Alliance Report – August 10, 2022

Nonprofit mailer updates

Comments to the PRC

Many thanks to everyone who submitted comments to the Postal Regulatory Commission on the impact of above-inflation postage rate increases. In response to a question, the PRC said: “We do plan to make the comments available, and are working out the details regarding timing and format for doing so, as this is not the normal notice and comment rulemaking for our agency.  We will let you know as we firm up the approach.”

We understand that the PRC plans to publish the comments when it sends a report to Congress, as they were solicited under the Consolidated Appropriations Act, 2022, the House of Representatives Report 117-79. We will keep you posted.

Our petition for a new rulemaking on rates remains active as we await a response from the regulator. Supporting comments are welcome at Docket No. RM2022-5.

USPS Q3 financial results

The Postal Service reported a large profit in the third quarter ending June 30 but noted that it resulted from a “one-time, non-cash benefit of $59.6 billion” that is received from the Postal Service reform Act of 2022. With the benefit, USPS earned a profit of $59.7 billion in Q3, and a $57.5 billion profit for the first nine months of the fiscal year, which ends September 30, 2022.

USPS went out of its way to emphasize the non-cash, one-time nature of the $59.6 billion from Congress. The agency had emphasized large losses in every financial report over the past decade including the non-cash charges that Congress reversed this year.

Without the benefit of the legislation, USPS reported an adjusted loss of $459 million in the quarter. The Postal Service’s operating revenue was $18.7 billion in Q3, not including the PSRA, an increase of $257 million, or 1.4 percent, despite a volume decline of 201 million pieces, or 0.7 percent.

The Postal Service emphasized the resilience of Marketing Mail, without noting that Q3 preceded the large July rate hikes:

Marketing Mail revenue increased $324 million, or 9.4 percent, compared to the same quarter last year, on volume growth of 545 million pieces, or 3.5 percent. Marketing Mail experienced steep volume declines at the onset of the pandemic but has been rebounding as the economy continues to recover. Marketing Mail has generally proven to be a resilient marketing channel, and its value to U.S. businesses remains strong due to healthy customer returns on investment and better data and technology integration.

USPS reported flat First-Class Mail revenue as its rate hikes offset a volume decline:

First-Class Mail revenue was essentially flat, compared to the same quarter last year, despite a volume decline of 620 million pieces, or 5.1 percent. First-Class Mail volume continued to decline due to on-going migration from mail to electronic communication and transaction alternatives and remains lower than pre-pandemic levels.

The package segment that USPS hopes will be its salvation continued to show troubling declines in revenue and volume “post-pandemic:”

Shipping and Packages revenue decreased $85 million, or 1.1 percent, compared to the same quarter last year, on a volume decline of 92 million pieces, or 5.0 percent, compared to the same quarter last year. Shipping and Packages volume remains higher than pre-pandemic levels despite the volume decline compared to the same quarter last year, due to the prior year pandemic-related surge in e-commerce.

Rates will go up on January 22, 2023

PMG DeJoy reaffirmed at both the Mailers Technical Advisory Committee and the Board of Governors that he intends to continue with his unprecedented raising of rates on monopoly mail twice a year. The first installment will happen on January 22. DeJoy will be taking advantage of a 40-year high in the Consumer Price Index with rate hikes probably ranging from about 4.5 percent for Marketing Mail Letters, First-Class Mail, and Periodicals, to 6.5 percent for Marketing Mail Flats.

The increases will incorporate six months of CPI from March through August 2022. The announcement will come between the Bureau of Labor Statistics CPI release dates of September 13 and October 13, following the pro forma approval by the USPS Governors. The PRC calculates its unique CPI price cap using a 12-month moving average which means it lags the headline CPI numbers we all see. The regulator also adds any previously unused rate authority to the CPI cap; currently, the “banked” authority is di minimus.

While DeJoy inherited and befitted from many years of work by his predecessors and staff to obtain the extra rate authority granted by the PRC, the semi-annual rate hikes are 100 percent his decision.

USPS is way behind on Delivering for America

Yesterday at the Board of Governors meeting, Postmaster General DeJoy warned that the agency still has losses of $60-$70 billion ahead in the ten-year plan. That does not square with the Delivering for America that promised (in Figure 2) breakeven by the Fiscal Year 2023, which started in less than two months, and profits very year after. The agency over-promised and is under-delivering.

In his statement, DeJoy warned that “stakeholders” must not oppose or delay his plan or there will be dire consequences:

When I first joined the Postal Service, we were projected to lose 160 billion dollars over the next 10 years and run out of cash in the near term.

