Postmaster General Louis DeJoy’s new plan for USPS: Slower mail and higher prices, sources say

WASHINGTON - Postmaster General Louis DeJoy is preparing to put all first-class mail onto a single delivery track, according to two people briefed on his strategic plan for the U.S. Postal Service, a move that would mean slower and more costly delivery for both consumers and commercial mailers.

DeJoy, with the backing of the agency’s bipartisan but Trump-appointed governing board, has discussed plans to eliminate a tier of first-class mail — letters, bills and other envelope-sized correspondence sent to a local address — designated for delivery in two days. Instead, all first-class mail would be lumped into the same three- to five-day window, the current benchmark for nonlocal mail.

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That class of mail is already struggling; only 38% was delivered on-time at the end of 2020, the Postal Service reported in federal court. Customers have reported bills being held up, and holiday cards and packages still in transit. Pharmacies and prescription benefits managers have told patients to request medication refills early to leave additional time for mail delays. The agency has not disclosed on-time scores yet in 2021.

The new service standards are part of a strategic plan that DeJoy, a former logistics executive and major Republican donor, is set to roll out in the coming days. While the change is not expected to have a significant impact on local service, the people said, they have commercial mailers, including banks, insurers, retailers and publications, worried they may aggravate existing slowdowns for nonlocal mail.

The plan also prevents first-class mail from being shipped by airplane, said the two people, who spoke on the condition of anonymity to discuss confidential conversations, forcing all of it into trucks and a relay of distribution depots.

The operational shifts would coincide with a push for significantly higher postage rates - which DeJoy has said was "imminent" - after the agency lost $9.2 billion in 2020 due to steep, pandemic-related declines in mail volume. It also has $188.4 billion in liabilities, the bulk of which is tied to pension and retiree health care obligations. Leaders have long sought to raise new revenue and, in 2021, are expected to pursue the first big postage rate increase in more than a decade, which could add up to a 9% jump compounded annually.

"The service standards they have today have never been enforced. Customers are not getting the service they pay for already," said Michael Plunkett, president and chief executive of PostCom, a national postal commerce advocacy group. "Before degrading service even more, I truly hope there's something more valuable and impressive in that plan."

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DeJoy in an emailed statement declined to discuss his plan, saying it was not finalized. He said Postal Service leaders had discussed the proposal for eight months and that any new operations would retain six- and sometimes seven-day delivery. The board of governors, he said, backs the proposed policies.

"This work is not only needed, it is long overdue," DeJoy said.

Congressional Democrats are pushing President Joe Biden to overhaul the Postal Service's leadership by filling the four open seats on the governing board. Such a move would create a majority bloc of Democrats with the votes to unseat DeJoy, if desired. Otherwise, Biden cannot directly intervene in postal operations; mail policy is insulated by law from elected officials to prevent politicians from tinkering with the mail.

In a statement Monday, the White House said Biden was focused on filling the board vacancies with nominees who "reflect his commitment to the workers of the U.S. Postal Service - who deliver on the post office's vital universal service obligation."

Mail industry experts say the postal economy runs on a system of elasticity, where the Postal Service relies on large injections of first-class mail volume from large clients to support its hulking national infrastructure and keep prices low for residential customers who increasingly have less use for the mail service.

The delivery slowdowns coupled with price increases, mailing industry officials say, could threaten that system by driving commercial mailers to cut costs and pull more volume out of the mail stream. In the long run, that could force the Postal Service to increase postage rates on the customers left in the system - including small businesses, seniors and people with disabilities - or to further cut service.

The Postal Service spent more than $457 million flying first-class mail in 2020, according to data it filed with the Postal Regulatory Commission, and spent $314 million transporting mail by truck.

"If suddenly some of your best customers quit putting things in the mail," said James O'Rourke, a professor of management at University of Notre Dame, "or they decide they can do it faster, better, cheaper another way, then the post office has this huge infrastructure and the demand is not supporting all of it."

A former Postal Service executive, who asked not to be identified because the person still works in the mailing industry, said it was unclear how much the agency could recoup by eliminating air transport for first-class mail, because the savings would depend on how much additional volume its trucking operation could handle without additional cost.

But even a 50% savings may not be enough in the long term to offset lost revenue from continuing volume declines made worse by the service cuts, the person said. The agency will continue to contract with air traffic vendors to transport packages and priority mail.

"The savings they're going to get out of this isn't a lot compared to what they're going to do to customers," the person said, "and that's assuming they implement everything right, which they never do."

Mail customers already are struggling with existing delays. Marlene and Aaron Pulhamus, a married couple in their 80s in Salisbury, Md., say they have been assessed $117 in credit card late fees because of mail delays. They've had Christmas packages lost and then found two months later, delays on letters. They also receive prescriptions through the mail, but those have so far arrived on time.

"We're seeing nothing but political hanky-panky going on," Aaron Pulhamus said. "For political reasons, they've created a situation where we're caught between a rock and a hard spot, and we just can't deal with it."

"We're senior citizens, and senior citizens depend on that contact," Marlene Pulhamus said. "I probably could walk to California if they're going to send it by truck. I mean, that's ridiculous. No mail service? Do they want everyone to use email? They're trying to get rid of people."

DeJoy and Ron Bloom, the chairman of the Postal Service Board of Governors, are set to testify Feb. 24, before a House panel on a reform bill and funding request for the agency. Letters sent to witnesses by the House Oversight and Reform Committee asked them to come prepared to discuss "legislative proposals to place the Postal Service on a more sustainable financial footing going forward while preserving the delivery performance standards on which the American people rely."

In an earlier hearing on the Postal Service in August, Democrats pressed DeJoy on service cuts, especially with the November election months away and heavier reliance on mailed ballots because of the pandemic. DeJoy had already begun discussing eliminating air transportation for first-class mail before the hearing, according to four people familiar with internal agency discussions, and modifying delivery windows to allow more time for transportation.

Democrats in that August hearing assailed DeJoy over the delays. Rep. Stephen Lynch of Massachusetts banged his fist on the lectern while growling at the postmaster general, “What the heck are you doing?” Rep. Katie Porter of California quizzed DeJoy on postage prices; he was largely unable to answer her questions.