COVID-19 pushes Postal Service’s finances to the brink

By: - April 17, 2020 10:46 am

KINGS PARK, NEW YORK – APRIL 15: US Postal Service worker Lou Martini goes about his daily delivery route during the coronavirus pandemic on April 15, 2020 in Kings Park, New York. Martini, who has been a postal worker for over 30 years, takes as much caution as he can while delivering the mail during the COVID-19 outbreak. A mask, gloves, hand sanitizer and the spraying down of some packages are a few of the precautions Martini incorporates into his daily routine as one of the nation’s ‘essential workers’. (Photo by Spencer Platt/Getty Images)

By Daniel C. Vock

WASHINGTON — Millions of Americans are relying on the U.S. Postal Service for key supplies while they isolate themselves to slow the spread of COVID-19. But the Postal Service itself faces uncertain times ahead, as the economic fallout of the pandemic and hostility from the Trump administration threaten to hobble it.

“At a time when America needs the Postal Service more than ever, the reason we are so needed is having a devastating effect on our business,” U.S. Postmaster General and CEO Megan J. Brennan said earlier this month. “Sales are plummeting as a result of the pandemic. The sudden drop in mail volumes, our most profitable revenue stream, is steep and may never fully recover.”

The pandemic could decrease the Post Office’s revenue by more than $22 billion over the next 18 months, and by more than $54 billion in the long term, she added. The drop in income, Brennan said, “threaten[s] our ability to operate.”

As dire as those warnings are, they are also increasingly common in Washington. All kinds of major institutions, from airlines to farmers to state governments, are hoping for financial relief from the federal government, as Congress considers what further steps it should take to keep the economy from completely seizing up while workers stay at home and non-essential businesses are shut down.

Congress, in fact, has already authorized a $10 billion loan for the Postal Service in a March economic rescue package, but the Trump administration has to approve the loan first.

Supporters of the Postal Service, including its employee unions, argue that getting the agency back on its feet should be a top priority for Congress.

“A collapse of the Postal Service at this crucial moment would severely undermine both our fight to defeat the COVID-19 virus as well as the effort to stabilize our economy,” said Fredric Rolando, the president of the National Association of Letter Carriers. The mail system delivers 1.2 billion prescription drug shipments a year, not to mention testing equipment that is vital for diagnosing who has the disease. Plus, letter carriers deliver valuable government documents from stimulus checks to mail-in ballots.

“In vast swathes of rural America and economically struggling urban areas, the Postal Service is the only option — the private companies rely on the USPS for last mile delivery,” Rolando added. (By law, the Postal Service must provide universal access to all Americans, and the number of destinations it must serve has increased in recent years even as mail volumes have declined.)

That is certainly the case for Coconino County in northern Arizona, a vast and mostly rural area that covers the Grand Canyon and a large portion of the Navajo Nation reservation. Two-thirds of the county does not have broadband connections, said Eric Peterson, the county’s public affairs director, so post offices and the mail system are very important for businesses and government services in the area.

In the states

Roughly 80 percent of Arizona voters cast their ballots by mail, and the novel coronavirus may increase those numbers. Meanwhile, the county is depending on residents to mail in their property taxes by the beginning of May, because those taxes pay for public health and other services that residents need during the outbreak, he said.

Michigan and Wisconsin residents recently saw the crucial role the Postal Service has in elections, as the number of voters opting to cast mail-in ballots in their recent presidential primary contests surged. The reliance on mailed ballots could increase even further for the November general election, particularly as Democrats on Capitol Hill have pushed to make voting by mail easier. The White House has resisted those calls, and President Donald Trump, who cast his own vote by mail, has called voting by mail a “terrible thing.”

In Pennsylvania, county officials are bracing for a deluge of mail-in ballots. The June 2 election will mark the first time that the Keystone State has offered no-excuse mail-in balloting. Some county officials are pushing for an all mail-in election. And legislation is making the rounds that would allow the state to automatically send a mail-in ballot toe every Pennsylvania voter.

Tammy Patrick, a senior advisor for the Democracy Fund who serves as a liaison between election officials and the Postal Service, said the agency’s officials have tried to reassure election administrators that they can rely on the mail system. But Patrick says she sees “reason to be concerned” about regional slowdowns or other interruptions to postal deliveries.

