Will the Postal Service survive? That’s a question that’s tripped from more than a few direct mailers’ lips over the past few years, and Postmaster General Patrick Donahoe’s response appears to be, “If I have anything to do with it, it will.”
Warning that the United States Postal Service is on “an unsustainable financial path,” Postmaster General Patrick Donahoe released a statement yesterday chiding the adjourned 112th Congress for failing to pass legislation that he believes will “put the organization on a stable, long-term financial footing.”
Donahoe held a press conference in November to urge Congress to pass a bill that would remove USPS’s obligation to prefund government retirees’ health benefits and allow it to sponsor its own healthcare program for its employees. According to Chief Financial Officer Joseph Corbett, the prefunding requirement accounted for 70% of the Postal Service’s record net loss of $15.9 billion in 2012. USPS was forced to default on the $11.1 prefunding payment and is experiencing average operating losses of $25 million a day.
“The Postal Service should not have to do business this way, which has undermined the confidence of our customer base and the $800 billion mailing industry we serve,” Donahoe wrote in the statement. “We will be discussing with our Board of Governors a range of accelerated cost cutting and revenue generating measures designed to provide us some financial breathing room.”
Direct mailers dependent on the Postal Service should not be affected by Congress’s inaction in the short term, says Jerry Cerasale, SVP of Government Affairs at the Direct Marketing Association. “There’ll be a 2.7% rate hike on January 31, but that was expected,” Cersale says. “They’d have to go through the Postal Regulatory Commission to get another rate increase, and there’s a waiting period,”
Last month the USPS began testing Metro Post, a same day delivery service, in San Francisco. It also has a promotion scheduled for March that will offer postage discounts for mailers who integrate hard-copy coupons that can be scanned and redeemed via mobile devices. A summer promotion will provide discounts for enterprise customers using “cutting-edged innovations” such as near-field communications and augmented reality in their mail campaigns.
“They‘ve been adding new services for direct marketers to help build revenues, and these things help, but they’re not going to crack that [$15.9 billion] nut,” Cerasale says. “They do need legislation, and this Congress is the one that has to do something. The Postal Service has enough cash to get through the year, but beyond that…”
To address financial challenges, Donahoe noted that USPS has reduced employee headcount by 60,000 and consolidated 70 mail processing facilities to pave the way for life-sustaining legislation from Congress. “We encourage the new 113th Congress to make postal reform an urgent priority,” Donahoe concluded.