Megan Brennan: USPS financial situation is “very serious but solvable”

In her witness statement to a Senate Committee hearing yesterday (21 January), US Postmaster General Megan J Brennan said that the financial situation of the United States Postal Service (USPS) is “very serious but solvable”. Brennan told the US Senate Homeland Security and Governmental Affairs Committee: “We can return to financial stability through the enactment of prudent legislative reform and a favorable resolution of the 10-year regulatory review.

“We will at the same time continue to pursue cost savings in all aspects of our operations, and growth where it is available, particularly in packages.

“These steps will allow appropriate investment in the future of the organization, so that we can continue to provide prompt, reliable and efficient delivery service to the American public.”

Brennan warned, however, that the USPS will not be able to return to financial health without the changes in legislation which she believed to be vital.

“Our debt is at an unsustainable level and while we continue to pursue available management actions to reduce our costs even further, there are limited remaining initiatives that will result in substantial cost savings without threatening our ability to continue to provide prompt, reliable, and efficient postal services,” said Brennan.

“The $5.1bn net loss for 2015 represents the ninth consecutive annual net loss the Postal Service has incurred. We have reached our borrowing limit and have a cash reserve that is wholly inadequate for an organization of our size. ”

Brennan outlined a four-point action plan which she believed would “reflect the adoption of many private sector best practices while maintaining our public responsibilities”.

The USPS proposal would:

• Require Medicare integration for postal retiree health plans;
• Continue the exigent price increase for market-dominant products;
• Calculate all retirement benefit liabilities using postal-specific salary growth and demographic assumptions; and
• Provide some additional product flexibility.

According to Brennan: “With legislation enacted that includes these provisions, the Postal Service can achieve an estimated $27bn in combined cost reductions and new revenue over the next five years. Together with other important initiatives, this would make us financially stable.”

Later in her testimony, Brennan fleshed out what USPS meant by product flexibility: “Our proposal authorizes the Postal Service to provide non-postal services to state, local and tribal governments, as well as new, commercial non-postal services, so long as the PRC concludes that the provision of such services is consistent with a number of requirements.

“Specifically, any such non-postal service must be consistent with the public interest, must not create unfair competition with the private sector, must not unreasonably interfere with the value of postal services, must be undertaken in accordance with all federal laws and regulations applicable to the provision of such services, and must be reasonably expected to improve the net financial position of the Postal Service.

“Our proposal also authorizes the mailing of beer, wine, and distilled spirits under specific conditions. The mailing must comply with all laws that govern the private shipments of alcoholic beverages at both the place of mailing and the place of delivery, and that the delivery can only be made to an adult of 21 years of age who provides a signature and valid identification.”

Wrapping up her presentation, Brennan said: “America deserves a financially stable Postal Service that can continue to play this vital role in our economy and society. In a dynamic and increasingly digital, mobile and device-driven world, the Postal Service has opportunities to enhance the way we enable commerce.

“However, we require the financial ability to invest in the Postal Service’s future. We have presented a path forward that depends upon the passage of a set of legislative provisions. If enacted, the Postal Service can meet all of our obligations and improve the way we serve the American public.”

The hearing also included testimony from:  Robert G. Taub, Acting Chairman of the Postal Regulatory Commission; Lori Rectanus, Director, Physical Infrastructure, U.S. Government Accountability Office; David C. Williams, Inspector General of the USPS; James E. Millstein, Former Chief Restructuring Officer at the U.S. Department of the Treasury and Founder and Chief Executive Officer, Millstein & Co.; Fredric V. Rolando, President of the National Association of Letter Carriers; John “Chip” Hutcheson III, President of the National Newspaper Association; and Kathy Collins, General Manager, Rothschild Mill, Domtar Paper Company.

Presentations from all the witnesses can be downloaded from the US Senate Homeland Security and Governmental Affairs Committee website. Click here to access.