Nation/World

U.S. Postal Service emerges healthier than ever, but rates, trucks, speed and more deliver challenges

Postmaster General Louis DeJoy has privately told associates in recent days that the hard part of his job at the U.S. Postal Service is just beginning.

President Biden just signed legislation that will allow DeJoy the financial freedom to remake the nation’s mail service as the postal chief sees fit. It’s an improbable bipartisan success for DeJoy, who before he even took office drew criticism over his connections to the Trump administration and his role as a major Republican political donor.

Within his first month on the job, he issued orders that slowed mail service in the run-up to the 2020 election and faced a barrage of lawsuits that accused him and the agency of tanking postal delivery as tens of millions of voters prepared to mail in their ballots. Delays dragged into the holiday season; consumers widely reported problems paying bills by mail and sending and receiving Christmas packages.

But now, as DeJoy heads into his third year at the helm of the agency, the Postal Service is set to emerge from the pandemic with healthier finances and business prospects than most could have imagined. It’s buying new delivery trucks, shipping hundreds of millions of coronavirus test kits to American homes and launching new services to compete with Amazon and other private-sector package shippers. And, as DeJoy has come to realize, the bulk of his work and the 10-year transformation plan he unveiled in March 2021 - to stem annual losses, reconfigure the agency’s decrepit network and reorient its business strategy - is barely underway.

“We have to have a vision for the future, and that’s on me now,” DeJoy said in an interview with The Washington Post. “We’re losing $10 billion. We have ratty old trucks. How the hell are we going to [fix] that? Well, you need to have a strategy to get there. You need to take some freaking action.”

Here’s what you need to know about what’s next for your mail.

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What’s behind the Postal Service’s problems?

Americans send far less mail than they used to, a trend line that will only accelerate, postal officials project. The Postal Service generally does not get funding from Congress, so it sustains itself off the sale of postage products. But that’s gotten more difficult as communication habits change and individuals do all kinds of formerly mail-based things - pay bills, check bank statements, renew insurance policies, send greeting cards - online.

That business model used to be profitable for the Postal Service, so much so that Congress in 2006 required it to pay its retirees’ health-care costs years in advance. It was a way of ensuring retired workers would be taken care of, and unburdening taxpayers of the expense.

But mail volumes have fallen sharply since 2008, and the Postal Service has been unable to make its retiree health-care payments since 2011; it had more than $200 billion in liabilities last year. The deficit has hamstrung the investment needed to remodel post office lobbies, replace decrepit delivery trucks and order new mail- and package-sorting equipment. Leaders haven’t been able to develop new services to attract customers.

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How is USPS dealing with its financial problems?

On March 8, Congress passed the Postal Service Reform Act, a $107 billion overhaul of the agency’s finances. The bill passed the House and Senate with strong bipartisan support, and Biden signed it into law Wednesday.

The legislation relieves much of the Postal Service’s debt, giving it the financial flexibility to modernize and make long-term investments in infrastructure and services. It removes $57 billion in past-due retiree health-care payments and $50 billion of those payments over the next 10 years. (The Postal Service’s balance sheet only factors in part of that cost.) It requires future postal retirees to enroll in Medicare, a move that would add minuscule costs to the public health-care system but would save taxpayers $1.5 billion over the next decade. Still, the relief only goes so far: The agency still has $131 billion in liabilities.

The bill is a key component of DeJoy’s 10-year plan for the Postal Service to avert a projected $160 billion loss over the next decade. Without the relief, senior postal officials privately concede, the agency would have had to scrap much of DeJoy’s plan, which includes service slowdowns, higher prices, reduced post office hours and network efficiencies, potentially leading to even more draconian service cuts.

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How did we get here?

Congress had debated some form of a postal restructuring for more than a decade before passing the Postal Service Reform Act. Those discussions became more contentious during the Trump administration, which suggested preparing the mail service “for future conversion from a government agency into a privately-held corporation.” Then the administration intervened in postal operations, The Washington Post has reported, to force changes designed to hurt Amazon, whose founder Jeff Bezos owns The Washington Post.

