Lawmakers Get Conflicting Advice On Fixing US Postal Service
July 30 2009 - 5:38PM
Dow Jones News
Lawmakers got conflicting advice Thursday on the best way to put
the U.S. Postal Service on firmer financial footing, with postal
customers and management suggesting aggressive cost-cutting
measures that postal labor unions say may be ineffective and
counterproductive.
The Postal Service's financial condition is so bleak that the
Government Accountability Office added it this week to a list of
"high-risk" operations that need a dramatic overhaul.
Mail volume has fallen so dramatically that the Postal Service
may close hundreds of urban and suburban post offices, and wants
permission from Congress to deliver mail five days a week rather
than six. At a U.S. House postal service subcommittee hearing
Thursday, Jordan Small, USPS acting vice president for network
operations, said curtailed delivery is "the last big option"
against a rising tide of red ink.
Even with a record $6 billion of cost savings this year, the
Postal Service is likely to lose about $7 billion and doesn't
expect to have enough cash from operations to make a mandated $5.4
billion payment for future retiree health benefits due Sept. 30,
the GAO said. The Postal Service's debt to the U.S. Treasury
Department likely will exceed $10 billion this year and the GAO
said it is in danger of reaching its $15 billion Treasury borrowing
limit in 2011.
Estimated annual savings from eliminating Saturday mail delivery
service range from $1.9 billion to $3.5 billion, levels that
opponents said may be inflated.
Moving to five-day delivery will only alienate customers and
drive them to private alternatives, exacerbating the Postal
Service's woes, National Association of Letter Carriers President
Fred Rolando predicted.
CVS Caremark Corp. (CVS), which delivers 90% of its online
prescription drug orders through the U.S. Postal Service, spending
about $13 million a year, is among the companies whose customers
would suffer by eliminating Saturday delivery, said Don Cantriel,
president of the National Rural Letter Carriers' Association.
"Without good service, we have nothing to offer," said Mark
Strong, executive vice president of the National League of
Postmasters of the U.S., and Sun City, Ariz., postmaster.
Union officials also expressed skepticism about closing post
offices, something the Postal Service said makes sense now that
nearly 30% of stamps are sold elsewhere and alternatives such as
online bill paying have cut into traditional mail use.
Mail demand is business-driven, so when the recession ends,
"most of the mail will come back," Strong predicted.
William Burrus, president of the American Postal Workers Union,
agreed, noting that Postal Service mail volume peaked at 213
billion pieces in 2006, when electronic alternatives already were
widespread. He said cutting service during a recession would leave
the Postal Service ill-prepared when business bounces back, as he
expects it will.
Business mailers are less optimistic, saying a system built to
process upwards of 300 billion pieces of mail needs to be cut to
half that level. Volume is projected to decline about 14% this
year, to 175 billion pieces.
Rethinking the postal system "is long overdue," said Arthur
Sackler, executive director of the National Postal Policy Council,
a trade association for about 30 businesses that spend $9.5 billion
on postage each year. He told House lawmakers that the Postal
Service is in a very deep hole and needs flexibility to do what
needs to be done.
"Everything has to be on the table," as far as cost-cutting,
said Jerry Cerasale, senior vice president of the Direct Marketing
Association. He warned against any increase in postage rates, an
idea the Postal Service hasn't floated, saying that would drive
business away, putting the Postal Service into a deeper hole.
-By Judith Burns, Dow Jones Newswires, 202-862-6692;
Judith.Burns@dowjones.com