GAO - Report - USPS financial issues, the history of how we got here…

The financial forecast by the GAO as to the Postal Service Financial health, is about as bleak as it gets. The issue started in the 2000’s & has only deepened. History will prove Dejoy was a disaster

U.S. Postal Service - brief primer

Fair warning I’m about to dump an incomprehensible amount of fact files. And yes I went deep into the National Archives, USPS Archives, and the Library of Congress - because I like facts and I lurve facts that are supported by ample documentation… so chug a Red Bull and try to keep up or you might want to consider reading this article in subsections, because it’s a lot of information…

And just when you’ve finally accepted that your research is gone - an unexpected gift from the Internet Archive gods…found here but more importantly the entire Twitter Thread found here.

During 2019 thru 2020 there was so much misinformation and disinformation swirling around the US Postal Service, that I felt compelled to try and correct the ever growing record. See March 2021 Article -where I drilled down further on the dubious business decision by DeJoy(less) and questionable contract awards and what certainty appears to be his modus operandi - lying and providing misleading answers

DeJoy(less) strikes again -he is by far the most problematic of all Trump Appointees SHOCKING AWARD TCV $6Billion to Oshkosh Electric Vehicles -the numbers don’t add up

USPS Brief History of significant events:

• February 20, 1792, President George Washington signed the Postal Service Act - this would be known as the United States Post Office Department until 1971

• July 26, 1775 - Benjamin Franklin appointed first Postmaster General by the Continental Congress

• July 1, 1847 - U.S. postage stamps issued - Fun Fact File: The Benjamin Franklin stamp paid the rate for one half-ounce sent up to 300 miles. The George Washington stamp paid the rate for longer distances or heavier mail

5c Franklin original model, 1847 whereas 10c Washington original model, 1847

• 1855 - Prepayment of postage required - see PRC Report Postage Rates 1789 thru 1930 ¹

• 1860 - Pony Express began - delivering messages, newspapers, and mail using relays of horse-mounted riders that operated - from April 3, 1860, to October 26, 1861, and between Missouri and California

• 1913 - Parcel Post® began - I’m not being felicitous -in 1913 parents could use the USPS to “mail children”

  • May 15,1918 - Scheduled airmail service began - previous (I believe dating back to 1910 or 1911 the USPS offered a small “regional airmail service between New York and Washington, D.C., on May 15, 1918 — during simultaneous takeoffs planes from Washington’s Polo Grounds and from Belmont Park, Long Island New York — both planes by way of Philadelphia.

  • Post Office Department -the Post Office Department comes back into play a several decades later- used Army pilots and six Army Curtiss JN-4H “Jenny” training planes.

  • By August 12, 1918, the Post Office Department took over all phases of airmail service, using newly hired civilian pilots and mechanics, and six specially built mail planes from the Standard Aircraft Corporation.

The exact Moment Congress put the USPS into an untenable and financially precarious position.

Because yes you’ll want to reread this previously archived research because in order to fully understand the totality and how many times Congress has handicapped our USPS from being “profitable” - the PRA states:

The United States Postal Service shall be operated as a basic and fundamental service provided to the people by the Government of the United States, authorized by the Constitution, created by Act of Congress, and supported by the people

• July 1, 1971 - United States Postal Service® began operations - which shuttered the US Post Office Department. President Nixon signed the Postal Reorganization Act - until 1970, the federal government provided postal services via the U.S. Post Office Department,a government agency that received annual appropriations… on July 1, 1971 those annual Congressmen appropriations stopped. See Pub. L. No. 91-375, 84 Stat. 719 (1970); 39 U.S.C. § 201

USPS received an annual appropriation as a general public service subsidy until 1982. ly, USPS has received annual appropriations for revenue forgone for providing (1) free and reduced rate mail for the blind and (2) overseas voting materials for U.S. elections. See, e.g., Pub. L. No. 116-260, div. E, tit. V, 134 Stat. 1182, 1423 (2020) (appropriating $55.3 million for fiscal year 2021).

In 2006 Congress Passed the Postal Accountability and Enhancement Act (PAEA) was enacted - see Pub. L. No. 109-435, 120 Stat. 3198 - it’s a 2,100+ page statute but below explain the general intent of the PAEA:

• imposed a price cap on market-dominant products

• required USPS to begin prefunding its retiree health benefits, and

• instituted provisions for increased transparency, oversight, and accountability…

Louis DeJoy and the many scandals

Between the straw donor scheme, SEC, OGE (lack of divestiture), the intent of making catastrophic delivery changes and the direct impact on mail in ballots —I’m genuinely surprised that nearly a year later DeJoy hasn’t been indicted.

