Highlights of the USPS Ten Year Plan
April 13, 2021The highly anticipated ten-year plan from the United States Postal Service (USPS) was published last week. The goal of the plan, entitled Delivering for America, is for the Postal Service to achieve financial stability over the next ten years. In the plan, the USPS indicates that they will face losses of up to $160 billion over the next ten years if the plan is not adopted. Many in the mailing industry take issue with the size of the projected deficit, in part based on recent financial reports from the USPS indicating cash on hand of almost $13 billion.
Highlights of the plan
The USPS proposes to combat the projected loss with four major funding sources:
1. Reducing retiree costs by legislative actions that would repeal the retiree health benefit pre-funding mandate currently in effect, and to maximize future retiree participation in Medicare. This will make up 36% of the shortfall.
2. Expanding the current USPS pricing authority above the current CPI cap. Twenty-eight percent of the shortfall will come from this initiative.
3. Cost improvements, including changes in service levels. This is an estimated 21% of the shortfall.
4. Revenue growth, primarily from parcels. This will comprise 15% of the shortfall.
Areas of support
Most mailers are supportive of the plans to continue with six- and seven-day delivery for mail and packages. Realistically, anything less would put the USPS at a serious competitive disadvantage.
Legislative actions to repeal the current retiree health benefit pre-funding mandate have long been supported by the mailing industry. In addition, better integration between the Federal Employees Health Benefit Plan and Medicare would reduce costs and increase participation.
Investments in upgrading postal processing equipment and information technology have been delayed due to financial constraints, and those improvements are desperately needed. In addition, much of the delivery vehicle fleet is reaching the end of its life and needs to be replaced, preferably with more electric vehicles.
Investments in employee retention, such as career planning, training, opportunities for growth, advancement and promotion are necessary to ensure a robust workforce.
Areas of concern
The published plan did not include input from mailing industry customers or craft employees, two major stakeholders in the success (and execution) of the plan.
Focus on packages. The USPS plan does not include sufficient solutions to attract and retain mail volume, but rather focuses on package volume. While there are certainly improvements that need to be made to the efficiency of processing and transporting packages, most of the revenue and volume involves other types of mail, so the USPS needs to put into its plan solutions not just for packages.
Price increases. The mailing industry fought for many years to get a more stable, predictable process for USPS price increases, which was obtained by the PAEA. Now, the USPS plan includes above-CPI pricing authority, and the ten-year plan is unclear on exactly how the Postal Service will implement price increases. The mailing industry needs a plan that allows planning and budgeting for regular, realistic price increases.
Service standard changes. The USPS is proposing to reduce delivery standards for First-Class Mail (and some Periodicals), resulting in one- to two-day slower delivery. Mailers would prefer to see more discussion with customers to determine what service levels are needed and how to cost effectively meet those needs.
