In a succinct portrait of the U.S. Postal Service’s decline since 2007, the Congressional Research Service (CRS) cites the Retiree Health Benefits Fund (RHBF) as the chief culprit and cast bulk mailers as the heroes that could save the faltering agency. The report also notes that USPS’s annual $90 million congressional appropriation is mere comic relief in the plot, amounting to just 0.1% of revenue.
The villainous part played by the Postal Service’s mandated pre-funding of RHBF has been made crystal clear during the first three quarters of fiscal 2014, CRS contends. Operational losses of $4.1 billion were almost entirely encompassed by the annual $4.3 billion charge for the retiree health benefits.
CRS also makes note that USPS’s revenues are “derived almost entirely from postage paid for the delivery of mail,” and that the mail mix has shifted dramatically in the past decade from First Class to advertising mail. In fiscal 2013, sales of market-dominant products such as the Standard Mail class used by direct mailers was $53.5 billion, accounting for 80% of revenues that year.
CRS concluded that, for postal reforms to be successful, they must address the punitive payments to the RHBF and “place the USPS on a long-term trajectory where the agency’s revenues could be expected to meet or exceed expenses.” Further noting that advertising mail yields lower profits than other classes, CRS’s recommendation could be interpreted as backing the installation of the exigency rate as the new base going forward.
Other points of note in the report:
Between 2004 and 2013, USPS had three profitable years followed by seven years of losses. The string of deficits began in 2007, the first year the Postal Service was required by the Postal Accountability and Enhancement Act to make payments into the RHBF. That year the agency’s revenue rose $2.1 billion, while expenses grew by $8.4 billion.
Despite the cataclysmic effect of the RHBF contribution to USPS’s bottom line, the CRS report notes that the Postal Service would have run deficits between 2009 and 2012 even if it weren’t required to make the payments. Minus the health benefit contribution in 2013, the Postal Service would have posted a surplus of $800 million—a modest gain, yet indicative of the operational costs slashed by Donohoe and company over the past half-decade.