The DeJoy(less) 10 year plan -that’s what we waited for? Job-Killer made him rich

DeJoy and use of Straw Donors

Let’s not forget about the vulgar (albeit textbook) straw donor scheme that Louis DeJoy and other senior executives archived here & here and here and here ← the last two archived Twitter thread is sourced to the teeth with solid research via FEC, Civil Attorneys General

-sidebar - if some one is tweeting attorney generals ← you kind of have to laugh;

• There is only one United States Attorney General

• When speaking about State Attorneys General -as in plurality the correct grammar is: attorneys is plural not generals. That’s basic legal “stuff” and no the irony of me highlighting spelling and grammar is not lost on me, at all.

In September of 2020 I walked you through the significance of North Carolina’s Attorney General Stein’s statement and in the context of both the State of North Carolina’s campaign laws and federal campaign laws…as it relates to DeJoy. It is curious that over a year later there’s limited public reporting concerning the FBI and NC AG’s investigation into what appears to be unlawful campaign contributions…

• One tried & true factor is Overhead reduction lowers cost, and in 2014 that’s what the USPS did.

• They furloughed a fuckton of people to get the overhead down & make their “books” look better USPS STILL has to pay the US Treasury BILLIONs put a pin in it - https://www.gao.gov/assets/670/666884.pdf

• I’m going to give it to you straight the USPS is not like ANY other Fed Agency —They are required to pay the Government BILLIONs -Lawmakers, both parties & the presidents ALL use the USPS as their piñata & as a bargain chip. It’s FOUL but predictable - https://www.gao.gov/assets/680/676884.pdf

• In March 202 the GAO reported;

  • FY 2018 USPS generated $10.5B in revenue v $5B to operate, making them profitable overall.

  • Not to belabor the point because of the LAW USPS has to pay the Government. Whereas other Federal Agencies are fully funded by various budgets but the USPS is required to pay the Government for a variety of cost, especially employee benefits (Healthcare, 401K, IRAs etc) this disproportionately hits the USPS bottom line and creates a negative balance sheet and that’s carried over for decades. https://www.gao.gov/assets/710/705230.pdf

U.S. Postal Service Annual Report to Congress;

The Federal law requires that every year the USPS must submit a report to Congress which details the following mandatory reporting requirements;

• Fiscal Year XXXX - Annual Report

• Fiscal Year - Comprehensive Statement on Postal Service Operations

• Fiscal Year XXXX: Performance Report Fiscal Year 2021 Performance Plan

  • May 2021 Report to Congress, for Fiscal Year 2020

  • December 2019 Report to Congress, for Fiscal Year 2019

  • 2018 Report to Congress, for Fiscal Year 2018

As you’ll note by comparing the various annual reports you can literally read and forecast the downward revenue trajectory and the increased cost of “doing business” whereas the radical changes implemented by DeJoy really had disastrous consequences for Mail Delivery service in Q3 and Q4 of 2020.

With the USPS financial outlook seemed to have deepened (after Congress the 2003 Presidential Commission on the United States Postal Service

September 29, 2021 GAO Report USPS financial issues

The GAO’s September 29, 2021 Report - which reads in part:

Congress designed the U.S. Postal Service to be self-sustaining, covering its costs primarily from selling products and services. However, in FY 2007, expenses began exceeding revenue. This has led to losses of $87 billion from FYs 2007 through 2020, and $188 billion in unfunded liabilities and debt. USPS's financial viability has been on our High Risk List since 2009.

Key objectives of the GAO Primer re USPS current financial situation and recommendations…

This primer explains how the U.S. Postal Service (USPS) works and why it needs reform, and discusses some options for addressing reform issues. GAO provides answers to questions about basic aspects of USPS and postal reform issues in a concise and easy-to-understand format. These answers are based largely on GAO's prior work

.

• consider reassessing the level of universal postal service that the nation requires; ²

• consider the extent to which USPS should be financially self-sustaining and what changes to law would be appropriate to allow USPS to meet this goal; and

• consider the most appropriate institutional structure for USPS going forward.  

This primer highlights key issues to help Congress consider the future of USPS, including consideration of the level of postal services the nation requires, the extent to which USPS should be financially self-sustaining, and the most appropriate institutional structure for USPS that best supports changes.

And yes, the USPS has made a series of efforts to substantially cut costs and adjust its over all cost of operations especially in light of declining mail volumes Unfortunately some of the previously enacted decisions -coined as a “significant cost savings from these efforts” have declined, especially in recent years. Because as I’ve previously explained the USPS is unlike any other Federal Agency and Congress owns part of the impending financial tsunami. Since the USPS is mandated to meet several statutory requirements and has a wide variety of stakeholders -as further detailed in the GAO’s info graphic below:

Reaching compromise and agreement among stakeholders regarding further changes will be difficult. USPS's deepening financial problems could put its mission to provide universal postal service at risk, along with the well-being of its retirees and the repayment of its debt.