DeJoy was hired as postmaster general in June 2020 by the Postal Service’s Trump-appointed governing board. He quickly made operational changes that significantly delayed mail service in the run-up to the 2020 presidential election.

That provoked worries among congressional Democrats, who forced emergency oversight hearings in the House and Senate to make DeJoy scale back his plans until after the election. But immediately afterward, the Postal Service began plugging the House to take up reform legislation. Those conversations began just six days after the November 2020 election, according to internal Postal Service records obtained via the Freedom of Information Act.

By January, DeJoy was having weekly calls with Rep. Carolyn Maloney, of New York, the top Democrat on the Oversight and Reform Committee. Just five months earlier, Maloney had said DeJoy deserved to be fired.

Those negotiations expanded into discussions with Rep. James Comer, of Kentucky, the top Republican on Maloney’s committee; Sens. Gary Peters, D-Mich., and Rob Portman, R-Ohio, two senators in charge of postal issues; and the Postal Service’s four major labor unions.

Maloney set the ground rules: Any member involved in negotiations could block a portion of the bill they didn’t like. The final legislation would include only components that both parties, the unions and DeJoy could agree upon. That left out Democratic proposals on mail-in voting and electric mail trucks, and GOP ideas on reining in the unions’ power and preventing the Postal Service from testing consumer banking products.

“I’ve had some real issues with the postmaster general,” Peters said in a recent interview, “but on the other hand, I also thought he could be part of the solution when it comes to this legislation.”

From May 2021 to this past March, Peters lined up Democratic support in the evenly divided Senate, persuading colleagues not to try to amend the legislation to include liberal priorities. DeJoy, a major GOP donor, took the Republicans, speaking in person to both the party’s House caucus and Senate conference.

In the end, the bill sailed through both chambers of Congress. It passed the House, 342 to 92, and the Senate, 79 to 19.

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What’s the impact on mail and package delivery?

Mail and packages are on track to take longer to arrive than they did this time last year. That’s because DeJoy slowed down “service standards,” or the time the Postal Service says it should take to deliver the mail, to cut costs.

Much of the slowdowns depend on the destination. The Postal Service set new mileage cutoffs for speedy mail delivery, but even so, its performance still lags well behind its new standards. DeJoy told The Post the agency doesn’t expect to hit its goals until 2024.

Mail and packages are also getting more expensive. The price of a stamp went from 55 to 58 cents in August, and will jump to 60 cents in July. Prices for other postal products, including magazines, marketing missives and packages, will rise, too. And the Postal Service may impose surcharges for the holiday season to cope with heavy volume during its busiest time of the year.

But consumers also will see prices go up across the shipping industry. Amazon in February raised the price of its “Prime” membership - which includes free shipping - by $2 a month or $20 a year citing “the continued expansion of Prime member benefits as well as the rise in wages and transportation costs.”

FedEx in 2022 raised rates an average of 5.9 percent, according to market research site ShipStation, and added surcharges for fuel costs, shipping distance, additional handling and e-commerce returns. UPS raised rates by the same amount and instituted its own surcharges.

When the Postal Service raises its rates, experts say, it opens the door for other shippers to boost prices, too. And when the Postal Service slows down its deliveries, it creates an opportunity for competitors to swoop in and claim additional market share. That can create a vicious cycle: As the Postal Service loses market share, its finances suffer, so it considers further service cuts.

“In the package marketplace, which is dominated by three major carriers, when one such as the Postal Service that specializes in business-to-consumer deliveries raises its prices, it provides an opportunity for competitors to do the same without fear of losing share in that particular segment,” said Leo Raymond, managing director at Mailers Hub, an organization that provides market information and support for commercial mailers.

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What still needs fixing at USPS?

