U.S. Postal Service facing $2B deficit
The U.S. Postal Service is facing a multibillion dollar deficit this year, its management said, and is saddled with outmoded rules that leave it unable to compete with private delivery companies.
In a March 2 letter to President Bush, the agency’s governors, warned that it faces a $2 billion budget deficit for the fiscal year ending Sept. 30, calling it a financial crisis “that cannot be averted by better management alone.”
The governors urged the president to lead a bipartisan effort to reform the 31-year-old Postal Reorganization Act.
The rate-setting process mandated by the law is “hopelessly outdated,” the governors said. “Prices for domestic services, which must be cost-based, require approximately 18 months to prepare, litigate and implement. By contrast, our competitors are able to change prices immediately,” the letter said, referring to companies such as FedEx, Airborne Express and United Parcel Service.
The nine governors, all of whom were appointed by previous presidents, noted that they have ordered the elimination or curtailment of non-essential activities and that they have reduced the agency’s capital budget by $1 billion.
The governors also announced that they have rejected the most recent recommendations of the Postal Rate Commission, which oversees the Postal Service, which last month denied a Postal Service request to further increase postage rates by $1 billion above the levels that took effect on Jan. 7.
This was the second time that the governors of the Postal Service, chaired by Robert F. Rider, have rejected the commission’s ruling. If the commission denies the Postal Service’s request a third time, the Postal Service could implement the rate increase if the governors unanimously agree.
The Postal Service’s action takes place at a time when e-mail is posing an increasing threat to regular first-class mail. In addition, competition from the private sector is increasing. Just this week TNT International Express announced that it was launching a domestic service in 14 key metropolitan areas. TNT had previously offered only international services from the United States.