“Given where we are right now, I’ve been telling everyone: ‘Make no assumptions,’” she said.

The Postal Service’s challenges

The Post Office faces several unique circumstances that make a bailout harder for it to secure than other companies or government agencies. Those start with an extraordinary requirement Congress imposed on the Postal Service in 2006 that requires the agency to prefund health benefits for its retirees for the next 75 years — including those who haven’t been born yet — something that’s unheard of in the public or private sector.

And lately those obstacles also include a president who is fixated on the Post Office and its business model for delivering packages, because the president believes it benefits one of his perceived enemies.

Those special circumstances also make it hard for outsiders to gauge just how difficult it would be for Congress to address the situation.

Brennan told a House committee that the Postal Service would run out of money by the end of the federal fiscal year on Sept. 30. The bipartisan board that oversees the postal agency — whose members were appointed by Trump — recently asked Congress for:

  • $25 billion of emergency money to offset coronavirus-related losses;
  • another $25 billion to pay for building projects to modernize the Postal Service (the last time the agency upgraded its fleet of mail trucks, for example, was in 1987);
  • and up to $25 billion in loans from the U.S. Treasury.

But according to The Washington Post, Trump threatened to veto a $2 trillion economic relief act passed by Congress in March if it contained money specifically designated to keep the Postal Service afloat.

“President Trump has blocked potential emergency funding for the agency that employs around 600,000 workers, repeating instead the false claim that higher rates for Internet shipping companies Amazon, FedEx and UPS would right the service’s budget,” the Post reported. (The president has repeatedly complained that Amazon benefits from the Postal Service’s rate structure, a complaint that seems to be related to the fact that Amazon owner Jeff Bezos also owns The Washington Post.)

So Congress included the $10 billion for a potential loan, instead.

There are other measures Congress could take to ease the burden on the Post Office as well. It could amend or abandon the 2006 requirement that the agency prefund its retiree health care benefits. In fact, the U.S. House overwhelmingly approved legislation in February — before the wave of coronavirus-related closings stalled the economy — to get rid of the requirement. It passed on a 309-106 floor vote, with support from both Democrats and Republicans. The U.S. Senate has not acted on a similar measure, which is sponsored by a Democrat and a Republican.

The Postal Service views the prefunding requirement as so onerous that Brennan warned Congress a year ago that the agency would run out of cash by 2024 if lawmakers did not change the mandate.

“The prefunding mandate is responsible for 100% of the Postal Service’s net losses” between 2013 and the coronavirus hitting earlier this year, wrote the American Postal Workers Union in a statement. The Postal Service has not paid the money it owes for those benefits since 2012, so it shows up as a debt on the agency’s balance sheets. (Of the more than $120 billion the agency owed for retirement benefits in 2018, more than $66 billion was for retiree health benefits.)

Nick Zaiac, a fellow at R Street, a Washington think tank that promotes market-oriented policy proposals, said the prefunding requirement should be repealed, but other changes could be made that would shore up the Postal Service’s finances without affecting service, such as loosening the stringent rules Congress has imposed on how the agency can invest its retirement funds.

The agency could also take steps that mail systems in other countries have done, such as reduce the number of days the Post Office delivers mail. (Congress, though, objected in 2013 when the Postal Service tried to move to five delivery days a week.) Congress could also clarify what it means when it requires the mail system to provide “universal service,” so that the Post Office could gain more flexibility, Zaiac said.

He stressed that the Postal Service should still break even, rather than depend on federal subsidies. “We to date have not accepted that the Postal Service is a social service agency,” he said. The fact that the Postal Service is supposed to cover its own expenses, without taxpayer money, he argued, is why it can operate with more autonomy than other government agencies, including giving more power to its labor unions than other federal agencies do.

But Zaiac said that Congress should act to shore up the Postal Service’s financial situation. “The Post Office should not go away,” he said. “Few Americans want that to happen.”

Daniel C. Vock is a Washington D.C.-based correspondent for the States Newsroom, which supports the Capital-Star. Capital-Star Editor John L. Micek contributed reporting. 

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