The following article on the Postal Service's financial crisis is a news analysis from Mailing and Systems Technology columnist Kate Muth, a freelance writer and consultant who has studied and written on the Postal Service for more than 15 years. Although she has done work for a wide range of interests in the mailing industry, the views expressed are her own.
The Pony Express is remembered as a legendary part of this nation's history and provides an indelible image of an early postal system connecting the western reaches of a new country with its more populous eastern portion. Many Americans might assume the Pony Express was the primary way that mail reached people living west of the Mississippi in the second half of the 1800s.
The truth is that the Pony Express lasted only 18 months (1860-1861), was not a Postal Service (then the Post Office Department) invention but was a contract service launched by transportation pioneer William H. Russell, and was a money loser from the start. But romantic folklore is borne from movie images and western novels and other retellings of a tale steeped in American folklore, but short on historical fact.
Unfortunately, we face a similar situation with today's communications about the Postal Service's plight - with the writing of the "current history" of the Postal Service. Some media have not done a good job of weeding out the facts from the folklore, for example by reporting that tax dollars are somehow at risk when the Postal Service loses money. In fact, it's postage ratepayers that foot the bill - and face future rate increases - when the Postal Service posts net losses. And people who should know better continue to use loaded words, like taxpayer bailout and subsidy, to describe the Postal Service's financial situation and challenges. The most damning part, however, is that public policy is being formed from this misinformation. The facts are challenging enough for the Postal Service; it shouldn't have to fight a misinformation campaign too.
On their face, the facts are sobering. The Postal Service is in the midst of a financial crisis unlike any in its 230-year history. It lost $8.5 billion in FY 2010 and is on track to lose $8.3 billion this year, according to estimates from postal officials. It will reach its borrowing limit of $15 billion and run out of cash by September 30, 2011. The Postal Service has indicated it will not be able to make the $5.5 billion prefunding payment into its Retiree Health Benefits Fund on September 30 as directed by law. And all of this is playing out while the world is embracing digital communications, raising questions about how a hard-copy communications infrastructure should adapt to the digital age.
In a desperate effort to conserve cashe, the Postal Service took the extraordinary step in early June of suspending its biweekly employer contributions into the Federal Employment Retirement Service (FERS), which will save it $800 million through the end of the fiscal year. It also announced it had suspended discretionary awards and its pay-for-performance program for executives and officers. It is in the midst of employee buyouts and a reduction in force that are part of its plan to shed another 7,500 positions. (Over the past four years, the Postal Service has reduced its workforce by 110,000 career employees.) It continues to focus on reducing its workhours to keep its costs down. It has revamped its retail strategy in an effort to close post offices more easily, while providing customers with even greater retail access to products and services.
While these are commendable efforts - and just the kinds of things a private-sector business would do - they are like sandbags against a rising Mississippi River. They will hold off the water for only a short time before the river comes rushing through, destroying entire communities. At the moment, these cash-conservation initiatives are among the few tools the Postal Service has to hold down its costs. Only Congress can provide the Postal Service with a complete set of tools to build a levee strong enough to hold off the flood waters. Only Congress can fix the overfunding of benefits plans so the Postal Service can stay afloat long enough to tackle its long-term challenges and thrive in a fast-changing communications market. If Congress is so worried about some of these long-term challenges - which include an oversized network, shrinking volume, a changing communications landscape, and a wanting digital strategy - it could tie continued payment relief to milestones in an operational plan. Of course, this would require Congress to allow the Postal Service to right-size its network.
Unfortunately, many in Congress seem to think the Postal Service needs a "crisis" before any reform of the system can occur. The Postal Service's situation is not so different from the stalemate that occurred over the debt ceiling, where lawmakers appeared willing to gamble with the nation's economic recovery just to advance a particular agenda. Similarly, Congress refuses to right a clear injustice against the Postal Service - the overfunding of its benefits plans - and instead lets the Postal Service slide into insolvency so lawmakers can gin up a crisis and force through their own "solutions."
Just as Wall Street clamored for a bipartisan solution to the debt ceiling, the mailing industry does the same for the Postal Service's financial crisis. Let's not forget that the mailing industry is responsible for 8.7 million jobs and more than $1 trillion in sales revenue, or 7 percent of gross domestic product, according to the latest analysis by the EMA Foundation for Paper-Based Studies. A financial fix is essential to the integrity of communications and commerce in this country.
