August 21, 2020
Dear Alliance Members and Sponsors,
At today’s Senate hearing, Postmaster General Louis DeJoy struck me as a logistics business guy trying to do the right things. His naiveté about communicating with the Hill, customers, and the general public was apparent too. He denied any conspiracy under questioning, under oath. He has not talked with the President, the White House, or Secretary of Treasury Mnuchin about what he’s doing, except for negotiating the $10 billion note terms with Treasury. He did not bring in a new team or consultants; he’s working closely with the USPS executive team.
His main initiative has been to tighten up the scheduling of the USPS logistics and transportation process that he thinks will lead to 97% on time mail nationwide and savings of $2 billion or more. He outlined the slack and inefficiency that had been in the process. He said USPS was nothing like FedEx and UPS have to be.
There were some delays during the logistics transition, but things already are better. Very interestingly, he revealed that in hot spot cities, employee unavailability has been 20-25% due to COID19, while it averages 4% nationwide. He gave an example of a major city with 750 routes that sometimes is short 200 carriers on a given day.
All of the initiatives that have been attributed to him in his first 67 days, except the logistics scheduling, were long-term and mostly he was not even aware of them until the political process brought them to his attention. These include decommissioning excess processing equipment and removing blue mailboxes. DeJoy said Postal Service letter processing equipment is working at an average 35% capacity. One reason the agency has been removing letter machines is to make room for package processing machines. He said USPS currently has 140,000 blue collection boxes, and it had removed 35,000 over the last ten years. Since he arrived, 700 boxes have been removed.
He gave several strong statements of commitment to get all election mail delivered on time through whatever extraordinary measures needed. All election mail will be treated as First Class Mail even if it is mailed as marketing mail. All changes have been put on hold until after the election. USPS has had about 50,000 contacts with election officials in preparation for this election. They will be communicating a lot up to the election, including a mailing to all Americans. DeJoy beefed up the usual cross-function team that is overseeing election mail.
DeJoy grasps the financial fact that USPS is on track to lose $9-$10 billion a year. He’s trying to do their part to reduce that by maybe $2-$4 billion. But he said they need legislation to integrate Medicare to eliminate underfunding of retiree health benefits, and rationalization of their pension prefunding. And he said several times that the need the PRC to give them pricing freedom. DeJoy mentioned more than once that Congress imposes many “unfunded mandates” on USPS, and suggested maybe they should fund them. These are similar to what we often call the Universal Service Obligation.
Dejoy said they estimate the need for $10 billion from Congress to cover COVID19-related losses and unfunded mandates. He also would like the $10 billion CARES line of credit to be repurposed from operating uses to capital investment in vehicles and equipment modernization. I believe he would need Congress to do that.
Nonprofit mailers are going to continue to have much work to do, especially with DeJoy’s encouragement of the PRC to hurry up and give surcharges. I think funding the USO with appropriations needs to be a major part of the USPS solution, and then hopefully we can mitigate massive rate increases. It’s encouraging that he mentioned the possibility of appropriations, but he clearly sees that kind of decision in the hands of lawmakers rather than the operators of USPS.
DeJoy’s opening statement is available here.
There is a House vote on a postal bill scheduled for tomorrow, and a House Oversight hearing on Monday. We will keep you posted.