Statement for the Record of

Thomas A. Schatz

President, Council for Citizens Against Government Waste

Before the House Committee on Oversight and Accountability.

“Oversight of the U.S. Postal Service”

December 10, 2024

Mr. Chairman and members of the subcommittee, my name is Thomas A. Schatz, and I am president of the Council for Citizens Against Government Waste (CCAGW).  CCAGW was founded in 1984 by the late industrialist J. Peter Grace and nationally syndicated columnist Jack Anderson to build support for implementation of President Ronald Reagan’s Private Sector Survey on Cost Control, also known as the Grace Commission, recommendations and other waste-cutting proposals.  Since its inception, CCAGW has been at the forefront of the fight for efficiency, economy, and accountability in government.  CCAGW has more than one million members and supporters nationwide, and, over the past 40 has helped save taxpayers $2.4 trillion through the implementation of Grace Commission findings and other recommendations.

CCAGW has long been concerned about operations at the United States Postal Service (USPS) and has made recommendations to make it more effective and efficient, beginning with the Grace Commission report on the USPS. 

On March 23, 2021, USPS Postmaster General (PMG) Louis DeJoy released the Delivering for America (DFA) Plan.[1]  The stated goal of the DFA plan is to transform the postal service and reduce costs.  However, the DFA plan has routinely fallen short of its goals, including estimates of profit and loss.  Instead of breaking even as the DFA said would occur, on November 14, 2024, the USPS reported a loss of $9.5 billion for Fiscal Year (FY) 2024, which is 46 percent greater than the FY 2023 loss.[2]

Rather than moving toward break even, the DFA plan is leading the USPS in the wrong direction, including by converting more than 190,000 flex employees to permanent status.  This has increased the strain on retiree health and pension liabilities not only now but also in the future because the USPS cannot terminate full-time employees without cause.[3]  Including wages and benefits, this will nearly double the cost of the retiring workers who needed to be replaced.[4]  Putting this decision in perspective, Sen. Rand Paul (R-Ky.) asked PMG DeJoy during the December 5, 2024, Senate Homeland Security and Governmental Affairs Committee hearing on the USPS whether he had ever heard of a private business where 80 percent of what they are doing to make money is declining that would hire more people.  

CCAGW recommends that for now, to help remedy this issue, that the USPS implement a hiring freeze for all non-delivery carrier positions.  While the excessive hiring may not be eversible immediately, the workforce can be eventually reduced by a hiring freeze and aggressive attrition.

According to the USPS Office of Inspector General, there are more than half a million career employees at USPS, and more than 700,000 retirees currently receiving a pension from USPS, costing the USPS $10 billion in 2023 alone.  Between the Civil Service Retirement System (CSRS) retirements and the Federal Employee Retirement System (FERS) retirees from the USPS, the current funds do not fully cover future amounts owed to retirees.  Unlike other federal agency employees whose annual appropriations contribute to either the CSRS or FERS, the USPS must pay retirement contributions using agency revenues, which as currently managed constitutes an unfunded liability.[5] 

Under existing law retiree funds must be invested in low-yield Treasury securities, which has an average return of about 3 percent.  A conservative 60/40 stock/bond fund would double that return to 6 percent, which could provide $9 billion for postal operations after making the same payments to Treasury.  Congress should allow the USPS pension plans to be invested in higher yielding stocks and bonds.

            Congress should also ensure that the USPS require anyone engaged in postal union negotiations to be fully aware of and consider the financial condition of the USPS.  This would help prevent the outcome of the negotiations from negatively impacting the finances of the USPS.  Indeed, USPS hasn’t even gone to binding arbitration in a long time and recent labor contracts agreed to by the Postal Service certainly don’t look like the type of deal an agency in financial crisis should sign.

A nationwide postal delivery network is and remains a significant part of the nation’s political, social and economic infrastructure.  Delivering mail and packages at affordable rates are essential for businesses, seniors and consumers living in rural and remote communities across America.  However, current USPS plans disadvantage and discriminate against those living in rural America, contrary to its constitutionally mandated purpose and centuries of American experience.  The USPS currently charges more and delivers longer and less reliably to rural areas with the new performance target set at only 80 percent for 3–5-day deliveries.  The USPS should treat all addresses the same, whether they are in a large urban hub, or in a remote location.

The USPS can also reduce costs by closing excess postal facilities that are not being used and stop future funding of new processing plants and logistics facilities.  The USPS has decided to insource these projects rather than outsource them to the private sector, which after analyzing the proposed costs would likely be able to complete the job more efficiently and cheaply.  Instead of building these new facilities, the USPS should be building new relationships and partnerships with private sector companies that have stimulated mail and package growth.

            Government agencies are frequently trying, often at the encouragement of a member of Congress, to waste valuable resources on building or developing something that is already available and functioning well in the private sector.  The USPS should avoid insourcing non-governmental functions like transportation and working to develop its own information technology solutions. 

Contracting with the private sector for non-essential government functions will get everything done cheaper and faster.  This is the fundamental principle behind OMB Circular A-76, which clearly states, “In the process of governing, the Government should not compete with its citizens. … In recognition of this principle, it has been and continues to be the general policy of the Government to rely on commercial sources to supply the products and services the Government needs.”[6] 

PMG DeJoy said that this he is in charge of the “biggest insourcing ever in America.”[7]   But this is not a private business where competitive marketplace forces are at work.  The Postal Service is forcing work and functions in-house that are more efficiently provided by the private sector and for mailers and shippers this means higher prices and slower service.  Sen. Paul made the point at the recent hearing that an entity in a declining market should be outsourcing all nonessential activities.

In addition to the insourcing, the USPS raised rates 40 percent on average and 70 percent for lightweight parcels given to the Postal Service for final mile delivery.  The USPS also announced that it was ending contracts for shippers who gave their products to the Postal Service for final mile delivery.[8]

Postal insourcing harms businesses that are currently offering better services as well as small businesses, seniors, and consumers who rely on USPS for affordable mail and package delivery services, including mail order medications and ecommerce goods.

            As noted in a November 14, 2024, blog post, “The USPS is not only losing money, but also failing to meet any of its mail service standards anywhere in the country, even after it had previously lowered them to make them easier to meet.[9]  There are reports of disastrous service in certain areas, especially where the Postal Service has re-routed mail and rolled out big new centralized processing facilities.[10] … Fundamentally, the Postal Service needs to focus on improving final mile delivery to Americans across the country, which is its core competence and unique role.  Congress codified this mission in the Postal Service Reform Act of 2022 by requiring the delivery of mail and packages together in an integrated delivery network to everyone everywhere six days a week.  The proposed changes threaten to further degrade service, and the Postal Service now seems to claim it has a mandate to build and require everyone to use its own integrated processing and transportation network.”[11]

            Again, on behalf of the members and supporters of CCAGW, I appreciate the opportunity to submit this testimony for the record.  If you have any questions, please feel free to reach out to me or CCAGW Federal Government Affairs Manager Eric Maus.