The Postal Service Reform Act was a narrow bill that took care of one part of the mail agency’s finances. But the Postal Service is still running a business that’s losing money because its main product - paper mail - is losing relevance.

DeJoy proposes to make the agency profitable, or at least break even, by de-emphasizing the mail and delivering more packages.

“We should be able to make this work,” he told The Washington Post. “We go to 161 million addresses every day. Our bags are more empty now than they ever have been. We’ve gone from 5.5 pieces per stop, down to about three, headed to 1.76 unless I change something. And that is the goal. To get an extra 20 packages a route, it’s a couple billion dollars.”

The Postal Service also has to deal with competitors in the package space that it doesn’t in the mail space. Amazon in recent years has been the agency’s biggest customer; it generated $3.9 billion in revenue in 2020, according to internal agency documents obtained by The Washington Post, and $1.6 billion in profit.

But Amazon is also sprinting toward developing its own package distribution arm, aiming in the coming years to divorce itself from the mail system. The company already delivers 72 percent of its own parcels, by some estimates.

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Who’s in charge of the Postal Service?

The postmaster general is in charge of the Postal Service. DeJoy was hired by the Postal Service’s board of governors, whose nine members serve staggered seven-year terms. They are nominated by the president and confirmed by a simple majority of the Senate. The panel has the power to hire and remove the postmaster general and deputy postmaster general.

Right now, the board has eight members: four Republicans, three Democrats and one independent. One of the Republicans is serving temporarily. Biden has nominated two people, Democrat Daniel Tangherlini and Republican Derek Kan, to fill the open and temporarily filled seats. The Senate held a confirmation hearing for those roles on March 31 and appears likely to approve them in the spring.

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What happens next at the agency?

There are two main things to watch.

First will be a fight over the future of mail trucks. DeJoy has overseen a deal to purchase up to 160,000 trucks, of which 90 percent will be gas-powered and 10 percent electric vehicles, by 2031. Federal environmental regulators have cautioned that the proposed fleet of “Next Generation Delivery Vehicles” is not much of an improvement over the current one in terms of fuel economy and greenhouse gas emissions. In late March, DeJoy placed the first order for 50,000 vehicles - 40,000 gas-powered, and 10,000 battery-powered.

Maloney, the House oversight committee’s chair, told The Washington Post that she will try to include funding for the trucks in a reconciliation package to bypass a potential Senate filibuster but that the Postal Service should first use some of its $23 billion in cash to boost its electric vehicle investment. Environmental activists have also signaled plans to sue the agency over the truck contract.

Second, the Postal Service will continue to play a large role in mail-in voting, but with enhanced supervision from civil rights groups.

The agency in December reached a settlement with the NAACP and its independent legal arm, the NAACP Legal Defense and Educational Fund, agreeing to leave in place “extraordinary measures” to prioritize the collection and processing of mailed ballots leading up to elections. It will also provide service performance data to the groups for the six weeks preceding elections, and a federal judge will continue to oversee the Postal Service’s operations for federal elections through 2028.

DeJoy told The Post that “it has never been in question” that the agency would continue to use those procedures, which expedite ballot handling and implement sweeps of processing facilities to locate potentially misplaced election mail.

“We always use the extraordinary measures,” DeJoy said. “We don’t need a judge to tell us, we don’t need a [nonprofit] to tell us. We will use our best efforts to make sure every ballot that we get our hands on will get delivered.”

Biden’s budget also includes $5 billion for the Postal Service for mail-in voting. The money would make postage free for election mail and reduce the cost to localities and voters to receive ballots through the Postal Service. DeJoy declined to say if the Postal Service wanted or needed that funding.

“We are interested in, to the extent that the states can standardize and use first-class mail, I think it creates more reliability,” he said. “We’re the most consistent thing in voting by mail. Everybody else changes rules every year. We’ve been pretty stable in that regard. But we don’t advocate for anything in that regard. This is the nation’s policy.”

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