Tuesday, May 17, 2011

BIG’s Blog: The Coming Postal Bailout . . . or Not

The Wall Street Journal’s lead editorial in their weekend edition The Coming Postal Bailout is a must read for every nonprofit fund raising organization in the United States that enjoys the USPS nonprofit postal discount.

“The odds of a multibillion-dollar rescue package went way up this week when Postal Service management reported a $2.2 billion loss for the first quarter, more than 25% higher than last year despite the economic recovery.” WSJ

Now, the casual reader of that statement would think, "Why worry, the feds will bail them out?" But there is more to this . . .

“the Postal Service expects $42 billion in additional losses over the next four years. Mail volume and revenues have suffered what Postmaster General Patrick Donahoe concedes are unprecedented declines since 2006, with projections of another drop of 20 billion letters mailed by the end of the decade . . .” WSJ

So, what would you do if you were trying to shore up the USPS? Cut costs, streamline the organization and automate to avoid insolvency? Apparently that makes too much sense for the management of the Postal Service.

“Instead, Postal Service management recently concluded negotiations offering the 205,000 member American Postal Workers Union a new four-and-a-half-year contract that will provide a 3.5% pay raise over three years, dole out automatic cost of living wage hikes after 2012, and expand no-layoff protections.” WSJ

Does this sound vaguely familiar to you? Hint, think General Motors. Oh, well now you are thinking, “GM ended up carrying out their bankrupsy with government help and the Post Office is way bigger than GM, so this will all work out okay.”

Ah, you might want to think about that again. Yes, GM did fine as did the union. But, GM had a lot of shareholders and bond holders that didn’t do so well. In fact, they got crushed. GM got rid of a lot of debt and could essentially start over and begin to grow thanks to a huge infusion of tax payer loans. But, there was the assumption that GM would make money and always the expectation that GM would pay back the government loans.

The situation with the Postal Service is not the same. Just look at the two most important dynamics of the GM rescue. First, GM cut costs and second, pushed to increase sales, both of which had to happen if they were going to survive.

The Postal Service? First, they just raised their costs (80% of postal costs are for wage and benefits) and second, they are not even pretending that they can grow volume and revenue.

And what is the big issue in Washington DC these days? Isn’t it about how to deal with the ballooning deficit and the national debt? If you’re counting on a business-as-usual bailout of the Postal Service without significant restructuring of how the Postal Service does business; and yes, I am talking about either losing the nonprofit postal discount or outright postal increases, you are seriously underestimating this crisis.

“Thanks to the digital revolution, mail can be delivered with the click of a mouse and snail mail will continue to slowly fade away.” WSJ

This is very serious. If your organization generates a significant amount of your donations via direct mail, you need a new plan now and the good news is that there are viable alternatives.


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