U.S. Postal Service:

Deteriorating Financial Outlook Increases Need for Transformation

GAO-02-355: Published: Feb 28, 2002. Publicly Released: Mar 20, 2002.

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The U.S. Postal Service (USPS) continues to experience deficits, severe cash-flow problems, rising debt, and liabilities that exceed its assets. USPS also lacks enough income to fund needed investments in safety, maintenance, expansion, and modernization and to cover its liabilities. USPS reported a $1.68 billion deficit in fiscal year 2001, up from $199 million a year earlier. The pressure to increase rates will mount as USPS contends with growing long-term obligations, including employee retirement and health benefits. Although USPS assumes that rising mail volume will cover rising costs and mitigate rate increases, this business model is increasingly problematic because of the potential for declining or stagnating mail volume. USPS has had little success in sustaining productivity increases. USPS' financial viability is also hindered by structural, legal, and practical constraints that make it difficult to close or consolidate postal facilities or realign the postal workforce. USPS must undertake a comprehensive transformation to address its financial, operational, and human capital challenges. USPS also needs to produce more timely and accessible financial information.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Congress did pass interim legislative action (P.L.108-18) to address the Postal Service's pension liability and provide some short-term financial relief for the Service. In addition, the House Committee on Government Reform established a special panel on postal reform and oversight to work with the President's Commission on the Postal Service, established in December 2002, on developing comprehensive postal reform legislation. The Commission is expected to issue its report with recommendations for comprehensive postal transformation in July 2003.

    Matter: Regardless of the process Congress chooses to deal with postal reform, USPS's worsening financial situation and outlook intensify the need for Congress to act on meaningful postal reform and transformation legislation. Accordingly, Congress may wish to consider and promptly act on incremental legislative changes that could help USPS deal with its financial situation soon after it receives USPS's transformation plan. In addition, comprehensive legislative changes will be needed to address key unresolved transformation issues. Congress could consider how best to address such issues, such as infrastructure and workforce issues that may require input from a variety of stakeholders and will involve some shared sacrifice. One option may be to create a commission to address the unresolved issues and develop a comprehensive proposal for consideration by Congress.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: USPS has taken some actions to implement its Transformation Plan and has provided annual progress reports on the status of its implementation efforts. In April 2004, USPS provided its oversight committees with proposed amendments to pending postal reform legislation. In addition, USPS has improved the transparency of its financial data by providing monthly and quarterly financial reports on its Web site.

    Recommendation: In view of the severity of USPS's financial situation, USPS's Board of Governors and the postmaster general (PMG) should provide proactive leadership for transformation by informing Congress and the public of the need for change in its transformation plan and by other means and by working with Congress and stakeholders in developing and implementing strategies for action. These strategies should include (1) actions that USPS can take within its current authority, (2) specific congressional actions that would enable USPS to take a number of incremental steps to address its growing financial and operational challenges, and (3) a process to address a range of comprehensive legislative reforms that will be needed to address key unresolved transformation issues. In addition, USPS should improve the transparency of its financial data by providing monthly and quarterly financial reports in a user-friendly format on its Web site in a more timely manner.

    Agency Affected: United States Postal Service

 

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