Donahoe Delivers State of the USPS Address to Catalogers

This wasn’t the upbeat, “we’re taking on the world” address he delivered at the National Postal Forum. On April 30 the Postmaster General delivered the real world address to a small group of mailers in a meeting room at the Washington Plaza Hotel. When Patrick Donahoe spoke to the hundred or so influential owners and leaders of catalog, printing, and direct mail companies, he spoke the plain talk heard in boardrooms.

“There are two things we’ll face to a greater extent, guaranteed. We will have somewhere between $1.2 billion and $1.3 billion of inflationary push on our costs. Period. And the volume number is not changing. We’re losing 8% a year on single-piece volume. That’s the cash cow of the organization. No matter what we do, that volume’s going away. People say, ‘Oh, cut operating costs and you’re okay.’ No we’re not.”

The PMG appeared to strike a chord with the assembled members of the American Catalog Mailers Association by asking them, as businesspeople, to feel his pain. “In the last 10 years we’ve lost 30 billion pieces of single-piece mail, more than 60% of our volume,” he said. “If you in your business lost 60% of any part of your volume, you would be very quickly making some changes, correct? When you take 30 billion pieces times a 49-cent stamp, that’s $14.5 billion lost every year. We lost that. That’s not coming back.”

Heads in the crowd nodded in affirmation. Though most in the room were in disagreement over Donahoe’s vision for the future management of the Post Office, they respect the former postal clerk from Pittsburgh who rose to become the nation’s 73rd Postmaster General, a job that once was a cabinet-level position—until it became difficult.

As the only revenue-generating federal government agency outside of the Internal Revenue Service, the Postal Service is depended upon by the United States to fund its retirement program and has been asked to prefund postal retiree healthcare on an aggressive payment schedule that continues to leave it some $40 billion short on its balance sheet.

“We’ve overpaid about $300 million into the retirement fund. You’ve overpaid,” he stressed to the catalogers, “because it’s your postage. And [the Senate and House of Representatives] are dilly-dallying around waiting to see what will happen. Nothing’s going to happen. That should be unacceptable to you. You should be talking to your representatives in the Senate and House.”

The Postal Service and mailers are in opposition over the kind of control Donahoe and his managers should have over service and pricing when, and if, postal reform legislation should be enacted. Donahoe and his board of governors would like to be able to set rates and service options unchecked, to operate the agency like a free market enterprise. Mailers counter that it is a government-run monopoly, the only game in town for delivering their letters and catalogs, and that it requires oversight of the Postal Regulatory Commission. The PMG wants the exigency rate baked into the rate base line. Mailers want it to be temporary and to return to the CPI rate cap.

Donahoe posed a multiple choice question to the room. If they could get only one of three things from postal legislation, what would it be? A resolution of the healthcare situation, a change in governance to let USPS set rates and get rid of the cap, or five-day delivery?  Donahoe told them not to raise their hands and read their minds instead.

“There are a lot of people who say, ‘I don’t care what happens to the rest, as long as we keep the cap.’ That ain’t going to happen in the long run, I’m sorry,” Donahoe said. “In the down volume world we live in, [the cap] is eventually going to be a problem. If you had to have a price cap and maintain all your infrastructure and have to go to a regulatory organization and wait three months for a ruling to make changes, you wouldn’t be in business that long.”

One thing all in the room agreed on was that postal reform legislation could solve a lot of the differences between USPS and mailers. Donahoe and his board favor the Senate bill introduced by Tom Carper (D-DE) and Tom Coburn (R-OK). Mailers have problems with it. So ACMA President and Executive Director Hamilton Davison asked Donahoe if he would accept half a loaf from legislators if they could get something passed this year.

Donahoe said he wouldn’t. He recalled that the Postal Accountability Enhancement Act passed in 2006 was nearly a decade in the making, and he was of a mind to wait it out. “If they gave us six- to five-[day delivery] but nothing in governance, every number we have says that that would be a gigantic mistake,” Donahoe replied.

Despite their differences with the PMG, catalogers applauded him loudly as he left the room. As he passed by, one association member voiced agreement with something Davison had said in his introduction of Donahoe: “He may well have the toughest job in Washington.”

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