Postal Reform Would Save USPS $23.6 Billion

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$19 billion of those savings would result from moves to five-day delivery and cluster boxes, says the Congressional Budget Office.

Postal Reform Would Save USPS $23.6 Billion
Cluster boxes hold a potential $8 billion in savings.
 

The Congressional Budget Office (CBO) has released a financial analysis of the House Postal Reform Act (H.R. 2748) that estimates that, if passed, it would return $23.6 billion in savings to the troubled U.S. Postal Service over the course of a decade.

Providing the bulk of those savings would be two of the most controversial measures in the bill introduced by California Republican Darrell Issa: eliminating Saturday delivery and wholesale reduction of direct-door delivery. Were the bill to be passed into law and enacted by year's end, the CBO figures that five-day delivery would return $10.9 billion and cluster boxes $8.1 billion to Postal Service coffers by 2024.

The rest of the almost $24 billion in savings would emanate largely from reductions in the funding of retiree health benefits and life and health insurance for current employees, as well as the re-calculation of retirement benefits using employee-specific data.

The CBO report did not enter rate-setting into its calculations, except to observe that it “anticipates that the Postal Service will continue to attempt to maximize revenue while decreasing cost.” However, the CBO anticipated that annual savings from five-day delivery would begin declining in 2019 if the Postal Service re-invested the accrued savings “or returned [them] to mailers in the form of lower rates.”

Not delivering to private addresses is not something new to postal service. Prior to 1863, mail was delivered from Post Office to Post Office and people paid a two-cent fee for door delivery or hired private delivery firms to take mail the proverbial “last mile.” By 2013, however, USPS was spending roughly $12 billion a year to provide this service to some 38 million addresses. More than two thirds of those would be converted to cluster boxes by H.R. 2748, though the CBO based its $8.1 billion savings calculation on a less ambitious plan envisioned by the Postal Service. The Post Office prefers to limit conversions to 1.5 million a year—or a total of around 14 million addresses by the end of 2022—in order to reduce customer complaints and maximize mail volumes.

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