority of USPS revenue. The decline is permanent, and it is driven by the transition to online banking and bill payment and the shift to email for personal correspondence.

Myth #2: USPS has cut its costs. Fact: Costs are increasing. Any potential savings are being overridden by rising costs, especially for compensation and benefits.
One senior Postal official recently cited workforce reductions through retirements in the last decade as evidence of cost cutting saying, “We know how to cut costs.” In reality, even as USPS revenues dramatically and predictably decline the Postal Service has failed to meaningfully cut its expenses. During the first 8 months of this fiscal year, USPS revenues declined more than $1.2 billion but USPS expenses actually increased by $281 million.

Myth #3: USPS receives no taxpayer support. Fact: USPS has received billions of dollars in indirect taxpayer subsidies over the years.
USPS benefits from preferential local, state, and federal tax treatment that results in an indirect subsidy, or tax expenditure, from all levels of government. USPS is exempt from the following: • • • • Local, State, and Federal Income Tax Property Tax Motor Vehicle Registration Parking Tickets

Like Fannie Mae and Freddie Mac, USPS can borrow money at very low interest rates from the U.S. Government; USPS borrows money through the U.S. Treasury paying less than 1% interest on some debt. The Postal Service has a $15 billion line of credit with U.S. Treasury.

Myth #4: Postal Reform Act Increases Regulation. Fact: Postal Reform Act Eliminates 14 of the most costly regulations and unfunded mandates on USPS, more than any other postal reform measure.
The Postal Reform Act will free the Postal Service from burdensome and costly regulations. Key Deregulations: 1. Eliminates the mandate requiring 6-day delivery of mail. 2. Eliminates the prohibition on closing small post offices solely for operating at a fiscal deficit. 3. Relaxes other statutory provisions that increase USPS ability to manage its own retail network. 4. Eliminates the cumbersome appeals process for post office closures if a contract postal unit is opened nearby, which would be much more cost effective. 5. Streamlines the existing appeals process for post office closures by reducing the maximum time for regulatory review from 120 days to 60 days. 6. Streamlines Postal Regulatory Commission (PRC) review of USPS proposals to substantially alter USPS’s retail network to no more than 90 days. 7. Streamlines PRC review of any proposal that is substantially similar to a proposal that has already been reviewed by the PRC to no more than 90 days. 8. Eliminates prior regulatory review of similar negotiated service agreements with individual mailers. 9. Eliminates the requirement for USPS’s governing board to approve similar rate agreements, allowing the Postmaster General to act instead. 10. Exempts USPS from costly prevailing wage laws that drive up contracting costs including the Davis-Bacon Act and the Service Contracting Act. 11. Broadens USPS authority to offer non-postal services by allowing USPS to sell advertising and offer state government services in postal facilities. 12. Removes a statutory rate preference for national and state political committees that amounts to an unfunded mandate.

13. Reduces the amount of revenue foregone to USPS from statutorily mandated non-profit advertising rates. 14. Eliminates the statutory requirement that all collections of fringe benefits for USPS employees must be as generous as those available in 1971.

Myth #5: Postal Reform Act just throws more money at the problems facing USPS. Fact: If USPS defaults to the federal government, the Act creates a governing Authority- superseding current USPS governance- with a mandate to cut costs.
In a statement released shortly after introduction of the Postal Reform Act, USPS wrote: “We strongly oppose a provision in the bill that provides for an additional $10 billion in borrowing authority from the U.S. Treasury. The Postal Service does not need to incur additional debt.” Current postal management that has failed to cut costs need not worry about this. The provision is only triggered if USPS goes into default to the federal government. At that point, a financial solvency authority (Authority) will replace the Postal Service Board of Governors. The Authority can access a separate and collateralized line of credit to maintain service and finance restructuring. Unlike current USPS debt, it must be repaid under a strict timeline when USPS meets key financial benchmarks and “graduates” from control of the Authority.

The Postal Reform Act makes serious structural reforms, eliminating costly regulations and unfunded mandates, and ensuring the fiscal solvency of USPS without a multi-billion dollar taxpayer bailout. You can read more about the Postal Reform Act of 2011 here.

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