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U.S. Postal Service Reports First Quarter Fiscal 2021 Results
On today’s podcast, I discuss some recent changes at the USPS Board Of Governors and clarify what president Biden can and cannot do with regards to the PMG and members of the Board of Governors. I review the recent service performance scores and reported revenue from the USPS fiscal quarter 1. And finally, I speculate on the potential of another round of price increases for 2021.
Welcome to the podcast, everyone! The USPS Board of Governors met on February 9 and unanimously elected Ron Bloom as the 24th chairman of the Board of Governors. They also elected Roman Martinez IV to serve as the vice-chairman.
Governor Bloom has served on the BOG since August of 2019, serving the remainder of a seven-year term that expired on December 8, 2020. Thus, he is currently in a hold-over year. Chairman Bloom promises a “bold and comprehensive plan what will revitalize the United States Postal Service.” If bold and comprehensive means improving service performance scores to the levels we saw in 2019 and early 2020, then I’m sure the industry will be thrilled.
Chairman Bloom has an impressive history of experience in the private sector and helping govern private and nonprofit institutions. Governor Bloom’s election to the chair for BOG also reflects a change in political affiliation as former Chairman Robert Duncan was Republican and now Chairman Bloom is Democrat. However, it is important to note that pursuant to Title 39 section 202, “Governors shall represent the public interest generally, and shall be chosen solely on the basis of their experience in the field of public service, law or accounting or on their demonstrated ability in managing organizations or corporations (in either the public or private sector) of substantial size”.
While I do not normally discuss the political affiliation or alignment of a member of the Board of Governors, it seems appropriate to do so in the wake of some comments from at least one member of Congress. Representative Bill Pascrell from New Jersey last month called on President Biden via a tweet “…to fire the entire Postal Board of Governors for their silence and complicity in Trump and DeJoy’s attempts to subvert the election and destroy the Post Office”. It appears to me that Congressman Pascrell may not be aware that there are actually two members of the current Board of Governors that are Democrat affiliated.
Pursuant to Title 39 section 202, “Nine of the members, to be known as Governors, shall be appointed by the President, by and with the advice and consent of the Senate, not more than 5 of whom may be adherents of the same political party.” Presently, we have six appointed and confirmed Governors with 4 affiliated with the Republican party and 2 affiliated with the Democrat party. That leaves 3 more for President Biden to nominate, with the advice and consent of the Senate, to change complete the nine positions and change the majority political affiliation to Democrat.
Since a member of the Board of Governors can only be fired for “cause” per Title 39, President Biden cannot simply “fire” the entire Board as Congressman Pascrell is suggesting. Moreover, it is the Board of Governors that have the sole responsibility to hire and fire the Postmaster General, not the President of the United States. So, there too the Congressman’s suggestion, which should be taken seriously, is not possible under the current law.
My opinion, for what it is worth, is that if President Biden wants to take a serious interest in the USPS, then he should fill the open seats on the Board of Governors and let them determine who is best to run the largest postal delivery network in the world. Oh, and it would also be nice to have a Deputy Postmaster General as well since they are part of the Board of Governors as well.
I mentioned service performance earlier and that too was discussed during the recent Board of Governor’s meeting. PMG DeJoy apologized for the delays and stated that the USPS will strive to perform better. CTO Scott Bombaugh openly acknowledged that the USPS did not follow the normal FIFO (first in first out) procedures and fell far short of their service standards. Of the 23.2 billion pieces measured in Q1, only 18.9 billion pieces met USPS performance standards. I experienced significant delays in First-Class Mail delivery and I have heard from many in the industry as well that have had had similar experiences including one customer that saw a catalog mailing inducted in October only to take six to eight weeks to deliver during a critical peak season.
While it is understandable that there are many factors that contributed to such substantial delays in mail delivery, such as employees impact by COVID-19, the push to expedite election mail, and an unexpected surge in package volumes, the fact is that many mail owners were severely impacted by these service disruptions. Thankfully, the USPS is waiving any mailer scorecard issues that resulted in assessments in January 2021 due to delivery issues in December of 2020.
The one bright spot for the first USPS fiscal quarter of 2021 was revenue. The surge in package volume helped increase operating revenue to 11.10% ahead of the prior year. Overall mail volume was down 1.2 billion pieces with First-Class volumes down by 4.1% and Marketing Mail down by 3.9%. There were approximately 2.3 billion pieces of political and election mail, which helped offset some of the declines in Marketing Mail.
One thing that was not discussed at the recent Board of Governor’s meeting was leveraging the additional pricing authority granted by the Postal Regulatory Commission. While the USPS has not yet stated when they would raise postage later this year, the PMG did say that a rate increase would be “imminent”. It is my opinion, along with most of the industry associations in which BCC Software participates, that the USPS will fully leverage the 5 to 7 percent increase in pricing authority granted by the Postal Regulatory Commission this calendar year. We do not believe a mid-year price increase would include any structural changes in postage calculation. However, as know that even a subtle change in pricing can completely change the way in which mail is sorted and inducted and there have been numerous examples in the past of unintended consequences when postage rates have changed without sufficient collaborative discussion with the industry in advance of implementation. If the PMG and the BOG are thinking of raising postage rates this summer, they should begin openly discussing it with members of MTAC and the mailing industry so that we can fully prepare for these unbudgeted increases.
Thank you again for listening to today’s podcast. If you have any questions or would like to contact us, please visit www.bccsoftware.com or give us a call. As always, we would like to know How Can We Help? Have a great day and hope to hear from you soon!