WASHINGTON – Postmaster General Louis DeJoy on Tuesday announced the largest rollback of consumer mail services in a generation, part of a 10-year plan that includes longer first-class delivery windows, reduced post office hours and higher postage prices.
DeJoy presented his long-awaited strategic vision for the U.S. Postal Service during a Tuesday webinar. Portions of the initiative already made public have raised alarms from postal advocates, who say they could further erode agency performance. Mailing industry officials warn that substantial service cuts could drive away business and worsen its already battered finances.
But DeJoy has cited the need for austerity to ensure more consistent delivery and rein in losses. The agency is weighed down by $188.4 billion in liabilities, and DeJoy told a House panel last month that he expects the Postal Service to lose $160 billion over the next 10 years. Without the plan, Postal Service Board of Governors Chairman Ron Bloom said the agency’s future was “profoundly threatened.”
DeJoy’s plan to make up that projected shortfall largely depends on Congress repealing a retiree health-care pre-funding mandate and allowing postal workers to enroll in Medicare. The agency also will ask President Joe Biden to order a review of how much the Postal Service should have paid into its pension funds, and credit the mail agency with overpayments.
DeJoy projected that these steps would save the agency $58 billion over the next decade, and that the agency could make up the rest through postage rate increases ($44 billion in new revenue), “self-help” cost cutting in mail processing, transportation and administrative efficiencies ($34 billion), and revenue from package volume and price increases ($24 billion).
“We respect, embrace and believe that we can become self-sustaining again,” DeJoy said, “not only because it is the law but also because it can act as our North Star and set parameters around our decision-making.”
The plan, which he told lawmakers was eight months in the making, is meant to reset expectations for the Postal Service and its place in the express-shipping industry. It is couched in the view that the historically high package volumes of the pandemic era will persist, and it would reorient the agency around consumers who do not rely on the mail service for letters, advertisements or business transactions as much as they once did.
The blueprint would have first-class mail ferried cross-country on trucks instead of airplanes, and introduces new products to help commercial shippers move packages more efficiently.
The agency projects that its package business will grow by 6% to 11% through 2025 as consumers maintain online shopping habits built during the pandemic. The Postal Service plans to open 45 package processing annexes nationwide to expedite shipping and will look to replace mail sorting machines with package sorters, infrastructure the agency has needed desperately for years.
“We believe that consumer behaviors fundamentally changed and expect continued long-term growth for package delivery,” Kristin Seaver, the Postal Service’s executive vice president and chief retail and delivery officer, said during the webinar.
“I’m not out to capture the whole market. We’re out to fill our network. We’re out to get more packages on our carriers, get more packages in our trucks,” DeJoy said later Tuesday in an interview with The Washington Post. “We are the most trusted brand. I just want to become the most used brand.”
The postmaster general also acknowledged in the interview the long-term declines in first-class-mail volume, the agency’s most profitable product, but one that’s been increasingly overtaken by more convenient forms of communication.
Between the projected price increases and slowing service standards, mailing industry officials have warned the Postal Service that they’re prepared to find other ways to do business. When delivery times hit their worst marks in decades over the holiday season, banks, utilities and credit card companies began encouraging customers to switch to paperless billing and statements, moves that could have long-term consequences on the Postal Service’s bottom line.
Little in DeJoy’s plan seeks to stem those losses, and the plan codifies slowdowns for nonlocal first-class mail, adding as many as two days to delivery timetables for items sent farther than 930 miles.
“I’m not competing for a change in medium,” he said in the interview. “I can’t stop electronic communications. What I can do is recognize that I can’t stop that. That’s kind of what we’ve done here. So we’re moving forward. I’m not chasing mail volume down, because I’m going where we see growth.”
DeJoy rolled out his plan as Democrats have renewed calls for his ouster and the removal of the agency’s governing board, which backs him and the proposals. More than 50 House Democrats last week asked Biden to fire the board’s six sitting members for cause – citing “gross mismanagement,” “self-inflicted” nationwide mail delays and “rampant conflicts of interest” – and to allow a new slate of nominees to consider DeJoy’s fitness for office.
