There is a lot of misinformation out there about coronavirus. We sort the facts from falsehoods.
The claim: The US Postal Service will shut down by June and be replaced by corporate partnerships.
Amid the economic fallout from the COVID-19 pandemic, an already beleaguered US Postal Service faces a daunting financial situation while rumors spread about the agency’s potential shutdown.
On April 5, a Facebook user shared a post claiming that the USPS would shutter in June. The post, which also describes secret plans by major corporations and the federal government to capitalize on USPS’s demise, has been shared over 250 times.
“All packages and bulk items will now be picked up at your home or place of business by Fed-Ex, the small items will be taken by you to …Wal-Mart. What? You can’t mail packages at Wal-Mart? Not yet….” the post alleges.
Specific claims about how workers will be treated in the prospective layoffs are also made, including that “All the 600+ thousand current employees will be given a one year’s severance package with 1 year’s benefits. Those employed for 20+ years will be given no retirement package.”
The Facebook user did not respond to a request for comment.
The post also cites a Fortune story that details alarms raised by some officials about the health of the Postal Service. “With a negative net worth of $65 billion and an additional $140 billion in unfunded liabilities, the USPS originally expected to run out of liquidity by 2021 without intervention,” the story reads.
“That has accelerated rapidly because of COVID-19. Fewer people and businesses are sending mail because of the outbreak, which could hasten the decline of the Postal Service and close its doors as early as June, officials warned.”
The finances of the USPS and COVID-19
The US Postal Service was already hurting financially before COVID-19 ravaged the economy. The agency, which relies on fees rather than taxpayer funds to finance itself, has seen rising net losses in revenue for over a decade.
The coronavirus pandemic has exacerbated the trend, with lawmakers and USPS officials raising alarm. According to reports from the agency, the total volume of mail delivered during the week of March 29 is down a quarter from the same time in 2019. While deliveries of packages were up 11.7% over the same period, the acute losses have raised concerns.
“As the Postal Service continues to spend resources in response to this crisis, the national decline in economic activity has led to a rapid drop in mail volumes and a significant loss in needed revenues, which puts our ongoing ability to provide our vital federal service at risk,” U.S. Postal Service spokesman David Partenheimer said in a statement to USA TODAY.
The price of delivering mail has also risen: The agency is bearing the cost of equipping its workers with personal protective equipment like masks and gloves as they continue to operate amid a global health crisis.
“There is no question that the post office at the national level has put serious effort into protecting the health and safety of workers during this exceptional time,” said Mark Dimondstein, president of the American Postal Workers Union, which represents over a third of USPS’s 600,000 employees. “But the post office has to fund these provisions out of its existing funding,” he cautioned.
“It has become clear that the Postal Service will not survive the summer without immediate help from Congress and the White House,” a March 23 statement from Reps. Carolyn B. Maloney and Gerry Connolly reads. The press release also notes Postal Service officials have warned that without aid it “could be forced to cease operations as early as June.”
“We will continue to work with policymakers in the months ahead to ensure that Americans have access to the mail during this critical time in our nation’s history,” they continue.
The agency reported a loss of $748 million in the first quarter of 2020, citing “systemic profitability challenges due to our restrictive business model and mandated costs.” USPS also reported a loss of $8.8 billion in fiscal year 2019, which was itself nearly more than double its losses for the year prior.
“We now estimate that the COVID-19 pandemic will increase the Postal Service’s net operating loss by more than $22 billion over the next 18 months, and by over $54 billion over the longer term, threatening our ability to operate,” said Megan Brennan, the Postmaster General and CEO of USPS, in a statement Thursday.
“The ask of the postal board of governors, the postal unions and even major mailers is very specifically requesting that Congress address the huge negative impact that this pandemic is having,” Dimondstein said of the situation, adding that without relief the agency would not be able to finance operations or compensate workers.
The agency has not announced it will cease operations. A liquidity crisis, or lack of on-hand cash, would hamstring the agency’s ability to function and likely lead to a far higher debt burden.
The postmaster general’s own comments imply that such a crisis would force the USPS to borrow heavily to finance itself. While debilitating, especially without intervention from the federal government, that situation does not automatically mean the US Postal Service would be forced to shut down because of its troubles.
“As Congress and the Administration take steps to support businesses and industries around the country, it is imperative that they also take action to shore up the finances of the Postal Service and enable us to continue to fulfill our indispensable role during the pandemic, and to play an effective role in the nation’s economic recovery,” Brennan also said of the Postal Service’s situation.
No private takeover
USPS denies claims that private companies are expected to take over operations from the agency.
“Predictions of the Postal Service’s imminent collapse are dramatically overstated,” said Michael Plunkett, president and CEO of the Association for Postal Commerce, an advocacy group for the mail industry.
“Private-public partnerships are already a prominent feature of the US postal system. Our members produce, transport sort, and track mail on behalf of their business clients and work closely with the Postal Service,” Plunkett added.
FedEx declined to comment on its corporate development activities, however, said it “has long supported reforms that would give the U.S. Postal Service the ability to adapt and prosper in a rapidly changing market with ever-shifting customer needs,” in a statement to USA TODAY.
Walmart did not respond to requests for comment.
The U.S. Postal Service has been designated as an essential service in emergency orders across the country. The $2 trillion stimulus package enacted by the federal government to ease economic fallout from the virus included a $10 billion loan to the USPS, though there was no direct funding.
On Thursday, the Postal Service Board of Governors requested Congress approve $75 billion to the USPS through a mix of direct cash, grants and loans that would be used for alleviating the current crisis and upgrading aspects of the agency.
Our ruling: False
The coronavirus pandemic has seriously impacted the financial stability of the U.S. Postal Service, to the point that the agency is expected to run out of cash on hand sometime this summer. It is unlikely, however, that whether without intervention the agency would shut down completely. Experts and advocates close to the industry, while cognizant of the urgency of the situation, are skeptical of closure. Claims that private firms will take over the agency’s operations are also baseless. We rate this claim FALSE because it is not supported by our research.
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Our fact-check sources:
- USA TODAY, Trump signs $2 trillion coronavirus stimulus intended to halt economic meltdown
- Mar. 23 Statement from Reps. Connelly and
- USPS Statement on COVID-19
- USPS Financial Report for FY19
- USPS Statement on First Quarter Finances for FY20
- Government Executive, USPS Requests $75B in Emergency Funds to Keep Agency Alive
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