Headwinds Brewing in Washington as USPS Says Its Ending Saturday Mail Delivery

Andrew Klips  |

If you’re eyeballing your mailbox on Saturdays for that letter from Grandma, a payment, a bill that you just can’t wait to pay or some other items that the United States Post Office delivers, come August you can stop looking.  According to the USPS on Wednesday, the mail service plans to end delivery of first class mail (e.g. magazines and direct mail) in the first week of August in an attempt to save some much-needed money.

Meanwhile, delivery of packages and prescriptions will still be performed on Saturdays and post office hours will not change, according to USPS today.  Package delivery was a rare point of growth for the USPS in fiscal 2012, increasing almost 9 percent from the year prior.

After years of posting significant losses, including a record $15.9 billion loss in fiscal 2012, the agency is embarking on an aggressive plan to cut costs and estimates that eliminating Saturday delivery will save about $2 billion per year.  Losses swelled in 2012, up from $5.1 billion in fiscal 2011.  In November, the USPS said that it is expecting a $7.6 billion loss for 2013.

It costs the USPS about $250 million each day to operate.

The debt-riddled Postal Service blames the losses in part on declining mail volumes as more people have gone digital for communications and bill paying as well as a law from 2006 that mandated the company make large payments into a fund for future retiree health benefits.

Subscribe to get our Daily Fix delivered to you inbox 5 days a week

Joe Corbett, Chief Financial Officer at USPS, warned late last year that the agency could be cashless by October 15 at the rate it was going.  Postmaster General Patrick Donahoe said at the same time that it was “critical” for legislation to be passed to help the 237-year-old institution restructure to avoid defaulting for a third time on payments to the government.

Much like other political wrangling in Washington, no bill could be agreed upon after lengthy deliberation; leaving the USPS to take matters into its own hands after previously saying that they needed permission from Congress to make changes.  Although considered independent, the USPS is overseen by Congress, which provides funding that has kept Saturday mail deliveries alive, even though the USPS has been wanted to stop them for years to save money.

Postmaster General Donahoe said today that the move is “absolutely necessary” as part of a broad plan to stabilize the company.

The catch here is that the Postal Service is making the reforms without any legislative changes on the premise that there is no law requiring Saturday delivery and the funding measures from Congress will expire at the end of March.  The headwinds in Washington are already starting to build against the move with Democrats and Republican voicing their opinions.

Oklahoma Republican Senator Tom Coburn called the move “common sense” to save money, while Maryland’s Elijah Cummings, the Democrat leader on the House of Representatives' Oversight Committee, believes that legislation should dictate delivery days, not an “arbitrary action by the Postal Service.”

President Obama has in the past been a supporter of eliminating Saturday deliveries, according to Senator Coburn.

It looks like there could be another battle brewing in our nation’s capitol that may – or may not – allow Saturday deliveries to come to an end.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.


Symbol Last Price Change % Change