GAO September 29, 2021 Report

As astutely observed since at least Fiscal Year 2010, the GAO has repeatedly stated that while USPS needs to cut its costs, “congressional leadership and action are essential to restore USPS to financial viability” —Also can we please consider this the end of the USPS actually uses Mules in the Grand Canyon argument? I received a bunch of Twitter hate for merely stating the facts. YES the USPS does in fact use donkeys —not to be conflated with a swamp donkey —which is a completely different beast of burden.

As you’ll note (and sure you’re probably sick of seeing me say) how the USPS isn’t like any other Federal Agency… those are the facts. For Example;

• USPS Board of Governors, which I explained in this previous article

• Postal Regulatory Commission (PRC) ³ an independent establishment of the executive branch, regulates USPS.

The PRC is composed of five Commissioners, each of whom is appointed by the President, by and with the advice and consent of the Senate, for a term of 6 years

• makes annual determinations on how well USPS is complying with mail delivery standards and postal rate requirements.

• If the PRC finds the USPS is in noncompliance, it is (by law) required to order USPS to take appropriate actions to achieve compliance.

Under current federal law, this provides USPS with (two main) statutory monopolies as it relates to deliver letter mail and to access mailboxes. The purpose of these monopolies was to protect USPS’s revenues, thus allowing the USPS fulfill its universal service mission (which is debatable given DeJoy’s recebf unilateral decisions).

1. USPS’s statutory letter delivery monopoly ⁴ serves as a revenue protection measure so that USPS can meet its universal mail service obligation, which includes service to all communities and uniform rates for some mail.As a practical matter, mail covered by this monopoly primarily consists of First-Class Mail and Marketing Mail.

2. USPS’s mailbox monopoly, legislation enacted in 1934 prohibited the delivery of unstamped mail into mailboxes, essentially granting exclusive access to mailboxes (“mailbox monopoly” ⁵) to USPS; this approach remains in place to this day…

The codification of USPS’s letter - both the mail delivery and mailbox monopoly, via a set of criminal and civil laws called the Private Express Statutes. Generally speaking these laws prohibit anyone other than USPS from carrying letters for compensation on regular trips or at stated periods over postal routes or between places where mail regularly is carried. 18 U.S.C. §§ 1693-1699 and 39 U.S.C. §§ 601-606.

As the GAO Report notes and frankly it is not unexpected that nearly 2/3 of cost are attributed to USPS Employee Compensation, which is just north of $63.3 billion

Part of the reason the GAO Issued this report is in doing so they are establishing a more fulsome baseline and the complex financial position the USPS finds itself in —no thanks to lawmakers from both political parties — I’ve been in DC for over three decades and let me tell you —Congress uses the USPS as a partisan piñata and no one wins. For over forty years Congress has contributed to the ever worsening Financial Outlook for the USPS and every Congress since 1984 has continued to kick the can down the road. By way of partisans and obtuse procrastination…

But then to have someone, like DeJoy who is by all conventional appearances beyond ethically challenged. And is the poster child for major quid-pro-quo as our Post Master General - to those who said I was wrong about DeJoy’s 10 year USPS plan (which is a complete shitshow of an epic financial tsunami of WTFINGF) or DeJoy’s insane USPS fleet turn over because tucked away in the GAO Reports footnotes - there it is👇🏻

In February 2021, USPS announced it had awarded a 10-year contract to manufacture a new generation of postal delivery vehicles. Under the contract, USPS made an initial investment of $482 million for the manufacture of 50,000 to 165,000 vehicles. According to USPS, the contract is the first part of a multi-billion-dollar 10-year effort to replace the USPS’s delivery vehicle fleet.

USPS & Louis DeJoy disclosed the following to GAO:

If you want to talk about a horrendous business model —and I’ll keep screaming this until I have no voice left -DeJoy’s entire business model is to accelerate financial insolvency, enter into numerous contracts (conflict of interest and OGE divestiture or lack thereof), cut hours, cut compensation, obligate nearly a half billion dollars to a company that doesn’t have the prerequisite qualifications to roll out hybrid or electric vehicles. But under DeJoy’s (grotesquely incompetent) leadership the USPS also disclosed this

• USPS’s compensation and benefits costs for current employees have been increasing since 2014

• USPS did not make $63.25 billion in required payments to fund postal retiree health and pension benefits through fiscal year 2020

• did not make these payments so that it could cover current and anticipated operating costs, deal with contingencies, and make needed capital investments.