Biden has nominated two Democrats and a voting rights advocate to fill three of four board vacancies (Bloom, the board chairman who is a Democrat, is serving in a one-year holdover term). If confirmed by the Senate, Democrats and Biden appointees would hold a 5-to-4 majority with the votes to remove DeJoy, if desired.
Biden cannot fire DeJoy; postal operations are purposefully insulated from the presidency and Congress to prevent politicians from tinkering with the mail system for political gain. The postmaster general answers only to the board of governors. Bloom told the House panel in February that the board “believes the postmaster general in very difficult circumstances is doing a good job.”
Congressional Democrats criticized DeJoy’s proposals. Rep. Carolyn Maloney, D-N.Y., who chairs the powerful House Oversight Committee, said in a statement that DeJoy’s plan should not be implemented until Congress can review it. Rep. Gerald Connolly, D-Va., who chairs the subcommittee responsible for postal issues, said the plan “guarantees the death spiral of the United States Postal Service.”
Gary Peters, D-Mich., who chairs the Senate committee in charge of the agency, agreed.
“While I understand Postal Service leadership’s desire to set long-term goals, I am concerned that several of the initiatives in this plan will harm service for folks across the country who rely on the Postal Service for prescription drugs, financial documents, running their small businesses, and more,” Peters said. “Cuts to service standards for first-class mail, limiting hours at local post offices, and making it more difficult for people to access postal products would adversely impact USPS customers across the nation, including in rural and underserved communities.”
Republicans were slower to react. GOP members of the House Oversight Committee wrote to DeJoy last week that they could not support a bill that they’d spent months negotiating with DeJoy and Maloney without incorporating elements of DeJoy’s plan. Sen. Rob Portman of Ohio, the top Republican on Peters’s committee and a key vote on postal policies, tweeted that he was “closely reviewing the plan proposed today & will continue to work on bipartisan postal reform.”
Most of DeJoy’s changes will not face regulatory road blocks. The postmaster general unilaterally controls operating hours at post offices, and the board of governors appears to back DeJoy’s changes to delivery times.
The Postal Service must consult the Postal Regulatory Commission on price increases, but the regulator issues only a nonbinding advisory opinion. A group of mailers is suing the commission to block the new pricing plan, but DeJoy has signaled that he plans to forge ahead with the changes.
Over the holiday season, postal performance sank: 71% on-time delivery for two-day mail and 38% for three-day mail during the last week of December. Rep. Raja Krishnamoorthi, D-Ill., compared those scores to unfavorable odds in a Las Vegas casino.
“Sending a letter should not be a game of chance,” he said during last month’s hearing.
The Postal Service’s delivery scores have rebounded in recent weeks, to nearly 83.7% for first-class mail the week of March 12. The agency attributed the improvement to more capacity in the air transportation network and the end of winter storms that delayed operations in much of the country.
The metrics are short of the agency’s marks from before DeJoy took over in June. The week before DeJoy implemented his midsummer changes, the Postal Service delivered 90.6% of first-class mail on time. It has not reached 90% in the eight months since.
DeJoy also will cut retail post office hours, resurrecting one of the changes he first implemented. The Postal Service Office of Inspector General found that the agency expanded lunch breaks in certain post offices beginning July 22 and often sought to match consumer demand with operating hours by closing post offices early. DeJoy suspended the policy after a public uproar and after members of Congress accused him of shuttering postal facilities in the run-up to the election.
DeJoy also has discussed an “imminent” postage rate increase with industry officials tied to a new ruling from the Postal Regulatory Commission that created a new pricing system. Industry officials said that increase could come as soon as this summer and be as large as 9%, a cost many say will be passed on to customers. DeJoy refused to say how much the agency planned to raise prices.