Postal Service: Universal Service at Risk Without Postal Reform

Universal mail service is at risk without statutory reform of the laws governing the Postal Service warned the Postal Service Board of Governors following its strategic planning meeting yesterday.

Universal service is the regular delivery of mail to every address across
the country — from the biggest city to the smallest village — at uniform and
affordable rates. Universal service is a national priority, called for by
Congress since the founding of the nation.

The Postal Service is facing a potential loss of $2 billion to $3 billion
this fiscal year, reflecting the fact that the organization’s costs are rising
at a rate exceeding mail volume and revenue growth. After yesterday’s meeting,
the board asked management to take unprecedented action on additional
cost-control options, including an immediate freeze on capital commitments that will affect over 800 facility projects and significant new reductions in work years and administrative staffing. Management will seek additional opportunities to reduce costs and will report on its progress to the board at future meetings.

Management has also made progress on other actions requested by the board
at its February meeting, including preparing a rate case that the board may
file with the independent Postal Rate Commission this summer, requesting a
postage rate increase of as much as 10 to 15 percent.

“Management has demonstrated tremendous focus and discipline in protecting
the ability of the Postal Service to meet the mailing needs of the American
people,” said Board Chairman Robert F. Rider. “This is demonstrated by
continuing, record service levels and significant increases in productivity.
Regrettably, our call for an additional rate increase, following so soon
after the last one, reflects the fact that the 30-year-old statutory model that
governs the Postal Service is in need of change to protect universal service
at affordable rates.”
Among the fiscal challenges faced by the Postal Service are wage rate
increases that exceed the rate of inflation, escalating fuel costs,
changes in the type of mail being processed, a communications marketplace marked by increased competition, and forecasts calling for the diversion of some
First-Class Mail to electronic alternatives. Employee compensation
accounts for 76 percent of Postal Service costs. The law governing postal
operations provides neither a mechanism to control wage rates nor to adjust postage rates quickly in response to market changes.

The Governors of the Postal Service recently wrote to Administration
officials and congressional leaders, explaining that, “We are taking the steps
within our power to sustain the institution. Long-term solutions, however,
require substantial changes to our regulatory framework.”