U.S. Senate signs off on Postal Service Reform Act

Following approval by the U.S. House of Representatives on February 8, the United States Senate followed suit yesterday, in also signing off on the Postal Service Reform Act, legislation that is focused on augmenting the financial health of the long-beleaguered United States Postal Service (USPS). The next step for the legislation is for it to be signed into law by President Biden.

The bipartisan approval of the Postal Service Reform Act was positively received by USPS Postmaster General and CEO Louis DeJoy.

“With the legislative financial reforms achieved today, combined with our own self-led operational reforms, we will be able to self-fund our operations and continue to deliver to 161 million addresses six days per-week for many decades to come,” said DeJoy in a statement. “I thank the Senate and our Committee leadership that broke the 10-year logjam which has long constrained the finances of the Postal Service. The Postal Service serves every American every day and so it’s only right that our future is now collectively assured by members of all political parties.” 

USPS officials highlighted various key aspects of this bill, including:

  • eliminating the unfair, outdated, and burdensome retiree health benefit prefunding requirement;
  • integrating its retiree health benefit program with Medicare in a manner that is fully consistent with private sector best practices;
  • formalizes its obligation to deliver mail and packages six days per-week through an integrated delivery network; and
  • includes accountability, transparency and reporting requirements

And they added that the Postal Service Reform Act is a key part of the USPS’s “Delivering for America 10-Year Strategic Plan” that was rolled out in March 2021 and focused on achieving financial sustainability and service excellence, in order to meet customer and business needs.

The plan takes an ambitious approach focused on helping the USPS get on solid financial footing, as the organization has been in the red over the last 15 years.

And it calls for the USPS to continue its universal six-day mail delivery, as well as expanding seven-day package delivery, with the latter being a major revenue source for the organization. A key part of the plan stated that the USPS will generate $24 billion in net revenue, partly from enhanced package delivery services for business customers, including same-day, one-day, and two-day delivery offerings.   

Other key objectives outlined in the plan include: improving cash flow for the investment of $40 billion in workforce, new vehicles, improved Post Offices, technology improvements, and infrastructure upgrades; a move to an electric vehicle delivery fleet with Congressional support; adjusting select delivery standards to improve efficiency and reliability; enhancing customer experience through a new suite of consumer and small business tools; stabilizing the workforce with a goal of cutting non-career employee turnover in half, and creating more opportunity for growth, including more predictable progression into career workforce; aligning pricing to reflect market dynamics; and ask for bipartisan legislation in Congress to repeal retiree health benefit pre-funding mandate and to maximize future retiree participation in Medicare.

Last month, the USPS reported that for the Fiscal Year (FY) 2022 first quarter, it had an adjusted loss of roughly $1.3 billion, much steeper than the $288 million adjusted loss it saw, for the same quarter last year. And USPS said that on a “generally accepted accounting principles basis, the USPS had a net loss of around $1.5 billion for the quarter, compared to $318 million in net income a year ago.

The organization said that its net loss and adjusted loss gains were due, in part, to inflationary impacts to operating expenses, which included rising prices related to energy and fuel expenses. But on a more positive note, it said that its service levels showed continued improvement throughout the quarter and were strong during the holiday season-driven uptick in volumes.

USPS said that the pandemic has significantly transformed the mix of mail and packages processed through the Postal Service’s network and the Postal Service anticipates that its volumes and mix will not return to pre-pandemic levels. The Postal Service continues to grow its revenue in mail services through optimization of its pricing strategies and effective use of its pricing authority, as outlined in the Delivering for America plan.

Jerry Hempstead, president of Orlando-based Hempstead Consulting, told LM that this bill is nothing more than what he called a financial bailout for the USPS.

“It adds to the National Debt and forgives the USPS for payments due that USPS has not made in years,” he said. “It moves USPS retirees to Medicare (like most of us) and removes the pre-payment requirement so the USPS can pay as it goes like other corporations. The bill allows the USPS to go into other businesses like banking apparently because they have done such a good job with finances up to this point. In any event, talk of improved service as a result of the bill is Kabuki theater and smoke and mirror stuff. It really is not a bill that changes much other than accounting.”

About the Author

Jeff Berman, Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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