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GAO urges Congress to “fundamentally” change USPS model

Friday, October 21st, 2011

As the US Senate pulls together a bipartisan bill to “rescue” the US Postal Service, the Government Accountability Office (GAO) has issued a brief new report urging it to “fundamentally change” the USPS business model.

The GAO was responding to last month’s request from Senator Joseph Lieberman, chairman of the Senate committee drawing up postal reform legislation, for details on trends in US mail volumes and possible responses.

Issuing its findings publicly yesterday, the GAO said USPS revenues would continue to decline as First Class Mail volumes are expected to drop 7% a year through 2020.

The USPS is already staring insolvency down the barrel, recording a $10bn net loss for the 12 months up to the end of September 2011.

In its latest report, the GAO predicted that mail volumes would fall from the 171m pieces seen in 2010 to just 127m in 2020, and the USPS revenues would fall over the same span from $67bn to $59bn.

Response to decline

To respond to the long-term decline, the GAO said Congress could either opt to keep the current system but provide USPS with extra flexibility, turn the Postal Service into a government-subsidised federal agency or leave the entire US Mail to the private sector.

In all cases, GAO suggested that the universal service obligation would have to be revised to reflect changing mail use.

If USPS is to maintain its monopoly protection and independence from subsidies, the GAO suggested that it be given more flexibility to compete with private sector rivals in delivery and retail, and have its overbearing pre-funding requirement for future retiree benefits restructured.

The GAO said Congress would also have to allow arbitration of labour contracts to take more account of USPS financial difficulties, while compensation and benefits would have to be revised to reflect conditions in either the public sector or the private sector – not a hybrid of the two.

In its forecasts, GAO said the USPS workforce would have to reduce from the current 570,000 to 425,000 by 2020, while the number of USPS facilities – including post offices and processing plants – would fall from the 36,750 seen in 2010 to 20,200 over the next nine years.

Senate

The Senate Government Affairs Committee is currently working on drawing up a bipartisan bill suitable to be discussed by the full Senate.

Its chairman, Senator Lieberman, said this week that along with Senators Susan Collins, Tom Carper and Scott Brown, he is “working very hard” on the bill, and that he now expected a mark-up by the Committee in early November, once the Senate returns from next week’s recess.

“I don’t know what we’re calling it these days – it’s not a postal reform bill, it’s kind of a postal rescue bill,” he said at a committee business meeting on Wednesday.

“We hope to have an agreement at least on the core bill by the end of the week, and… I’d like to go to a mark-up on that bill some time in the first week or two after we get back in November – it’s urgent.”

House

Over in the US House of Representatives, where a bill has already been marked up in committee, though does not have bipartisan support, three Congressmen said yesterday they will be seeking to add an amendment to protect six-day-per-week delivery.

The Issa-Ross bill, officially known as the Postal Reform Act, seeks to allow USPS to eliminate Saturday deliveries in order to save up to $3bn a year in operating costs. It also proposes various measures to set up two new bodies to take charge of USPS in the event it can no longer pay its bills.

The bill has not yet been scheduled for a full hearing by the House, but Republican Representatives Sam Graves and Jo Ann Emerson, along with Democrat Gerry Connolly, said yesterday that when it is heard, they will offer an amendment to safeguard Saturday deliveries.

Writing to their Congressional colleagues, the Congressmen stressed the reliance by certain groups of the population on six-day mail delivery, noting their belief that rural areas and the elderly would bear a particular burden from loss of Saturday deliveries.

They also cited union claims that five-day delivery would mean the loss of 30,000 to 50,000 jobs among rural mail carriers alone.

“Given the economy and the significant job losses our country is already facing, five-day delivery is a step in the wrong direction,” said the Congressmen. “There are more cost effective and less destructive means of reforming the Postal Service’s business model.”

A letter was also sent to Congressmen, in support of the Connolly-Emerson-Graves letter, by various publishing industry organisations and suppliers, along with dozens of local newspapers fearing the impact of losing their mail distribution channel at the weekend.

Source: James Cartledge, Post&Parcel

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