THE BLOG
06/20/2010 05:12 am ET Updated May 25, 2011

The Postal Service's Fiscal Crisis and Future Viability

For more than 200 years the United States Postal Service has connected Americans, facilitated commerce and provided good paying jobs for millions of Americans. As a result of postal workers' high level of service, the Postal Service has become one of the most trusted organizations in America. But the Postal Service's tradition of service is under more pressure than ever before due to a financial crisis jeopardizing its viability for years to come.

In the last three years alone, mail volume has fallen off a cliff, from 213 billion pieces in 2006 to 177 billion pieces in 2009, driving down Postal Service revenues at a time when their health care and pension obligations are increasing. In response to these problems, the Postal Service has cut jobs through attrition and put many cost saving measures into place to help address the issue. Unfortunately, a comprehensive strategy or business model that puts the Postal Service on a sustainable path has yet to be implemented.

To get to the bottom of this issue, the House Committee on Oversight and Government Reform held a hearing last week to examine the status of the Postal Service, and evaluate recent reports from the Government Accountability Office (GAO), the Postal Service Inspector General and the Postal Service on short and long-term strategies for the financial viability and stability of the USPS.

GAO's report on the postal business model, required by the 2006 postal reform law, determined that the USPS business model is unfeasible since it prohibits mail service from sufficiently reducing costs in response to declining mail volume and revenue. GAO recommended solutions that fell into three broad categories: reducing compensation and benefits costs, reducing some operations and network costs and generating revenues through product and pricing flexibility. It is worth noting that due to the financial crisis at the Postal Service, GAO issued this report a year earlier than was required by the 2006 postal reform law.

The committee also examined the USPS Inspector General's report entitled "The Postal Service's Share of CSRS Pension Responsibility." The IG argued that the USPS has overpaid into the Civil Service Retirement System by as much as $75 Billion. Employees who worked for both the old Post Office Department before 1971, and the independent Postal Service after 1971, receive pension payments that are funded by the federal government and the Postal Service.

If these findings are correct, it puts the changes to the USPS business model in a whole new light because the Postal Service would be able to fully fund its retiree health care obligations for the next 75 years if it was allowed to access the funds. Congress could then relieve the Postal Service of its requirement to pay an average of $5.5 billion into the health care trust fund for future retirees until 2016. Taken together, these two steps would put the Postal Service on much firmer financial footing.

Finally, the Committee examined a Postal Service report entitled "Ensuring a Viable Postal Service for America: An Action Plan for the Future," which explained strategies for the Postal Service to cope with its ongoing fiscal challenges. At the hearing, Postmaster General John Potter's testimony focused on the report that highly recommends cuts in service as a way to deal with the budget shortfalls. The report concluded that without bold, decisive and comprehensive action the Postal Service will face "continual financial peril." Furthermore, the report states that without further action to rein in costs by Congress and the USPS, the Postal Service will face a dramatic budget shortfall of $238 billion in the next decade.

Evaluating these reports is an important part of the thorough review needed to find solutions that will ensure the Postal Service's viability. We still need to get a firm handle on how much would be saved by eliminating a day of delivery and a better understanding of the impact of this proposal on customers and the postal workforce. Furthermore, we need a model for change that carefully balances the economic needs of the Postal Service with its core mission and ensures that economic and social issues are fully addressed in all future business and policy decisions.

Until we find solutions for the Postal Service and all those who rely on it, we will continue to look closely at this issue. The Committee is looking to bring together experts and interested parties in a policy forum later this year, and we will continue to work hand in hand with the Postal Service to protect retiree pensions and to put the Postal Service on a sustainable path.