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DeJoy charges ahead with USPS cost-cutting despite beating financial projections

Timely delivery service remains poor, and critics hope President Biden’s nominees, once confirmed, can increase pressure on Postal Service leaders

Postal workers load packages in their delivery vehicles at a Los Angeles post office in Aug. 2020. (Richard Vogel/AP)

The pandemic’s e-commerce shipping surge propelled the U.S. Postal Service to better-than-expected financial fortunes in the second quarter, the agency reported Friday, but its governing board and Postmaster General Louis DeJoy said they would press forward with service cuts.

Here are four takeaways from the Friday’s board session:

Mail service remains poor

When the board last met, in February, governors attributed the mail service’s generationally bad on-time performance during the holiday season to vicious package volumes, employees out on leave because of the pandemic and entrenched problems with the agency’s processing network. And they said that service would improve in the next quarter.

Well, service got worse.

In the quarter that ended Dec. 31, the Postal Service delivered 78.4 percent of first-class mail on time, well short of the internal goal of 96 percent. In the quarter that ended March 31, that number dipped to 78.1 percent.

As USPS delays persist, bills, paychecks and medications are getting stuck in the mail

By the percentages, that is basically flat. But in the real world, that is hundreds of thousands of first-class items — bills, paychecks, prescriptions — that did not arrive on time. And that’s fueled complaints from mail customers who’ve gotten dinged on their credit scores or incurred late fees because of bills that got stuck in the mail.

Biden’s nominees are still not in place

President Biden in February nominated Ron Stroman, Anton Hajjar and Amber McReynolds to fill vacancies on the postal board. They had confirmation hearings in April, and all three advanced with the support of the Senate Homeland Security and Governmental Affairs Committee’s top Republican, Sen. Rob Portman (Ohio). Their confirmation before the full Senate seems likely, according to aides managing the nomination process.

But a full confirmation vote could still be weeks away. Historically, that would still be a rapid nomination and confirmation process for postal nominees; Biden named his choices (read more about them here) just 35 days after taking office.

Meet Biden’s Postal Service nominees, who could add pressure on Louis DeJoy

But the pace is still too slow for some of DeJoy and the board’s critics, who wanted Biden’s nominees in place for this board meeting specifically to push back on some of the postmaster general’s proposed service cuts. The Senate had a narrow window to make that happen — the committee voted to advance the nominations on April 28, and Chair Gary Peters (D-Mich.) reported them to the Senate the same day — but chose not to hurry the process through. The chamber is now in recess.

Logistically, that delay will not mean much for the board. DeJoy’s backers would still have the votes on the nine-member panel to advance his plan. But the speedy confirmation would have been more symbolic, and would have signaled Senate Democrats’ desire to continue to confront DeJoy.

The USPS is facing financial, service and public relations crises, but the president's new appointees could have an impact beyond restoring timely service. (Video: Joshua Carroll, Brian Monroe/The Washington Post)

Package volumes keep losses in check

Financially, the Postal Service has to be pleased with the first six months of fiscal 2021. The agency projects it will lose $160 billion over the next decade, including $9.4 billion in 2021, alone.

In the first quarter, the Postal Service actually made $300 million. It lost $1.7 billion in the second quarter, improving on the $1.9 billion loss recorded during the same period last year.

Put that all together, and the Postal Service is down $1.4 billion through the first half of the year, making it likely the agency will beat its projections by a wide margin.

That is largely thanks to packages, which continue to buoy its balance sheet because of the consistency of e-commerce shipping volumes. Package revenue climbed 33.6 percent in the quarter, compared with the year-ago period; volumes jumped 25.3 percent.

That was not enough to offset declines in first-class mail revenue and volumes (down 6 percent and 8 percent, respectively) and marketing mail revenue and volumes (13.6 percent and 13.5 percent, respectively). But it was enough to beat expectations.

Combined with the Postal Service’s cash reserves — $25.5 billion — the agency is on its most solid near-term financial footing than it has been in years.

DeJoy’s changes already in motion

Starting almost two weeks ago, the Postal Service began implementing some of DeJoy’s largest structural changes from his 10-year plan.

On April 27, the agency announced it would consolidate 18 mail-processing facilities into larger regional plants by November, purchase 138 package sorting machines and lease 45 package-specific processing annexes. On May 4, it told supervisory level employees to prepare for a “reduction in force,” the postal term for layoffs, if enough workers did not take early retirement.

What’s in Louis DeJoy’s 10-year plan for the USPS

Those were two big tenets of DeJoy’s 10-year vision: embrace and invest in package delivery, and centralize the agency’s bureaucracy to eliminate extra layers of staffing. The agency is moving swiftly on both, and has already presented arguments to the Postal Regulatory Commission to justify increasing prices and slowing down mail service.

Many of those changes have certain mailing stakeholders up in arms. Unions are furious about the plant consolidations. The moves are not layoffs, but job relocations. For workers in Cape Girardeau, Mo., for example, whose plant is merging with St. Louis, they are not losing their jobs. The jobs are simply moving 120 miles away. They will have to choose whether they want to move, find another Postal Service job nearby or leave the agency.

Supervisors are upset about the impending layoff and early retirement program. The retirement offer does not come with any additional financial incentive. One supervisor, who spoke on the condition of anonymity out of fear of retribution, told The Washington Post the offer “feels like a slap in the face.”

Mailing industry executives are outraged over the proposed price increases — as much as 7 percent — and delivery slowdowns, and argue that they should not have to pay more for declining service. Many have told DeJoy in private meetings that they will spend less on mail and more on digital communication if the agency presses on with its changes.

DeJoy, in Friday’s meeting, appeared unmoved.

“Yes, I do hear criticism,” he said. “What I don’t hear is any viable comprehensive alternative.”

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