(US)Postal Service facing financial crisis
The U.S. Postal Service is facing a deficit likely to exceed $2 billion in the fiscal year ending Sept. 30, the agency’s governors warned President Bush.
The agency is confronting a financial crisis “that cannot be averted by
better management alone,” the governors stated in a letter dated March 2.
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the law is “hopelessly outdated,” the governors said.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, an agency that oversees the
Postal Service. The commission 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. In effect, they
have kicked the ball back into the commission’s court. 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 email 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.
William Armbruster can be reached at [email protected]
JOURNAL OF COMMERCE, 06th March 2001
