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GAO Goes Postal on Postal Service
Sweeping reform needed to save the mail, say watchdogs 
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Even with an estimated 8.7 percent postage rate increase set to become effective this June, the General Accounting Office has recommended a total transformation of the economically strapped and beleaguered U.S. Postal Service.

The GAO report "U.S. Postal Service: Deteriorating Financial Outlook Increases Need for Transformation" warns, "If structural issues are not addressed, we believe a crisis will develop to the point when options for action will be more limited and costly. As the incidents of anthrax in the mail indicated, disruptions in mail delivery service can have far-reaching consequences for the government, households, businesses and the general economy."

In Jan. 2001, the Postal Service found itself added to the GAO's feared "high-risk list" of federal agencies in danger of becoming unable to "economically, efficiently, and effectively perform their missions." 

In it's Jan. 2001 "High-Risk" report, GAO warned Congress that the Postal Service "might be headed for financial shortfalls that could, in the long run, hinder its ability to remain self-supporting while carrying out its mission of providing affordable, universal postal services that bind the nation together." 

Despite another postage rate increase last July, and the agency's own best efforts to "Control costs and improve productivity," as recommended by GAO, "financial shortfalls" were exactly what the Postal Service encountered during fiscal 2001, racking up a $1.68 billion operating deficit. So far during fiscal 2002, Postal Service revenues are lagging some $1.5 billion behind projections with mail volumes down by 4.5 billion pieces from 2001. 

In it's latest USPS report, GAO states, "Continuing [USPS] deficits have resulted in insufficient cash to finance capital project needs and repay debt," and, "In addition, USPS's debt continues to grow and is nearing its $15 billion statutory limit. USPS's debt is budgeted to reach $12.9 billion by the end of fiscal year 2002. Currently, USPS's liabilities exceed its assets. USPS's substantial and growing liabilities will require increasing amounts of funds in the future."

How are We Going to Fix This? 
GAO called on the USPS to create a "transformation plan" addressing questions such as:

  • "Should the Postal Service continue to have a monopoly on First Class mail?"
  • "Should it continue to deliver to every address seven days a week?"
  • "Can the agency survive with a break-even mandate, or should it be allowed to make a profit?"

Since 1970, the Postal Service has operated under a law establishing it as a semi-independent federal agency, mandated to be revenue-neutral. That is, USPS is required to break even, rather than make a profit. That, along with other statutory and operational challenges faced by USPS, may have to change, according the the GAO.

On April 4, USPS will submit to Congress an overview of its "transformation plan," which Postal Board chairman Robert F. Rider says "will provide the framework for how the Postal Service of the future will be reformed and revitalized to meet the changing needs of our customers, the American people, over the next 10 to 20 years." "It is clear to all of us that the time for debating the need for reform is past," stated Rider in a USPS press release.

Time for Sweeping Reform Has Come
Even the Postal Service acknowledges that "baby steps" taken so far in attempts to shore up the troubled agency have failed and that the time for sweeping reform has come. 

As Postmaster General John Potter told Congress on March 13, "If we have learned anything from the financial pressures we are facing, it is that we can no longer rely on past strategies of raising rates for long-term success. We are in a situation that has been amplified by the range of competitive choices, traditional and electronic, now available to consumers and businesses." [Text of PMG Potter's statement to Congress]

Postage Rate Increase Approved
On March 22, the Postal Rate Commission approved postage rate increases that could go into effect as early as June 30, 2002. The rates for First-Class letters will increase by 3 cents, from 34- to 37-cents. The post card rate will increase two cents to 23 cents. [Read the Press Release]

Table showing all new postage rates (To become effective June 30, 2002)

Submit a Comment on Postal Rates to the Rate Commission

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