How to Fix the USPS Financial Crisis

Can you imagine in a world in which you didn’t receive mail anymore? No more letters, no more birthday cards, no more nothing? Well, if our legislators don’t find a way to save the Postal Service soon, that idea may very well become a reality. There’s no doubt that USPS is in dire financial straits right now, with a budget deficit in the billions of dollars growing wider each day. However, the first thing you need to know about USPS’ financial crisis is that Congress created it. In 2006, Congress enacted a federal mandate that requires USPS to pre-fund future employees’ health and retirement benefits. While both Congress and the Senate debate on how to help the Postal Service, here are three ideas that can potentially help fix the USPS financial crisis.

1. Eliminate the Pre-Funding Mandate

The most obvious solution to setting the Postal Service on sound financial footing is to eliminate the pre-funding mandate. Pre-funding future employees’ health and retirement benefits is not essential to USPS’ business model. Ever since Congress enacted the pre-funding mandate in 2006, USPS has operated at a net loss each year. In fact, pre-funding is the main reason why USPS lost $3.9 billion in 2018. Where there’s smoke there’s fire, and repealing the pre-funding mandate is the first and most obvious step to fix the USPS financial crisis.

2. Adopt GAAP (Generally Accepted Accounting Principles)

Unlike most large American corporations, the US Postal Service doesn’t use GAAP in their accounting practices to determine the organization’s liabilities. Following the GAAP method would place USPS employees on an actual vested liability schedule, rather than the total projected liability schedule they are currently on. Think of an actual vested liability schedule kind of like paying off a credit card each month. On the other hand, a total projected liability schedule is like using a credit card your entire life and then paying it all off at one time. USPS currently takes the latter approach, which requires them to make enormous payments at once. All in all, changing this liability schedule would reduce the USPS deficit by approximately $41 billion.

3. Allow USPS Workers to Invest in More Than Low-Return Treasury Bonds

Did you know that USPS workers can only invest in Treasury bonds as part of their retirement benefits? It’s true. USPS employees can currently only invest in specialized Treasury bonds, and relative to corporate pension funds, these investment restrictions have generated less-than-stellar returns. As a result, USPS has had to pinch pennies and set aside money to meet its financial obligations to retirees. A simple solution would be to broaden the scope of assets that USPS employees can invest in to generate potentially much more attractive financial returns. This would put more money in USPS retirees’ pocket and give USPS itself a bit more financial breathing room at the same time.

We Need the Postal Service More than We Realize

It’s not just every American who relies on the Postal Service to deliver their mail every day. Millions of businesses also use USPS’ shipping services as the backbone of their eCommerce operations. Even Amazon CEO Jeff Bezos gave an interview earlier this week in which he credited USPS for Amazon’s early success. Losing access to USPS’ universal services and affordable rates would send ripples throughout our nation’s economy, and consequently, the global economy, as well.

There’s no debating that America needs the United States Postal Service. We all need to come together and find a way to save it. These three ideas could provide the right starting point.