The U.S. Postal Service reported continued financial losses for the third quarter of 2020, with the Postmaster General announcing Aug. 7 that the agency plans to modify its organizational structure to reduce costs.
“This organizational change will capture operating efficiencies by providing clarity and economies of scale that will allow us to reduce our cost base and capture new revenue,” said Postmaster General and CEO Louis DeJoy in a news release.
“It is crucial that we do what is within our control to help us successfully complete our mission to serve the American people and, through the universal service obligation, bind our nation together by maintaining and operating our unique, vital and resilient infrastructure.”
The U.S. Postal Service has reduced employee compensation costs over the last decade, but not as much as the agency initially predicted.
On top of creating new business operating units, the organizational modifications include a management hiring freeze to “prepare for future changes” and a request for voluntary early retirement authority from the Office of Personnel Management. That authority allows an agency to temporarily lower the age and years of service requirements for retirement, with the goal of encouraging more employees that are on the cusp of retirement to make that transition.
According to the news release, such initiatives are not designed to initiate a reduction in force or have an immediate impact on employees.
Though revenue for the first three quarters of 2020 is $553 million greater than for the same period in 2019, due in part to a strong increase in package volume, the agency continues to report significant losses of $2.2 billion in the third quarter of this year compared to a net loss of $2.3 billion for the same quarter last year.
“The strong growth of our package volume in the third quarter was encouraging, but there is great uncertainty about whether that growth will be sustainable,” said USPS Chief Financial Officer Joseph Corbett in a news release.
“At the same time, First-Class Mail and Marketing Mail have seen deep volume declines associated with the pandemic, and that lost volume may never return, as was the case following the Great Recession of 2007-2009. We cannot let the recent growth of our package business mask our underlying business model problems, and we are redoubling our efforts to develop a plan to ensure our viability to provide universal service to all of America.”
Members of Congress, employee groups and financial experts have disagreed about the true heart of USPS financial declines, with many pointing fingers at the prefunding mandate for employee retirement, which has placed prolonged monetary strain on the agency.
DeJoy told the USPS board of Governors Friday that he had reached an agreement with the Department of Treasury the week prior on the terms and conditions associated with the $10 billion loan authorized for the agency in the Coronavirus Aid, Relief and Economic Security Act, but noted that the lending authority will not solve the agency’s “liquidity crisis.”
“These losses, driven by the economic shutdown’s impact on first-class and marketing mail, show the need for federal assistance during the pandemic, just as other sectors have received,” said Fredric Rolando, president of the National Association of Letter Carriers, in a statement.
“In this economic and public health crisis, the Postal Service is proving more essential than ever, allowing tens of millions of Americans to shelter at home while postal employees deliver needed supplies, medications and much more.”
Members of Congress have been critical of DeJoy’s management of the agency, such as his decision to eliminate overtime for hundreds of thousands of workers and cause delays in delivery.