It’s official. The United States Postal Service (USPS) has decided to terminate its sponsorship of the U.S. Pro Cycling Team, led by the incomparable Lance Armstrong. The USPS had been the team’s lead sponsor since 1996. Beginning in 2005, the team uniforms will feature the logo of the new title sponsor, Discovery Communications.
Since the USPS renewed its sponsorship contract in 2000, postal management has spent $25 million on the team. Adding $12 million in earmarked advertising expenses, plus charges for sending postal employees on junkets to France, brings the total cost closer to $40 million, or about $8 million a year.
Lance Armstrong is an authentic hero to millions of Americans. Nevertheless, postal managers deserve censure for blowing precious ratepayer dollars on this folly during times of serious financial stress.
It is true that cutting $40 million in costs out of a $68 billion entity facing tens of billions in unfunded future liabilities and trying to cope with shrinking mail volume won’t save it from financial abyss. Indeed, some of the USPS’s problems are statutory and structural, and can be corrected only by deep and dramatic legislative reform and, ultimately, privatization. But the decision to squander even $40 million on the cycling team demonstrates that many of its financial wounds are management driven and, therefore, self-inflicted. Over the years, postal officials have exhibited a pattern of misplaced priorities, poor planning, entrenched inflexibility, and a near-total absence of transparency and accountability.
The USPS is a government-owned monopoly with control over all first-class and standard-mail delivery, and it also enjoys unchecked hegemony over postboxes themselves. It’s obvious to many that the USPS is one dysfunctional government bureaucracy.
Back when the USPS renewed the cycling contract in 2000, it was already seeing mail volume stagnate. It was losing money and feeling the heat of customer dissatisfaction. Yet, during 2000 and 2001, the USPS chose to hike rates three times for its captive customers. Had postal management been operating under normal business incentives it would have been compelled to redirect funding away from nonessential items, like the cycling sponsorship, and into improving its core business: delivering the mail. Instead, postal managers blithely rationalized the continued cycling sponsorship by claiming it boosted postal-employee morale and increased brand awareness.
The USPS claimed that the sponsorship brought in money, saying that it generated $18 million in revenue over a four-year period. However, the USPS Office of the Inspector General (IG) was able to document only $684,000 of that alleged $18 million. The IG also found widespread weaknesses and accounting lapses in all of the USPS’s sports-sponsorship programs. Even if the figure were accurate, only a government bureaucracy would brag about earning $18 million in revenue on a $40 million investment.
Ironically, the market where “brand awareness” might have had a favorable impact as a result of the cycling sponsorship is Europe, where the sport is wildly popular. In Europe, USPS management has complete control over the pricing of its products and services. Though postal management treats cost and revenue statistics for international mail as proprietary information and does not customarily make it available to the public, in 1998, prior to the last cycling-team-contract renewal, the U.S. Postal Rate Commission published a redacted version of that information. It showed that not only was the USPS losing money in Europe, but that those mail services were being cross-subsidized with first-class ratepayer money. The USPS 2003 annual report states that international economy-mail revenues dropped 24 percent between 1999 and 2003 and the number of pieces of international mail the agency handled dropped by a whopping 71 percent. Only government bureaucrats could continue supporting a money-losing venture without answering to shareholders and a private-sector board of directors.
Dropping the U.S. Pro Cycling Sponsorship is long overdue, but it is a largely symbolic and political gesture at this point. Congress is in fact currently deliberating the merits of several postal-reform bills that, if passed, would preserve the agency’s monopoly control over mail, liberalize the rate-setting process, and give current postal management more autonomy to compete in the private sector. It would be somewhat incongruous for postal officials to claim that most of its financial woes are caused by onerous statutory constraints out of their control while they jet off to watch the Tour de France wrap-up in Paris. Based upon the public pronouncements of postal executives about wanting to retain the mail monopoly while they “grow the business,” ratepayers ought to be very concerned that same people who chose to waste tens of millions of dollars on the U.S. cycling team may soon be free to leverage their chronically inefficient and wasteful bureaucracy into new money-losing ventures. The cycle continues.
–Leslie K. Paige is director of special projects at Citizens Against Government Waste.