Task Force also says to eliminate rate caps on Marketing Mail and other non “essential” services.
Last April, the President signed an Executive Order that established the Task Force on the United States Postal System, whose purpose was to develop recommendations for the reform of the USPS®. On December 4, that Task Force, which is chaired by Treasury Secretary Steven T. Mnuchin, released the report, United States Postal System: A Sustainable Path Forward.
“The USPS’s current business model has become outdated due to changes in technology, markets, and customer needs and preferences,” states the report. “It is unsustainable and must be fundamentally changed if the USPS is to avoid a financial collapse and a taxpayer-funded bailout.”
It goes on to say, “The Task Force believes that all components of the USPS’s business model must be reevaluated and redefined in order to produce a new and viable business model.”
To mailers, the implementation of the recommendations in the report could mean significant price increases.
Mail is “largely price inelastic” and modest price increases would not lead to less demand, says the report. As a result, the Task Force recommends that “the PRC (Postal Regulatory Commission) use the full extent of their authorities to establish a new system for regulating rates and classes for market dominant products for the purpose of enabling rate increases that would increase the USPS’s net income.”
Mailers of Marketing Mail would especially be affected if these recommendations are implemented because the Task Force recommends the elimination of rate caps on Marketing Mail. “There is little public policy justification for the federal government to maintain price caps on commercial marketing solicitations,” the report says. The report also recommends that the USPS should be required to price mail that is deemed to be not an essential service at a market rate.
Here are some of the other key recommendations from the report:
- Clearly define the USO (Universal Service Obligation). Provide a targeted definition of minimum, essential postal services that due to specific social and economic needs have a basis for government protection.
- Review and determine if income generated by activities defined to be outside of the USO could be optimized to cover the costs of funding the USO.
- Develop a new model that can be used to both set rates and control costs to achieve sustainability.
- Redefine mail classes by creating products defined by the type of sender and the declared purpose of the mail item.
- Require price increases, reduce service costs, or exit the business for any mail products that are not deemed an essential service and do not cover their direct costs.
- Price competitive products in a manner that maximizes revenues and generates income that can be used to fund capital expenditures and long-term liabilities.
- As a means of generating more income, the mailbox monopoly could be monetized.
- Align USPS employee rights with other federal employee rights by eliminating collective bargaining over compensation for USPS employees.
- Explore and implement new business lines that generate revenue and that present no balance sheet risk to the USPS.
- Strengthen the regulatory oversight role of the PRC, providing the PRC with expanded controls, imposing increased accountability on the USPS.
- Pursue reform of the Federal Employee Retirement System that would increase employee contributions and move toward a defined contribution system.
- Maintain but restructure the retiree health benefits liability, including the $43 billion in pre-funding payments that the USPS failed to pay into the Postal Service Retiree Health Benefits Fund and the unfunded actuarial liability, with the total liability re-amortized with a new actuarial calculation based on the population of employees at or near retirement age.
The USPS is reviewing the report. About the report, Postmaster General Megan Brennan said, “The recommendations contained in the report should be evaluated together with legislative and regulatory reforms to address our urgent financial challenges.” She added, “Reforms are necessary to enable the Postal Service to further reduce costs, grow revenue, compete more effectively, function with greater flexibility to adapt to a dynamic marketplace, and to prudently invest in our future.”
To read the full list of the recommendations made by the Task Force, you can access the report here.
