PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

A New Year and New Opportunity to Fix a Long-Term Problem: USPS Inefficiencies

By at 12 February, 2021, 1:06 pm

SMALL BUSINESS INSIDER

By Karen Kerrigan-

The COVID-19 relief package passed in the waning days of 2020 is providing a lifeline to small businesses impacted by COVID-19. This financial bridge will help many small firms and their employees, but the road ahead remains tough for the small business ecosystem given economic and COVID-19 uncertainties, and new costs or disruptions that could easily force hundreds of thousands of additional small businesses to close their doors for good.

Congress is now working on a supplemental financial support – a targeted one would do fine. It boggles the mind that actions are also being considered that impose new costs and burdens on small businesses (such as a minimum wage hike). The months ahead promise to be bumpy, and new costs and mandates would undermine recovery and economic growth. Legislative efforts need to provide relief, be flexible, targeted, and reduce uncertainties.

SBE Council advocated for key measures that were included in previous relief packages such as tax relief changes, sensible regulatory fixes, and practical updates to the PPP and EIDL loan programs. Given the vast sums of taxpayer dollars involved in these recovery and relief programs, the need for accountability and transparency is critical. This includes PPP/EIDL accountability, as well as oversight of other big spending provisions such as the direct grant of $10 billion provided to the U.S. Postal Service (USPS).

The small business community remains highly dependent on a functional and efficient Postal Service, especially given the “touchless” economy we continue to operate in. To that end, the end-users of USPS services – such as small business owners – have a stake in where the agency is headed.  How will the USPS address longstanding concerns, and how will its leaders spend that big chunk of taxpayer money that Congress allocated to it?

Similar to many labor-intensive and retail-oriented entities, USPS struggled under the weight of the pandemic in 2020. The agency posted a $9.2 billion loss for the fiscal year. Yet, in the decade prior to the pandemic, USPS incurred losses of more than a billion dollars every year, and is now saddled with $160 billion in unfunded liabilities.

Recently, the USPS has shown positive signs in its Q1 financials released on February 9, which reported a $318 million net gain on account of “non-cash workers’ compensation adjustments and a time-limited peak surcharge.” Holiday volumes and cost-cutting helped, as without these factors the loss would have been $650 million.  Moving forward, the American public still needs more transparency from the agency – particularly with package pricing. In addition, service problems continue to plague USPS, which has caught the attention of the entire Maryland congressional delegation, among other elected officials.

A February 9, Fox 5 story reported on “mail delivery problems” that “continue to plague the USPS well after the holiday rush has ended.”  Maryland House and Senate offices are “getting a surge in complaints from people who have gone weeks without receiving mail. Other lawmakers in the District and Virginia are also hearing about alarming experiences from their constituents.”

The Maryland delegation is pushing “for USPS officials to investigate and resolve what they are calling widespread delivery delays.” According to the news report:

“A lot of missing packages have urgently-needed items inside such as prescriptions and medications. Some businesses are also unable to fulfill orders because of delays including North Bethesda Olive & Loom owner, Ferzan Jaeger.”

To stay in business, these small businesses need their packages to be delivered in a timely manner. Customers won’t buy from small businesses, if they don’t receive their packages.

As noted by Fox 5: “The United States Postal Service received $10 billion as part of the COVID-19 Relief Package. Right now, it is not clear how USPS is using the money.”

So here we are. Service issues continue to plague the USPS, and a long history of financial losses does not help to build confidence in their future operations.

As an arm of the federal government, USPS has had access to many resources, including cutting-edge technologies when it comes to processing equipment and digital mailing capabilities. Yet, its business model and management practices remain woefully out-of-step with the realities of the modern marketplace.

The nonpartisan Government Accountability Office (GAO) has consistently reaffirmed the view that a preservation of the financial and management status quo leaves the mission of USPS “increasingly in peril.”  As noted in a May 2020 GAO report to Congress:

“Since GAO’s 2009 high-risk designation, the U.S. Postal Service’s (USPS) financial viability has progressively worsened due to declining mail volume, increased employee compensation and benefit costs, and increased unfunded liabilities and debt.”

Like other watchdogs, the GAO questions the sustainability of the USPS business model and implores congressional action.

For small businesses, a paralyzed or imploding postal system is not acceptable.  And the latest $10 billion cash infusion raises obvious questions. Will service improve? Or, will the $10 billion go straight down the black hole of USPS debt?

Obviously, and urgently, USPS needs to dig deep into its business model and fix the problems that continually drain billions from our government time and time again.

Indeed, solutions are achievable, especially given consumer changes accelerated by the pandemic. In advance of the 2020 holidays, we highlighted the seismic shift in e-commerce and shipping. This is an opportunity USPS must continue to leverage to get its pricing, service issues and financial house in order.

We know that USPS (like most small businesses have been forced to do) can indeed pivot. Recent reforms they’ve made benefitting U.S. businesses demonstrate they have the capability to change. For example, the Postal Service’s new international rate framework came into effect last summer, which provides a huge win for U.S. small businesses that in the past faced hefty shipping disadvantages compared to foreign competitors.

The pandemic has tested many Americans, our health care system and workers, and many small businesses across America.  Being open to change and doing so quickly but intelligently has been key to survival – especially for small business owners.  With all of its resources, the market opportunity that lies ahead, and a new infusion of $10 billion courtesy of U.S. taxpayers, Congress should expect big and bold changes from the USPS in 2021. Those changes should be driven by the need to stop the financial hemorrhaging, acceptable service levels, and the adoption of a business model that supports financial sustainability and the core mission of USPS.

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council. 

 

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