Snail Mail: What’s Killing the Post Office?

Seems you can’t escape these days from having someone jawing at you about health care and medical expenses. That happened to me again this morning while I was chasing the belt on the treadmill. It appears that e-mail isn’t the only problem facing the U.S. Postal Service. Add retiree medical costs to the deficit mix. Say what?

Here’s the back-story. The U.S. Postal Service — required now by law to deliver snail mail six days a week, rain or shine — is proposing to end Saturday delivery as one way to cut a budget deficit that could top $200 billion by 2020. (See Bloomberg News article by Angela Greiling Keane as printed in the Akron Beacon Journal.)

I’m sure there are some businesses and individuals that want and need Saturday mail delivery. But for most of us, c’mon. It’s not critical, and faced with similar circumstances — declining volume and changing customer habits (e-mail, text messaging and so on) — most businesses would make a similar or maybe even more extensive change in its business model.

Yet there really is more to this story than e-mail. And the U.S. Postal Service is being forced to confront an issue today that many other organizations — and private and public — are putting off until tomorrow, if they plan to address it at all. The issue: funding of future retiree medical and pension obligations.

Here’s an interesting perspective from John E. Potter, postmaster general of the United States in an article he wrote for the Washington Post, “Five Myths about the U.S. Postal Service“:

It’s no secret that the Postal Service has been losing money since 2007. What are not well known are the financial demands of the Postal Reform Act of 2006 — demands not faced by the private sector. Though the USPS is self-supporting, its finances are tied to the federal budget because postal employees participate in federal retirement plans. In 2006, Congress required that the USPS prefund 80 percent of future postal retiree health benefits. This will cost more than $5 billion a year through 2016. No other federal agency or private company carries such a heavy burden.

Without the prefunding requirement, the Postal Service would have been better able to weather the recent recession. In 2008, prefunding contributed to a loss of $2.8 billion. Without it, we would have been $2.8 billion in the black.

So it’s not just e-mail or Saturday delivery that’s putting the squeeze on U.S. Postal Service, it’s the so-called legacy or entitlement costs: health care and pensions. And this is going to be one of the dominant issues in the country over the next decade.

Saying that, the U.S. Postal Service is submitting its proposal to government regulators that will contain among other items the request to eliminate Saturday mail delivery.

I heard on CNN — but can’t verify — that the proposal would be submitted via e-mail.

Go figure.

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