Friday, March 19, 2010

Déjà vu: The Postal Service’s Economic Troubles

Weekly column by Senator Susan Collins

The United States Postal Service (USPS) recently outlined a ten-year plan intended to address declining mail volume and increase its slumping revenue. In recent years, the USPS has been hit with falling mail volume, the recession, and the loss of customers to digital technology, such as e-mail and online bill paying, that has replaced traditional mail.

During a recent hearing before the Senate Appropriations Subcommittee on Financial Services and General Government, of which I am Ranking Member, Postmaster General John Potter testified that the Postal Service faces a projected $238 billion shortfall during the next decade. And he’s asking Congress to help fix its dire and deteriorating financial condition.

If this sounds familiar, it’s because we have been here before.

I also serve as Ranking Member of the Homeland Security and Governmental Affairs Committee, which has held 14 hearings related to the financial crisis at the Postal Service since 2003.

Nine years ago, the Government Accountability Office (GAO) first placed the Postal Service on its “high-risk list” because it faced formidable financial, operational, and human capital challenges that threatened its long-term viability. As a result of the passage of the postal reform act of 2006, which I authored with Senator Tom Carper (D-DE), the GAO removed the USPS from the list. But last year, the Postal Service, losing billions and facing a crisis, was once again added to the high-risk list.

Approximately every three years – in 2003, 2006, and again last year, the Postal Service has come to Congress seeking relief from its financial obligations in exchange for promises of future profitability. Now, among other things, the Postmaster General is asking Congress to allow it to reduce delivery services from six to five days a week. The USPS also wants to be freed from its obligation to pre-fund retiree health benefits.

In 2003, Congress passed pension reform legislation I coauthored that reduced the Postal Service’s pension costs by approximately $9 billion from fiscal year 2003 to 2005.

In 2006, the Postal Accountability and Enhancement Act that Senator Carper and I sponsored relieved the Postal Service of a $27 billion obligation, primarily by transferring the Postal Service’s obligations for the retirement benefits of its employees with prior military service to the Treasury Department.

In 2009, Congress voted, at the Postal Service’s request, to reduce the Postal Service’s annual retiree health benefits payment that was due on September 30th by $4 billion.

Over and over again, the Postmaster General has promised that if only Congress would allow the USPS relief from its financial obligations and take other actions, it would be on solid financial footing. But time and again, I have been disappointed in the results.

The Postal Service is one of our oldest institutions and is the linchpin of a $900 billion mailing industry that employs close to nine million people in businesses as diverse as paper manufacturing, printing, catalog companies, publishing, and financial services.

This is why I believe the Postal Service needs to focus first on expanding customer services and developing new revenue streams rather than cutting services in order to reduce its red ink.

I will, as I always have, carefully consider the Postmaster General’s latest requests. But the USPS will have to present a compelling case that cutting services, such as reducing delivery to five days a week, will not further decrease volume, drive more customers away, and set off a death spiral.

It will take all members of the postal community, including Postal Service employees and management, members of the mailing community, Congress, and the Administration to contribute to the solution to this financial crisis.

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