Business & Economy

About 40 percent of post offices operate in the red. Could banking services bring in more money?

The U.S. has more than 31,000 post offices, but a recent report found that 42% of them were not generating enough revenue to cover their expenses in 2019. Here's a post office in Mission, S.D.
The U.S. has more than 31,000 post offices, including this one in Mission, S.D., but a recent report found that 42 percent of them were not generating enough revenue to cover their expenses in 2019.
Stephen Groves | AP

America has a lot of post offices — over 31,000 in fact. Most sell enough stamps and other services to cover their costs, but many, especially those in rural areas, do not.

Some 42 percent of the nation's post offices were underwater in 2019, not generating enough revenue to cover their expenses, according to a report released last month by the U.S. Postal Service inspector general. Half of those that didn't cover their costs are within 5 miles of another post office.

So, are there too many post offices?

"The short answer is no," says Paul Steidler, a senior fellow at the right-leaning Lexington Institute who studies the U.S. Postal Service. He says the agency looked at the issue a decade ago.

"Patrick Donahoe, the postmaster general at the time, proposed closing 3,700 post offices, about 12 percent of the number that are in the country today. And frankly, there was a firestorm of bipartisan, intense congressional opposition to this."

One reason for the bipartisan backlash is because rural post offices tend to be situated in red state America.

Rather than shutter offices, the Postal Service settled instead for service cutbacks, according to James O'Rourke, a professor at the University of Notre Dame's Mendoza College of Business.

"What they did was leave them open and reduce operating hours, to about six hours, in some cases four and even as few as two hours at some post offices," O'Rourke says.

The inspector general's report says the Postal Service hasn't taken any further steps to make more money at its retail operations but does have several options at its disposal.

There is a congressional subsidy available for rural post offices of $460 million per year, but the inspector general report says the agency hasn't requested the reimbursement since fiscal year 1982. The Postal Service told the inspector general it does not request the subsidy because it prefers to be financially self-sufficient, and that even if it did, the amount would not be enough to cover the cost of providing service to rural customers.

The search for new lines of revenue

Experts say there are other services it could be providing, such as selling hunting and fishing licenses, leasing parts of its buildings — or O'Rourke says, getting into banking.

"Access to safe and affordable financial services I think is vital, particularly among low-income families," he says. "It's something the Postal Service could do very easily. They've got the locations. They have clerks that are trained in accepting and managing money, and they have a focus on customer service."

The Postal Service already sells money orders, and a group of Democrats in Congress has proposed expanding this service through a pilot project to provide low-cost check cashing and fee-free ATMs at six rural and six urban post offices.

At a recent news conference, Rep. Alexandria Ocasio-Cortez, D-N.Y., celebrated the work of the Postal Service and spoke about a plan to find new sources of income.

"The Postal Service is awesome. We love the Postal Service, Americans love the Postal Service, they want to protect the Postal Service, they want to expand the Postal Service."

The proposal, Ocasio-Cortez says, would raise more than $1 billion for the Postal Service, "so everyone from our babies to our seniors can continue to enjoy the services that they provide."

It's not clear how much support the Democratic plan has in Congress. The Lexington Institute's Steidler says he thinks the proposal is ill-advised but says post offices have a value beyond their profit margins.

Post offices, he says, "especially in rural areas, tend to be a part of the town's identity" and "part of the town's history." He says many are old and "have very iconic and, you know, beautiful architecture. So there's a value there beyond, how much they make or don't make."

The Postal Service is also a crucial lifeline for many people in rural America. Mail carriers often deliver packages the last mile for other shippers, along with prescriptions. In many rural areas, post offices can also serve as a town gathering place.

In response to the inspector general's report, the Postal Service says current law forbids it from closing small post offices just because they're operating at a deficit, although the agency's recently released 10-year plan says it might propose consolidating a small number of post office branches in urban areas.

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