NOW

GLAZER: Task Force Calls for Shipping to Subsidize Mailing

Gordon Glazer

By Gordon Glazer, CMDSM, CMDSS, MDP, MDC

Shipware LLC

The shelved Presidential Commission report on the United States Postal System was released yesterday, December 4, 2018, surprising many of us who thought it would never see the light of day. The Commission was initiated by Trump to potentially privatize the USPS and dynamically change how the Post Office prices its services, specifically targeting Amazon’s alleged sweetheart deal. Trump tweeted, calling the USPS Amazon’s “Delivery Boy” and stating it was being subsidized unfairly.

The scope of the study was intensive, with virtually every major organization and stakeholder involved. Fortunately, there was no recommendation from the Commission to privatize. In addition, there was consensus in the report advocating legislative reform to strengthen oversight by both the Board of Governors and the PRC, adjust and amortize the prefunding healthcare requirement, reform the contributions into the Federal Retirement System, and eliminate the right of collective bargaining from compensation by aligning employees’ rights with other federal employees.

Many findings were consistent with expectations, such as aligning pricing by class to cover both actual and operational costs; sustaining the monopoly on mail and package delivery, including exclusive access to the mailbox; maintaining the Universal Service Obligation (USO), opening the door for revised delivery standards (i.e. eliminate Saturday mail delivery); and to pursue new revenue streams.

Surprising was the lack of mention on the reported abuse of the Reseller programs. While the OIG was heavily consulted, somehow, the OIG findings of $1B in annual savings from fixing this program was not covered.

The report also showed the disconnect in Washington between reason and reality. Instead of reforms that would allow the USPS to align healthcare costs like other government agencies, the Commission recommended keeping the prefunding of the healthcare mandate in place and provide relief by restructuring the payment schedule. No other company or Government organization has this requirement. This is, and will continue to be, a dirty money grab by Washington politicians to Tax and Spend, but in this case, the tax is hidden in the form of increased postage. Let me explain.

If you follow the money, when the PAEA was passed in 2006, the USPS could forgo future overpayments into the Federal Retirement System for employees where the USPS was their 2nd Government career. At the time, the OIG reported the USPS had overpaid $75B and was continuing to overpay. In return for stopping these overpayments, Congress required the prefunding of their future retiree healthcare requirements to keep the cash flowing. For a while, it was sustainable, until the 2008 recession hit the USPS especially hard.

This position clearly shows the bias in the report, where the goal is to protect the national budget and not to do what is right for the USPS and the American public.

The other disturbing finding was the recommendation on how to pay for the estimated $4.4B cost of the USO, by crossing a line separating the Market Dominant and Competitive businesses. They want to increase prices on Shipping to pay for USO and took a page from UPS’ playbook, and their relentless attempts to get the PRC to change the “Operational Cost Coverage” methodology to pay a larger share by raising prices for Shipping services.

While the Commission was in favor of creating new revenue streams by licensing the right to the mailbox from 3rd party providers and selling fishing and hunting licenses, they came out against allowing an expansion into banking services, citing an unnecessary risk to the balance sheet. Another example of the Commission being influenced by industry. Studies have shown great support for USPS banking with little risk. It would open universal services to many rural areas with limited access to banks.

The frosting on the cake was this statement: “Many of the Task Force’s proposed reforms to pricing, costing, and services are designed to create such a transfer of value from commercially oriented products to socially oriented essential services.”

The Commission is clearly crossing a line it shouldn’t. Competitive products are priced based upon costs and market conditions. Adding a Social Service fee would be punitive in nature. USO changes should be limited to market dominant services and continue to fulfill the original, grand design of our Postal System as put forth by Benjamin Franklin.

While I am glad privatization is off the table, it looks like it is going to be a tough road ahead for legislative postal reform. The biggest problems facing the Post Office were created by Congress and need to be fixed by Congress. Unfortunately, politics will likely forestall unbiased reform. I remain hopeful that we end up with a better deal than the last one. The American public deserves to keep a viable and competitive Postal Service.

Gordon Glazer, CMDSM, CMDSS, MDP, MDC is a Senior Consultant, USPS Specialist at Shipware LLC, an innovative parcel audit and consulting firm that helps volume parcel shippers reduce shipping costs 10%-30%. Gordon is a postal industry veteran with 32 years’ experience and is a sought-after speaker and industry thought leader. He welcomes your questions and comments, and can be reached at 858-724-0457 or gordon@shipware.com.