Final Myth vs Fact

8/6/2019 Final Myth vs Fact

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H.R. 2309, the Postal Reform Act of 2011Myths/Facts

Myth #1: The crisis at the United States Postal Service(USPS) is temporary, caused by the recession.

Fact: Increasing use of electronic, paper-free technology hascaused a permanent decline in mail usage. USPS has nobusiness model to cope with this reality.

A recentBusinessweek cover storyillustrated USPSs failed business model: Paul Vogel, a

former letter carrier who is now the postal service's chief marketing sales officer. his job is topersuade banks to keep sending paper statements in the mail. It's a losing battle, and Vogelknows it. "Inevitably, it's going to go to those new technologies," he sighs.

According to the same story, Phillip Herr, the Government Accountability Offices expert on thePostal Service, is struck by how many USPS executives started out as letter carriers or clerks.He finds them so consumed with delivering mail that they have been slow to grasp how swiftlythe service's financial condition is deteriorating. "We said, 'What's your 10-year plan?'" Herrrecalls. They didn't have one.

In 2001, 80% of household bill payments were made by mail, by 2009 that number dropped to54% and today it is almost certainly below 50%. First-Class Mail, which is three times more

profitable than Standard Mail, is more than 25% off its peak volume and is no longer a majorityof USPS revenue. The decline is permanent, and it is driven by the transition to online bankingand bill payment and the shift to email for personal correspondence.
http://www.businessweek.com/magazine/content/11_23/b4231060885070.htmhttp://www.businessweek.com/magazine/content/11_23/b4231060885070.htmhttp://www.businessweek.com/magazine/content/11_23/b4231060885070.htmhttp://www.businessweek.com/magazine/content/11_23/b4231060885070.htm


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Myth #2: USPS has cut its costs.

Fact: Costs are increasing. Any potential savings are beingoverridden by rising costs, especially for compensation and

benefits.

One senior Postal official recently cited workforce reductions through retirements in the lastdecade as evidence of cost cutting saying, We know how to cut costs.

In reality, even as USPS revenues dramatically and predictably decline the Postal Service hasfailed to meaningfully cut its expenses. During the first 8 months of this fiscal year, USPSrevenues declined more than $1.2 billion but USPS expenses actually increased by $281million.

Myth #3: USPS receives no taxpayer support.

Fact: USPS has received billions of dollars in indirecttaxpayer subsidies over the years.

USPS benefits from preferential local, state, and federal tax treatment that results in an indirectsubsidy, or tax expenditure, from all levels of government. USPS is exempt from the following:

Local, State, and Federal Income Tax

Property Tax

Motor Vehicle Registration

Parking Tickets

Like Fannie Mae and Freddie Mac, USPS can borrow money at very low interest rates

from the U.S. Government; USPS borrows money through the U.S. Treasury paying less

than 1% interest on some debt. The Postal Service has a $15 billion line of credit with

U.S. Treasury.


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13. Reduces the amount of revenue foregone to USPS from statutorily mandated non-profit

advertising rates.

14. Eliminates the statutory requirement that all collections of fringe benefits for USPS

employees must be as generous as those available in 1971.

Myth #5: Postal Reform Act just throws more money at theproblems facing USPS.

Fact: If USPS defaults to the federal government, the Actcreates a governing Authority- superseding current USPSgovernance- with a mandate to cut costs.

In a statement released shortly after introduction of the Postal Reform Act, USPS wrote: Westrongly oppose a provision in the bill that provides for an additional $10 billion in borrowingauthority from the U.S. Treasury. The Postal Service does not need to incur additional debt.

Current postal management that has failed to cut costs need not worry about this. The provisionis only triggered if USPS goes into default to the federal government. At that point, a financialsolvency authority (Authority) will replace the Postal Service Board of Governors. The Authoritycan access a separate and collateralized line of credit to maintain service and financerestructuring. Unlike current USPS debt, it must be repaid under a strict timeline when USPSmeets key financial benchmarks and graduates from control of the Authority.

The Postal Reform Act makes serious structural reforms, eliminating costlyregulations and unfunded mandates, and ensuring the fiscal solvency of USPSwithout a multi-billion dollar taxpayer bailout. You can read more about the PostalReform Act of 2011here.
http://oversight.house.gov/index.php?option=com_content&task=view&id=1359&Itemid=29http://oversight.house.gov/index.php?option=com_content&task=view&id=1359&Itemid=29http://oversight.house.gov/index.php?option=com_content&task=view&id=1359&Itemid=29http://oversight.house.gov/index.php?option=com_content&task=view&id=1359&Itemid=29

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