GAO calls for aggressive action to remedy financial condition of the USPS

WASHINGTON—Following a July 2009 report in which the Government Accountability Office (GAO) added the United States Postal Service (USPS) to its “High-Risk List” of federal areas in need of transformation, a March GAO report cited the need for the USPS to consider various restructuring steps to stem its significant revenue and volume declines that it has incurred in recent years.

The GAO report noted how USPS mail volume has declined by 35 billion pieces—or 17 percent—from fiscal years 2007 to 2009, losing $12 billion during that span. It also mentioned how the USPS does not expect total mail volume to return to its previous level when the economy recovers, forecasting that total mail volume will decline to 167 billion pieces in fiscal year 2010—its lowest level since fiscal year 1992 and 22 percent off its fiscal year 2006 peak.

A reason for these declines is due to a shift from traditional mail delivery to electronic communication alternatives, including e-mailing business documents and online purchase ordering.

The GAO stated how the USPS expects to borrow $3 billion in fiscal year 2010, which would bring its total outstanding debt to $13.2 billion. And by fiscal year 2020, the USPS is projecting that total mail volume will further decline by 16 percent to its lowest level since 1986.

“Action is urgently needed in multiple areas by USPS and Congress to address USPS’ pressing challenges so that it can achieve financial viability, including restructuring USPS operations, networks, and workforce to reflect changes in mail volume, revenue, and use of mail,” said the GAO in the latest report. “The longer it takes for USPS and Congress to address USPS’ challenges, the more difficult they will be to overcome.”

The USPS is fully aware of its myriad challenges, and on March 2 released a report that addressed key areas that would make it a more financially viable entity, including:

• restructuring retiree health benefits for as many as 800,000 retirees, even though it only has an active work force of 596,000 career employees. Left uncorrected, that bill will reach $4 billion next year;
• adjusting delivery days to better reflect current mail volumes. This likely would mean the end of Saturday home delivery, although most of its 32,741 post offices would remain open that day; and
• establishing a more flexible work force to respond to changing demand patterns. More than 300,000 of its 596,000 career employees are expected to retire in the coming decade.

“The USPS finds itself on a course that is not sustainable,” said Louis J. Guiliano, chairman of its board of governors. “These challenges can be overcome, but overcoming them will be an enormous undertaking.”

The USPS maintains that cutting Saturday delivery would provide an annual savings of about $3 billion, whereas the Postal Regulatory Commission in 2008 estimated it would result in roughly $1.9 billion in savings.

Cutting weekly delivery days from six to five raised several questions by the GAO, including how it would impact the USPS’ efforts to grow mail volume and encourage commercial mailers to continue using the mail; as well as how it would affect mail processing costs, salary, and benefits for mail processing employees and carriers.

USPS Deputy Postmaster General and Chief Operating Officer Patrick Donahoe explained that the USPS has seen a 23 percent decline in mail volume since the end of 2006, which has forced it to “look very seriously” at this measure. He added that a slowly improving economy may help temper falling volumes somewhat, but at the same time the USPS is not forecasting a substantial volume uptick.