• ..under its current business model, it anticipates that it will run out of cash on hand even if it continues to not make all of these required funding payments

• defaulting on these funding payments could have a significant effect on USPS’s postal retirees and their surviving dependents, adds to USPS’s already large unfunded liabilities, and affects USPS’s ability to become more financially viable in the long-term.

• USPS $188 billion in total unfunded liabilities and debt as of the end of fiscal year 2020.

Because if you look at the aggregate data concerning the USPS’ sources of revenue — you can see what certainly looks like a perilous financial cliff… whereby their three largest sources of revenues are First-Class Mail, Marketing Mail, and shipping and package delivery…

As the GAO Report notes — Congress hasn’t updated or enacted the necessary legislation, since the Postal Accountability and Enhancement Act of 2006. For over a decades the GAO has consistently reported;

… USPS’s ability to take actions under its current authority is insufficient to fully address its financial situation and that while USPS needs to cut its costs, congressional action is essential to restore USPS to financial viability.

What is increasingly frustrating is, as part of Congress passing legislation to ease the economic impact COVID-19 caused on our Economy, Congress granted the USPS the authority to borrow up to a statutory limit of $15 billion from the U.S. Treasury to help cover its operating expenses —to date it’s unclear if Louis DeJoy has tapped into those funds and/or utilized the debt forgiveness too. No really over a year ago I walked you through what Congress codified in 2020

As the GAO Report’s info-graph shows; Actual and Projected Balance of the Postal Service Retiree Health Benefits Fund, Assuming No Further Payments into the Fund, by Fiscal Year - my GOD look at the projections -

So it goes without saying - it’s been a rather busy workweek and I didn’t want to half-ass reporting concerning the newly published GAO Report and as evident in this article, the research required for this article was -in a word: voluminous because I do think my readers are smart enough to read various reports and then make an informed opinion.

In short - unless Congress acts - then DeJoy and his ilk will lick their chops because if their end goal was to financially ruin the USPS and then chop it up into little pieces and/or entering into a public-private partnership —congratulations you’re ahead of schedule…

And for now I think you have a lot of small and big facts to help better formulate a well informed opinion concerning the ever complex financial matters facing the USPS… <whispers - why hasn’t DeJoy been indicted? Where is the FBI investigation into his obvious unlawful straw donor scheme? Where is the NC Attorney General’s investigation?

-Filey

1. See Library of Congress - Daily national era. [volume] (Washington, D.C.), 27 May 1854. Chronicling America: Historic American Newspapers. Lib. of Congress. https://chroniclingamerica.loc.gov/lccn/sn86053546/1854-05-27/ed-1/seq-2/

2. Various GAO Reports concerning the USPS:

• GAO, High-Risk Series: Dedicated Leadership Needed to Address Limited Progress… Most High-Risk Areas, GAO Report -21-119SP (Washington, D.C.: Mar. 2, 2021).

• U.S. Postal Service: Congressional Action Is Essential to Enable a Sustainable Business Model (GAO Report -20-385)

• U.S. Postal Service: Expanding Nonpostal Products and Services at Retail Facilities Could Result inBenefits, but May Have Limited Viability (GAO Report -20-354)

• U.S. Postal Service: Additional Guidance Needed to Assess Effect of Changes to Employee Compensation (GAO Report -20-140)

• U.S. Postal Service: Offering Nonpostal Service through Its Delivery Network Would Likely Present Benefits and Limitations (GAO Report - 20-190)

• U.S. Postal Service: Projected Capital Spending and Processes for Addressing Uncertainties and Risks (GAO Report -18-515)

• U.S. Postal Service: Strategies and Options to Facilitate Progress toward Financial Viability (GAO Report-10-455)

3. See 39 U.S.C. §3653 - Annual determination of compliance - last accessed September 30, 2021 - https://www.govinfo.gov/content/pkg/USCODE-2011-title39/pdf/USCODE-2011-title39-partIV-chap36-subchapIV-sec3653.pdf

4. See Universal Service and the Postal Monopoly: A Brief History - which explains in particularity the two monopolies - last accessed September 29, 2021 - https://about.usps.com/universal-postal-service/universal-service-and-postal-monopoly-history.

5. United States Postal Service v. Greenburgh Civic Associations 453 U.S. 114 (1981) SCOTUS upheld the constitutionality of a statute that prohibited the deposit of unstamped “mailable matter” in a mailbox approved by the United States Postal Service. - Accessed 1 Oct. 2021.