The Postal Service Needs Fixing. Here’s How It Could Happen.

WASHINGTON — On at least one issue, most of Washington agrees: The Postal Service needs an intervention.

A constellation of forces, including the 2008 recession and punishing retiree obligations, have pushed the agency to a point of financial distress for some time, inviting a flood of proposals for how to turn its trajectory around.

The volume of mail the Postal Service moved in 2019 was down roughly a third from 2006, when the numbers started falling steadily year over year.

But the agency, which generates $70 billion in annual revenue, remains a sprawling concern with a legal monopoly over mail delivery and access to mailboxes, operating across all 50 states, Guam, the U.S. Virgin Islands and beyond. Despite new pressure from the pandemic, the Postal Service has been able to offset some of its losses in recent years with new, soaring revenue from parcels, keeping its overall revenue fairly stable.

Yet, even as postal workers continue to visit every single address every single work day, the institution of the Postal Service has become a focus of sharply partisan debate over whether the upcoming presidential election will be secure, given the expected increase in mail-in balloting because of the pandemic.

All of this leads to a complex picture of a federal agency amid a transformation in its core business model, fighting to modernize and stay afloat while facing unique challenges.

Here are a few of the solutions experts have suggested for bringing long-term stability to the Postal Service, even as they acknowledge that none can be done right away:

There are few options for cutting back.

The Postal Service routinely receives the highest public approval ratings of any federal agency, and its services are widely relied upon. Besides its role in distributing advertising and media mail, its infrastructure has helped foster some of the most powerful modern corporations. These include businesses like Netflix, which started out selling and renting DVDs through the mail, and major pharmacies like CVS and Express Scripts, which rely on the Postal Service to deliver 1.2 billion prescriptions per year, according to the National Association of Letter Carriers.

The Postal Service’s outsize role in commerce has made proposals to pare down its services, such as eliminating Saturday delivery, politically unpalatable.

“There’s a consensus among the American people and among politicians in both parties that some things should not happen to the Postal Service,” said Paul F. Steidler, a senior fellow at the Lexington Institute. “One is there should be very few, if any, additional closures of facilities, and another thing is there should continue to be six-day-a-week delivery.”

A hunt to expand is underway.

Still, the Postal Service’s network reaches deep into isolated corners of the country, and some have proposed novel ways to leverage its extensive real estate footprint to provide more services, particularly in smaller communities.

A 2018 report overseen by Treasury Secretary Steven Mnuchin suggested using post offices to help states process hunting and fishing licenses, akin to the way local branches already help process passport applications for the State Department.

Jim Sauber, the chief of staff at the National Association of Letter Carriers, said that because of its huge network of local post offices, the Postal Service is well positioned to do many other things, such as voter registration or helping census workers count people in remote areas that postal workers already visit regularly.

“We could do contact tracing for local public health authorities who needed help during the pandemic outbreak,” he said. “Our members know their neighborhoods perfectly; they know how to track people down, they know where they live.”

The Postal Service is barred from delivering alcoholic beverages, according to Prohibition-era restrictions that do not apply to its competitors and have prevented it from capitalizing on skyrocketing online alcohol sales throughout the pandemic. A bill, sponsored by Representative Jackie Speier, Democrat of California, was introduced last year and would overturn the restriction.

From time to time, the Postal Service has also explored reintroducing postal banking, allowing post offices to offer basic financial services like savings accounts and check cashing. France, China and Japan all have modern postal banking systems, and the United States once did as well. Its postal savings system, established in 1910, supported more than four million depositors and held nearly $3.4 billion in savings at its peak in 1947.

The U.S. Postal Savings System was ended in 1967, but a number of politicians, including two Democrats, Senators Elizabeth Warren of Massachusetts and Kirsten Gillibrand of New York, have called for its revival as a way to reduce the number of people without access to traditional banking — and who often turn to payday lenders and check-cashing outfits that set high interest rates and take sizable fees.

Skeptics of these new avenues caution that experimenting with any of them would require training thousands of employees to take on new duties that have little to do with mail delivery. Any proposal allowing the Postal Service to expand into new services would also require changing the omnibus 2006 Postal Accountability and Enhancement Act, which narrowly defines what services the agency can offer, and requires the Postal Regulatory Commission to evaluate any nonpostal activities.

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“That was put in there because the Postal Service has wandered into various nonpostal businesses over the decades, and, according to the G.A.O., they tended to lose money,” said Kevin R. Kosar, a resident scholar at the American Enterprise Institute, referring to the Government Accountability Office.

Retiree benefits are a heavy weight.

In addition to declining mail volumes over time, the Postal Service is also saddled with unusually onerous obligations to its retirees.

Under the 2006 law, the agency has been required to pre-fund its retiree health benefits at a rough cost of between $4 billion and $5 billion per year, as well as to keep its pension and retiree health benefit funds invested in low-interest government bonds. Under financial strain, the Postal Service has not made payments into its health benefits fund since 2011, accumulating roughly $120 billion in unfunded liabilities between that and its pension fund. Since 2007, nearly 90 percent of the Postal Service’s reported losses came from obligations to its retiree health benefits fund.

One way the Postal Service has sought to reduce costs in recent years is through attrition, allowing workers to retire without replacing them. In the past two decades, the agency has shed almost 300,000 employees — a nearly 37 percent reduction of its work force.

“The number of its retirees is approximately one retiree for one person still working at the Postal Service, and many postal workers are older, so, demographically, it’s in a bad place,” Mr. Steidler said.

Many experts and union leaders believe this imbalance could largely be fixed by giving the agency freedom to invest a portion of its retiree health benefits and pension fund into a more diverse mix of assets, including some index funds, similar to quasi-public corporations like Amtrak, and other funds for state government workers and public teachers.

“If the Postal Service had done that 10 years ago, its financial woes would largely be taken care of at this point,” Mr. Steidler said.

A 2019 report by the post office inspector general, which compared the U.S. Postal Service with that of 11 other advanced countries, found that the United States Postal Service is the only one that does not diversify its pension investments across other types of assets like real estate and equities.

The big picture isn’t clear.

Analysts have worried for years that the Postal Service’s accounting system is outdated, obscuring many of its costs, and making it difficult to set appropriate prices.

Currently, the Postal Service studies things like labor and transportation costs by sampling, collecting data from offices and routes throughout its vast network. It collected nearly 640,000 samples in 2018.

But a report last year by the post office’s inspector general stressed the need to overhaul the agency’s systems to collect more granular, real-time data across its operations, providing a more comprehensive understanding of the costs across its routes. The same recommendation was made in a 2014 report prepared for the agency by the consulting firm A.T. Kearney.

Though modernizing its system for assessing costs could benefit the Postal Service substantially over time, the 2014 report found that implementing such a system could cost as much as $125 million, and the agency has been reluctant to shoulder that expense given its ongoing budgetary problems.

Especially given the increase in parcel volume, the Postal Service could benefit significantly from upgrading its fleet and retrofitting mail trucks designed to carry letter mail to make space for packages.

But without a clear picture of its overall costs, it may be impossible to plan upgrades or make an informed case for increasing postage or delivery fees, experts say.

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