PRC Chief Tells What Will Keep the Postal Service Going

Periods did not customarily end the sentences of recently retired Postmaster General Patrick Donahoe. Nearly every one of his hopeful statements concerning the future viability of the U.S. Postal Service concluded instead with, “but first we need comprehensive postal reform.” Donahoe fought hard for it, as did Delaware Senator Tom Carper, but time ran out for them. Megan Brennan is now the PMG and Carper’s Democratic party has relinquished the driver’s seat in the Senate. As 2015 wears on, legislative relief for the Postal Service is about as likely to occur as an upturn in First-Class Mail volume.

The Postal Regulatory Commission also has a new acting chairman in Robert Taub. Though he never clerked a Post Office like Donahoe or walked a carrier route like Brennan, Taub does have serious postal street cred, having helped craft the 2006 Postal Accountability and Enhancement Act (PAEA) as a member of Rep. John McHugh’s staff on the Oversight & Government Reform Committee. Taub believes that, with a little assistance from Congress on the Postal Service balance sheet, PAEA, which is pronounced like the Spanish dish paella, is meaty enough to see USPS through for the time being.

“I do believe that the Postal Service has a mess on its balance sheet, and legislation is needed to fix it. But the essence of PAEA has worked. It set a regulatory regime for prices and products, has generally worked well, and is a stable foundation for us to work on,” Taub says.

Taub took part in a panel discussion on the future of the Postal Service at the Brookings Institution in March, where an old debate once again reared its head. Is the Postal Service a government agency pledged to provide universal service, or is it a free-market business competitor? Taub believes it has to be both, that the current regulated-monopoly model is one that must be sustained, and that the blueprint set for it by PAEA remains viable.

“It defined what the universal service obligation was: If it’s a postal product, we should be offering it. If non-postal, we shouldn’t be offering it,” the PRC chief says. “If it’s market dominant, if it has captive customers, it’s regulated under a price-cap regime. If it’s a competitive product, regulatory rules will be fewer and a little more straightforward. And they have to be self-sufficient so there is no cross-subsidy.”

In April the PRC issued a financial review of Postal operations (the second annual, starting a trend) that painted in broad strokes the garish picture that is USPS’s financial condition. It recorded $1.4 billion in net operating income against a total net loss of $5.5 billion, inflating the total net deficit since PAEA’S passage to $51.7 billion. But competitive products grew by 11% in both volume and revenue, and Standard Mail volume rose by 1% despite an exigency-fueled 6% rise in rates over 2013.

“While the situation’s not optimal, the good net operating income news demonstrates that the Postal Service has the capability to keep moving forward. They may have to hold some of their vehicles together with Band-Aids, but they’re going to meet their basic mission to deliver,” Taub says.

Unless, of course, the economy goes sour again. “Lord willing,” Taub says, “we won’t see that.”

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