"The crisis we're facing gives us an historic opportunity to make changes that will lay the foundation for a leaner, more market responsive Postal Service that can thrive far into the future. [But] there is no one single answer or quick fix to [this] crisis.” –Postmaster General John E. Potter
It’s probably not much of a surprise to anyone that the U.S. Postal Service is finding itself in a world of fiscal hurt and is trying to aggressively staunch both current and future bleeding in a variety of unpleasant ways in order to survive.
Say what you want about the USPS – that it's bloated with bureaucracy, burdened with hefty pension and healthcare burdens, or is a business model clearly outdated in an age of mass electronic communication – but there was a time and a place when the service the men and women in light blue provided received a lot more honor and respect than it does now.
I mean, back in the day, letter-writing used to mean something – indeed, letters between ordinary and extra-ordinary folks alike provided great literary treasure troves to be mined repeatedly by historians. It was a time-honored form of communication for both trivial and serious matters alike.
It’s not easy doing all of this, either. To give you some scope of how big the Postal Service’s operation is, its annual revenue is more than $68 billion, it operates 36,000 retail posta office locations alone, and delivers nearly half the world's mail. If it were a private sector company, the Postal Service would rank 28th in the 2009 Fortune 500. On top of all of that, the USPS is a federal agency that gets no tax money – and that’s saying something in this day and age.
[Milwaukee’s Journal Sentinel newspaper put together a great video two years ago showing how the mail gets sorted by the USPS. Note how workers use what look like specialized “shovels” to get all the letters out of big collection “tubs” and onto the sorting system’s conveyer belts.]
I even spent time in elementary school learning how to properly write letters, put addresses on envelopes, etc. In fact, one of our assignments was to write letters to our favorite sports heroes – and for my pains, I received an autographed photo of Redskins Quarterback Joe Theismann. (A pretty cool moment in any kid’s life, let me tell you.)
Back then, the postman making his rounds wasn’t just an anonymous face providing a service wholly taken for granted in my neighborhood. He knew everyone on our block by name, with more than few front porches sporting a cup of cold lemonade or hot chocolate for him, depending on the season.
In fact, one of my top 10 favorite science fiction novels of all time lionized the Postal Service in a most unique fashion (while telling what I still consider to be a hell of a good story).
David Brin’s The Postman, first published back in 1985, detailed how Gordon Krantz – a lone wanderer in the aftermath of nuclear war and the collapse of modern civilization – is first by accident and then by design considered to be a postman trying to restore the United States of America.
By dint of courage and luck, Krantz manages to start re-knitting the societies surviving along the Oregon coast by pretending to be a postman, helping them repel an invasion by an army of survivalists led by surgically-enhanced psychotic ex-soldiers.
I can’t do Brin’s story the justice it deserves here, but it’s worthy to note he partially dedicated his novel to the memory of Benjamin Franklin – the first Postmaster General in this country. And it conveyed the sense of what the regular delivery of mail really meant to people.
[Kevin Costner made what I still think is a truly wretched movie based on Brin’s novel back in 1997, completely altering the main character and the story line – but the trailer below explains why the appearance of a postman helped jump start the re-civilization process in the book and film pretty well all the same.]
Today, of course, we prefer to communicate by email – or text messages, instant messages, facebook invites, and the like. Cutting back on all that paper is good for the trees, no doubt, but we’ve also seemed to lose something along the way, too. In the 1990s, tragic shootings by disturbed people at several USPS locations brought the hateful term “Going Postal” into our daily language. Then came early retirements, layoffs, and other cost-cutting moves as mail volumes started an inexorable fall with the rise of Internet and wireless connections.
Now, volume is projected to fall from 177 billion pieces of mail in 2009 to 150 billion by 2020; representing a 37% decline in First-Class Mail alone, with revenue contributed by First-Class Mail expected to plummet from 51% today to about 35% in 2020, according to USPS. The Postal Service says if it takes no action, it will face a cumulative shortfall of $238 billion by 2020.
“Unfortunately, economic drivers that significantly affect mail volumes, such as continuing high unemployment levels and lower investments, appear to be lagging the general economic recovery and last quarter’s 5.9% growth in GDP (gross domestic product),” said Joseph Corbett, the USPS’s chief financial officer and executive vice president. “This situation, coupled with the growth in electronic alternatives to mail, creates a very challenging environment.”
Downward pressure on mail volumes is expected to continue in the near term as well, throughout 2010. “Our volume for 2010 is projected to be approximately 167 billion pieces, a decline of approximately 10 billion pieces from last year’s total,” he says.
The first quarter of the Postal Service’s fiscal year ends Dec. 31 and is typically its strongest quarter for due to seasonal business and holiday mailings. Not so anymore, for first-quarter 2010 revenue declined 3.9% and, despite expenses declining 4.4%, USPS suffered a net loss of $297 million. First-quarter 2010 volume was 45.7 billion pieces, compared to 50.2 billion in the same period last year, or 8.9% below 2009.
Even worse, these losses were not unexpected despite ongoing aggressive cost reduction initiatives, said USPS. Fiscal year 2009 cost savings totaled $6 billion, with USPS reducing work hours for the first quarter by more than 28 million, or the equivalent of 15,800 full-time employees — on top of a reduction of 115 million work hours, or the equivalent of 65,000 full-time employees, during its last fiscal year.
“With net losses reported for 2007, 2008 and 2009, the continued negative trend in fiscal 2010 raises significant uncertainty about the Postal Service's ability to generate sufficient cash flows to fund large cash payment obligations in September and October 2010,” Corbett noted.
The situation is compounded by the requirement established in postal reform legislation of 2006 that the organization pay $5.4 billion to $5.8 billion annually to prefund retiree health benefits — a requirement no other government or private sector organization faces, USPS stressed. Though Congress enacted legislation to restructure the payment for 2009, there is no assurance that similar adjustments will be granted in 2010 – or at all.
It’s not a happy time at the USPS, for sure. Postmaster General John Potter (seen testifying below at left) is recommending a whole slew of changes to help slim the USPS down in the face of falling volumes, but even the package recommended below will only save $123 billion over 10 years – leaving the agency to still deal with $115 billion in red ink. Those changes include:
• Restructure retiree health benefits payments to be consistent with what is used by the rest of the federal government and the majority of the private sector and address overpayments to the Postal Service Civil Service Retirement System pension fund.
• Adjust delivery days to better reflect current mail volumes and customer habits: a fancy way of saying no more Saturday mail deliveries.
• Continue to modernize customer access by providing services at locations that are more convenient to customers, such as grocery stores, pharmacies, retail centers, and office supply stores. Increase and enhance customer access through partnerships, self-service kiosks and via its website.
• Establish a more flexible workforce that is better positioned to respond to changing demand patterns, as more than 300,000 employees become eligible to retire in the coming decade. (Read as fewer full-time workers, more part-timers.)
• Ensure that prices of Market Dominant mailing products are based on demand for each individual product and its costs, rather than capping prices for every class at the rate of inflation. (That translates into higher costs for everything sent via the mails.)
• A modest exigent price increase will be proposed, effective in 2011.
"Lifestyles and ways of doing business have changed dramatically in the last 40 years, but some of the laws that govern the Postal Service have not,” added Potter. “These laws need to be modernized to reflect today's economic and business challenges and the dramatic impact the Internet has had on American life. But if given the flexibility to respond to an evolving marketplace, the Postal service will continue to be an integral part of the fabric of American life.”
I for one would like to see the USPS get that chance.