Today that deficit is substantially less, but we are still looking at $60 to $70 billion of losses over that period — which we will quickly wipe out our 20 billion dollar cash balance — unless we take immediate and substantial action.

All stakeholders need to realize that each day lost in executing on our strategy will consume cash and eventually accumulate to a cash deficit that will necessitate more aggressive actions by us or the federal government.

Yet, it is hard to point to any way in which stakeholders have slowed down the USPS. A practical consequence of USPS dilly-dallying is that mailers can expect two years or more of additional large rate increases. DeJoy confirmed this at recent meetings with mailers.

Union threatens to stop DeJoy from executing

At a July 27 speaking engagement at the conservative American Enterprise Institute, PMG DeJoy said that he plans to reduce USPS jobs by 50,000 as an important part of getting to breakeven in his Delivering for America plan.

Mailers have been urging USPS for years to consolidate its network and eliminate its documented inefficiencies and excess costs. Several PMGs before DeJoy have acknowledged the problem and tried to rationalize the network. The postal unions, especially the American Postal Workers Union, have consistently prevented consolidation and job reductions.

Not long after DeJoy’s perhaps ill-advised revelation at AEI, APWU President Mark Dimondstein, who is up for reelection, blasted the idea of reducing jobs. His statement throws down the gauntlet:

Statement of APWU President Mark Dimondstein in Response to Recent Remarks by Postmaster General Louis DeJoy on Future Postal Staffing

August 8, 2022

In a recent presentation before the neoconservative American Enterprise Institute, Postmaster General (PMG) Louis DeJoy outlined his views of the future direction of the United States Postal Service.

One remark from the Postmaster General during a discussion following his prepared speech created headlines that deeply concern postal workers and the American Postal Workers Union. The PMG said that, through attrition and retirements, the USPS “may need to get 50,000 people out of the organization” in the next 10 years to “break even.”

Let me be perfectly clear with our members: Prior to the PMG’s remarks, postal management had never discussed any such proposals or plans on the future size of the postal workforce or of the APWU bargaining unit. In fact, over the last two years the APWU and postal management have reached a number of settlements that increased much-needed staffing in Function 1 mail processing, creating 10,000 new clerk craft jobs. We are currently pressing management to agree to increase staffing in Function 4 Retail. We also reached a number of agreements, including in the recently ratified contract, resulting in tens of thousands of PSEs being converted to career positions. These are welcome developments and a testament to the powerful campaigns our union has led to demand management invest in the staffing and retention policies necessary to ensure we provide the quality service the public deserves.

I’ve spoken with the PMG since his remarks and made clear to him our position: without postal workers, there is no USPS. We make it work and we’re committed to fulfilling our mission of providing essential services to the country. The best way to get the Postal Service back to break even is to focus on improving service quality, expanding and enhancing service, and growing the Postal Service’s role in a fast-changing economy – including growing with long-needed staffing.

If it’s management’s intent to weaken our union, attack our pay and conditions or eliminate family-sustaining union postal jobs, the PMG will get a strong fight from the APWU. But let’s also be clear about one thing – we don’t bargain with newspaper headlines.

When PMG DeJoy was hired, we made clear that our union would judge the PMG based on his actions. When he degraded service in the summer of 2020, we opposed his actions and led the fight back which forced management to abandon the worst of those policy changes.

When PMG DeJoy introduced management’s 10-year “Delivering For America” plan, I called it “the good, the bad, and the ugly.” There were elements of the plan we supported, like efforts to grow the USPS’s market share in the booming e-commerce business, advocating for six-day delivery and for a better path to career jobs for our non-career members. And we vowed to use every resource of our union to fight elements of the plan we opposed, like cuts to service standards and retail hours of operation.

We will oppose future job reductions that affect the lives of the postal workers we represent, good living wage union jobs for future generations and diminishes the good service the people deserve. Rest assured that any such management actions will be met with unbridled opposition of the APWU – the same kind of fightback, allied with the labor movement and the people of our country, that won the “Stop Staples” campaign, defeated the privatization plans of the White House in 2018 and compelled the USPS to do right in relation to vote by mail during the 2020 election.

Mailers must be forgiven if they feel like they are in the movie Groundhog Day or experiencing déjà vu all over again. We pay the price with higher rates as postal management tries (unsuccessfully) to get costs under control. DeJoy will be the first if he breaks the mold. The unions have won every time before.