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

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

Giving testimony to the US House of Representatives Oversight & Government Reform Committee yesterday (11 May), US Postmaster General Megan Brennan repeated her view that the US Postal Service’s (USPS) financial situation is “very serious but solvable”. Brennan added: “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 revenue 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.”

On the subject of “legislative reform”,  Brennan commented: “We are now entering the 10th year since the enactment of the Postal Accountability and Enhancement Act of 2006 (PAEA). At the time the PAEA was enacted, we had just finished fiscal year 2006, in which we delivered 213 billion pieces of mail; last year, we delivered 154 billion pieces, a 28 percent decline. Unfortunately, the PAEA did not establish a business model with sufficient flexibility to enable us to effectively respond to this unanticipated precipitous volume decline.

“Rather, as a result of this law, the Postal Service is subject to statutory and regulatory constraints that make it impossible to maintain financial stability while achieving our primary mission of providing prompt, reliable and efficient postal services and meeting our other legal obligations. The PAEA imposed an inflexible price cap that has proven to be completely unsuitable in an environment characterized by declining mail volumes — particularly in First-Class Mail, which provides the greatest contribution to covering our institutional costs, including the costs associated with the ever-expanding number of U.S. delivery addresses.

“In addition to having limited ability to generate revenues under the price cap, we have limited ability under the PAEA and other laws that place obligations on us to control our major cost drivers, such as our network costs and our pension and retiree health care benefits.”

Brennan continued: “The Postal Service is required to maintain an extensive network necessary to process and deliver the mail to every address six days a week. The cost of that network is largely fixed or growing, regardless of volume. However, less volume and limited pricing flexibility means that there is less revenue to pay for that network. In addition, the PAEA imposed a major burden on us through its accelerated schedule for prefunding our retiree health care benefits liability. While this schedule may have been considered manageable at the time the PAEA was enacted, volume trends and revenue impact since that time have upended that belief.”

Click here to view the full text of Brennan’s written testimony.

 

 

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