The Pony Express is remembered as a legendary part of this nation's history and provides an indelible image of an early postal system connecting the western reaches of a new country with its more populous eastern portion. Many Americans might assume the Pony Express was the primary way that mail reached people living west of the Mississippi in the second half of the 1800s.
The truth is that the Pony Express lasted only 18 months (1860-1861), was not a Postal Service (then the Post Office Department) invention but was a contract service launched by transportation pioneer William H. Russell, and was a money loser from the start. But romantic folklore is borne from movie images and western novels and other retellings of a tale steeped in American folklore, but short on historical fact.
Unfortunately, we face a similar situation with today's communications about the Postal Service's plight - with the writing of the "current history" of the Postal Service. Some media have not done a good job of weeding out the facts from the folklore, for example by reporting that tax dollars are somehow at risk when the Postal Service loses money. In fact, it's postage ratepayers that foot the bill - and face future rate increases - when the Postal Service posts net losses. And people who should know better continue to use loaded words, like taxpayer bailout and subsidy, to describe the Postal Service's financial situation and challenges. The most damning part, however, is that public policy is being formed from this misinformation. The facts are challenging enough for the Postal Service; it shouldn't have to fight a misinformation campaign too.
On their face, the facts are sobering. The Postal Service is in the midst of a financial crisis unlike any in its 230-year history. It lost $8.5 billion in FY 2010 and is on track to lose $8.3 billion this year, according to estimates from postal officials. It will reach its borrowing limit of $15 billion and run out of cash by September 30, 2011. The Postal Service has indicated it will not be able to make the $5.5 billion prefunding payment into its Retiree Health Benefits Fund on September 30 as directed by law. And all of this is playing out while the world is embracing digital communications, raising questions about how a hard-copy communications infrastructure should adapt to the digital age.
In a desperate effort to conserve cashe, the Postal Service took the extraordinary step in early June of suspending its biweekly employer contributions into the Federal Employment Retirement Service (FERS), which will save it $800 million through the end of the fiscal year. It also announced it had suspended discretionary awards and its pay-for-performance program for executives and officers. It is in the midst of employee buyouts and a reduction in force that are part of its plan to shed another 7,500 positions. (Over the past four years, the Postal Service has reduced its workforce by 110,000 career employees.) It continues to focus on reducing its workhours to keep its costs down. It has revamped its retail strategy in an effort to close post offices more easily, while providing customers with even greater retail access to products and services.
While these are commendable efforts - and just the kinds of things a private-sector business would do - they are like sandbags against a rising Mississippi River. They will hold off the water for only a short time before the river comes rushing through, destroying entire communities. At the moment, these cash-conservation initiatives are among the few tools the Postal Service has to hold down its costs. Only Congress can provide the Postal Service with a complete set of tools to build a levee strong enough to hold off the flood waters. Only Congress can fix the overfunding of benefits plans so the Postal Service can stay afloat long enough to tackle its long-term challenges and thrive in a fast-changing communications market. If Congress is so worried about some of these long-term challenges - which include an oversized network, shrinking volume, a changing communications landscape, and a wanting digital strategy - it could tie continued payment relief to milestones in an operational plan. Of course, this would require Congress to allow the Postal Service to right-size its network.
Unfortunately, many in Congress seem to think the Postal Service needs a "crisis" before any reform of the system can occur. The Postal Service's situation is not so different from the stalemate that occurred over the debt ceiling, where lawmakers appeared willing to gamble with the nation's economic recovery just to advance a particular agenda. Similarly, Congress refuses to right a clear injustice against the Postal Service - the overfunding of its benefits plans - and instead lets the Postal Service slide into insolvency so lawmakers can gin up a crisis and force through their own "solutions."
Just as Wall Street clamored for a bipartisan solution to the debt ceiling, the mailing industry does the same for the Postal Service's financial crisis. Let's not forget that the mailing industry is responsible for 8.7 million jobs and more than $1 trillion in sales revenue, or 7 percent of gross domestic product, according to the latest analysis by the EMA Foundation for Paper-Based Studies. A financial fix is essential to the integrity of communications and commerce in this country.
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