The numbers are in, and they show that the US Postal Service seriously ramped up commercial spending in 2018! According to research done by Bloomberg Government, USPS spent $15.9 billon in postal contracts for the fiscal year 2018. This marks a nearly $900 million increase from their commercial spending in 2017. However, while commercial spending has certainly ramped up over the past few years, it’s not the real reason behind why USPS keeps losing money. Keep on reading if you want to turn over some stones and get some answers. Like the old saying goes: the truth will set you free!
What are Postal Contracts?
Postal contracts describe exactly how the US Postal Service allocates their commercial spending each year. Think of postal contracts like jobs, just worth millions (or in some cases, billions) of dollars. Pretty simple stuff, right?
So What Does USPS Spend Money On?
USPS divides up their commercial spending on highway and air transportation, rent, professional services, information technology, and then everything else. Highway transportation is the largest and fastest-growing single source of USPS commercial spending. In 2018, the Postal Service spent nearly $4.3 billion on highway transportation alone. Coming in second-highest in commercial spending, air transportation accounted for roughly $2.7 billion in 2018. Combined, highway and air transportation represented a near-total of $7 billion of USPS’ 2018 postal contracts.
Note: All figures are from data in Bloomberg Government’s USPS report, which Bloomberg received via a Freedom of Information Act request.
Are These Postal Contracts the Reason for USPS’ Huge Loss?
If you’ve been paying any attention to current events this past year, you might have noticed that USPS posted a $3.9 billion loss in 2018. Believe it or not, this spending isn’t the reason why USPS keeps losing money year after year (despite what you might read on the Internet). The real reason behind USPS’ $3.9 billion loss comes down to pre-funding. Due to a Congressional mandate enacted in 2006, USPS is required to allocate a large portion of revenue to pre-fund their future employees’ health and retirement benefits. If you’re thinking that doesn’t make a whole lot of sense right about now, we’re right there with you. However, that’s a different conversation for a different time.
Some of USPS’ Biggest Partnerships
Below, we’ve listed out five of the US Postal Service’s biggest partners, in terms of total percentage of USPS commercial spending. These partnerships represents who USPS pays to operate.
- FedEx – Even though FedEx and USPS are direct competitors, they both heavily rely on each other. FedEx relies on USPS for last mile delivery, and USPS relies on FedEx to share air cargo space on their planes. USPS paid FedEx $1.9 billion in 2018, representing 12% of USPS’ postal contract dollars.
- US Bank – US Bank facilitated $1.1 billion of USPS contract dollars in 2018 by managing the Postal Service’s credit cards. USPS uses these credits cards to buy fuel for their delivery vans, maintain vehicles and facilities, and more.
- EnergyUnited Service Corporation – USPS paid EnergyUnited $429 million for third-party billing services in 2018, mostly for fuel and utilities.
- Eagle Express/Hoovestol Group Inc – Logistics and freight company Eagle Express/Hoovestol received a total of $420 million from USPS in 2018 for highway transportation services.
- Victory Packaging – Victory Packaging is the Postal Service’s main source of shipping supplies, such as boxes and mailers. USPS paid them $220 million in 2018.
USPS: A Partially Privatized Jobs Machine
So, what does all this mean? All of these postal contracts serve as economic proof that USPS is a “partially privatized” institution. In other words, the US Postal Service pays private companies $15.9 billion to transport the mail (at least that’s what they paid out in 2018). You don’t need to be a rocket scientist to see that’s an enormous amount of money…and with all that money comes jobs. Think about just how many government jobs are created or funded in this whole postal contract process. We’ll give you a hint: it’s a lot. The US Postal Service is a massive jobs machine!