USPS Financial Projections Show a Need to be Recalculated

As was widely reported last month after the Postal Service released it financial results for Fiscal Year 2023 (October 2022 through September 2023), the third year of Postmaster General Louis DeJoy’s 10-Year Plan, the agency’s anticipated and actual financial performance numbers are far apart.

Projections

On page 46 of The Plan, the agency charted its projected net losses totaling $159.8 billion, on total revenue of $705.8 billion, over the FY 2021-2030 period.  On pages 49-50, those data are recast to reflect the presumed benefits of the initiatives contained in The Plan.  The text of The Plan did not detail either how the figures were developed or the bases for the projected revenues, expenses, and resulting losses/surpluses. 

Although it’s not stated, readers can readily surmise that the unexplained assumptions underlying the numbers were likely designed to provide sharp contrast, yielding numbers absent The Plan’s initiatives, and after their implementation, that are the least and most positive, respectively.

Concurrently, the USPS has issued an Integrated Financial Plan annually to separately present projected revenue, expenses, and end-of-year results.  As shown below, the annual projections of results as The Plan is being implemented vary from what the agency had at first forecast.

History later revealed how close (or apart) any of the projections were to actual results.

The Postal Service would offer its customary reasons to explain these variances, such as unforeseen electronic diversion, inflation, competition, and external factors such as the workers’ compensation liability and imposed costs.  However, such factors aren’t new, and have been present in the economic environment since well before issuance of The Plan.  Why they seemed so poorly estimated is unknown. Absent public disclosure of how the agency developed the estimates in The Plan, there can be no objective evaluation of how reliable the bases of those projections might have been; the same could be said for its annual IFP numbers.

A do-over

Projections are, by definition, educated guesses but, looking at how divergent the various USPS projections are with both each other and final results, many observers are questioning whether the doomsday 2030 forecast presented in The Plan, and used as the justification for its initiatives, is itself still realistic.  Observers further note that, if The Plan is off in its projections by a significant amount, the value of the initiatives in The Plan, like its assumptions of revenue and expense, also may be, and should be reconsidered accordingly.

For example, in a recent article in FedWeek, Paul Steidler, a Senior Fellow with the Arlington (VA)-based Lexington Institute, asserted that the “Postal Service Needs to Correct Its Financial Projections”:

“The US Postal Service (USPS) needs to scrap its financial projections in the 10-year Delivering for America (DFA) strategic plan issued in March 2021 and take a hard, comprehensive look at how it does financial forecasting.  A complete overhaul appears in order.

“USPS should voluntarily issue new projections for Fiscal Years 2025-27 with a similar level of detail as in the DFA.  By Fiscal Year 2027, if not sooner, USPS could be out of cash, as Postmaster General Louis DeJoy has warned.

“Such new projections are important to the US Congress, which has provided more than $120 billion in assistance to USPS since 2020.  The US Government Accountability Office, Congress’s nonpartisan, independent auditor, and the Postal Regulatory Commission will also be able to better perform their oversight duties of USPS with such information.

“If USPS does not voluntarily provide this information, Congress should demand it and, if necessary, require it by law. …

“Financial forecasting is, by nature, subject to many variables and an inexact science.  But the magnitude of USPS’s misses, and the serious financial challenges it now faces at a time of historic network change underscore the need for a new approach.”

Steidler recommended some specific steps:

“Determining the core reasons for the prior DFA errors.  In other words, what went wrong and why?

“Reviewing econometric models and alternatives that exist and should be implemented.  With rapid, unprecedented changes in USPS’s business and operations, it is essential that the economic tools keep up.  USPS may also need to strengthen its staff in this area.

“More precise product cost measurement.  USPS should implement the recommendations of its Inspector General’s 2014 Greenfield study.  This called for overhauling USPS’s product cost measurement system so it could price products more appropriately, that is cover the products’ costs.  Simply put, if each product is priced correctly, USPS will not have financials losses. …”

Of course, providing a realistic picture – of service, financials, or anything – does not support the PMG’s narrative. Controlling the message, and using selected facts (and excuses) to bolster his now-familiar assertions (and explanations) are core to DeJoy’s opaque prosecution of his agenda.  Because recalculating the financial bases for his Plan might not yield the results he’d prefer, it’s unlikely any reassessment will occur, so the validity of his $160 billion estimate and the actions he’s based on it all will remain untested.

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