The Postal Service sees brighter days ahead, now that it has a strategy that invests $40 billion into its infrastructure and workforce over the next decade.
The USPS 10-year strategy is designed to relieve the agency of $87 billion in net losses it has posted the past 14 years.
Postmaster General Louis DeJoy told reporters Tuesday that USPS can tackle about half of the plan on its own, but will also need help from its regulatory agency and Congress.
“This is an optimistic, growth-oriented approach to our future that will ensure our place as a vital part of the nation’s critical infrastructure for years to come,” DeJoy said.
Through a combination of agency cost-cutting, funding and legislation from Congress, as well as permission from the Postal Regulatory Commission to relax first-class mail delivery standards in some cases, USPS expects to reach a break-even year as soon as 2023, and generate modest annual profits each year after that.
By comparison, USPS ended 2020 with a $9.2 billion net loss.
USPS also expects to dig itself out of the financial hole by 2030, going from $160 billion in projected net losses to a $0.2 billion net profit. DeJoy said the plan strikes a balance between keeping the agency self-sustaining in the long-term, while also preserving its level of service to customers.
USPS Chief Financial Officer Joe Corbett said the plan sets realistic goals, but leaves “a thin margin for error” and little time for delays.
“Our ability to return to financial sustainability by 2023 and thereafter is based on two large assumptions — that we are able to implement the totality of the plan, and that we can do so on a reasonable schedule. If we encounter roadblocks with any of the major elements, we quickly get into negative territory and may face annual losses for the coming decade,” Corbett said in a press conference outlining the strategy.
To build the workforce USPS needs, DeJoy said the agency is in the middle of reducing its administrative staff by 60,000 employees. That reduction is driven by Voluntary Early Retirements that eligible employees can accept through April 16.
For front-line employees like letter carriers and plant workers, however, DeJoy said USPS is looking to streamline the path non-career employees have to become career workers in order to reduce turnover.
DeJoy said USPS hired 200,000 temporary workers during its peak holiday season late last year but those hires never moved the needle on the agency’s overall headcount. USPS over the past year has also dealt with a critical shortage of employees because of the COVID-19 pandemic.
Shifting more of its workforce to career status, DeJoy added, would also improve customer satisfaction.
“Having our carrier workforce be the same every day when it visits our residences is something that the American people want. We’re going to fulfill that objective, and I think it’s going to lead to good growth and keep us delivering a lot of things to the American people,” DeJoy said.
To fix its long-term financial picture and afford $40 billion in infrastructure and workforce investments, USPS expects it will be able to bring in $24 billion over the next decade through pricing changes and save $34 billion over the same period by cutting costs in its mail processing, transportation, and retail operations.
DeJoy said the price of a first-class postage stamp will go up, but said he and the USPS Board of Governors have not yet decided on what the increase will be, or if the agency will even max out the rate authority approved by the PRC.
“If all these other opportunities come together quickly, we may not have to use all of it. We are committed to delivering affordable service to the American people,” DeJoy said.
The agency expects it will save $58 billion in the same period of time, if Congress passes a bill that would eliminate its 2006 mandate to pre-fund retiree health benefits well into the future, and would require future postal retirees to enroll in Medicare Part B.
Faster packages, more time to deliver mail
In addition to higher prices, the Postal Service will ask the PRC for more flexible targets for first-class mail delivery.
Chief Retail and Delivery Officer Kristin Seaver said USPS would still deliver 70% of first-class mail within three days and 20% within four days. For the 10% of mail that travels the furthest in the USPS network, Seaver said USPS will target five-day delivery.
DeJoy said more breathing room for first-class mail delivery would allow USPS to cut costs by delivering more mail through ground transportation, and cut deliveries through its air delivery contractors.
Seaver said the Postal Service will grow its “storefront for government services concept” by offering passport, identity proofing and biometric capture services at more of its post offices. However, the agency is also limiting post office hours at some locations, depending on workload, customer foot traffic and overall demand.
“As we’ve done in the past when we evaluate post offices, we will adjust hours, but we do not close post offices,” Seaver said.
USPS will also dust off a 2015 plan to close and consolidate mail-processing facilities that Congress put on hold. The plan states the agency will “strategically implement some of those consolidations where facilities remain underutilized.”
Recognizing that more of its overall revenue now comes from its package business, the agency is rolling out a service called USPS Connect, which will offer same-day and next-day package delivery to small and medium-sized businesses that rely on the USPS network to function.
USPS sees this as a viable service because about half of its packages travel 150 miles or less for delivery.
Through improved operations and cost-cutting, USPS expects the plan to save $34 billion.
The Postal Service expects it will spend $12 billion on its next-generation vehicle fleet over the next decade – more than a quarter of its projected investments.
CFO Corbett said the vehicle award to Oshkosh Defense would cover the agency’s overall infrastructure investment if Congress pushes the agency to purchase more electric vehicles than it originally planned.
“We’re looking, obviously, to Congress and others. We really don’t have the capital to invest in something that’s more expensive than combustion engines right now,” he said.
Senate Homeland Security and Governmental Affairs Committee Chairman Gary Peters (D-Mich.) said cutting service standards for first-class and limiting post office hours would “adversely impact USPS customers across the nation, including in rural and underserved communities.”
National Association of Letter Carriers President Fredric Rolando said “there are many positive elements” of the 10-year plan, such as its focus on growing revenue and expanding business. But he said NALC also has “obvious concerns” with other parts of the strategy.
“The business plan provides a good starting point for discussion going forward and should satisfy those who wanted to see such a plan before moving forward with legislation,” Rolando said in a statement.
But we have deep concerns about other elements of the plan that, if implemented, would fail to meet its stated goal of providing ‘service excellence.’ The APWU will stand united with the people of the country to ensure they receive the ‘prompt, reliable and efficient service that the law requires.
American Postal Workers Union President Mark Dimondstein said the plan has “positive attributes,” such as a $4 billion investment to overhaul post office lobbies and opening 46 new annexes to handling a growing volume of packages. But he added APWU remains concerned about what the plan means for service.
“Any proposals that would either slow the mail, reduce access to post offices, or further pursue the failed strategy of plant consolidation will need to be addressed,” Dimondstein said.
Former USPS executive Stephen Kearney, the executive director of the Alliance of Nonprofit Mailers, said the agency’s plan to generate $44 billion in 10 years by setting higher rates will backfire.
“Mailers will only accelerate their exit from the USPS,” Kearney said.