U.S. Postal Service: Network Rightsizing Needed to Help Keep USPS Financially Viable

The recession accelerated declines in mail volume in fiscal year 2008 and flattened revenues despite postal rate increases. That year, mail volume fell by 9.5 billion pieces, or 4.5 percent, and resulted in a net loss of $2.8 billion as the U.S. Postal Service's (USPS) cost-cutting did not close the gap between revenues and expenses. We testified this March before this subcommittee that USPS's financial condition has continued to deteriorate in the first 5 months of fiscal year 2009, with accelerating declines in mail volume and financial losses. USPS projected its financial condition to continue deteriorating for the rest of the fiscal year and to result in an unprecedented cash shortfall of $1.5 billion, assuming that ambitious cost-cutting targets are achieved. This testimony updates that information and focuses on (1) how USPS's financial viability is challenged given current economic conditions and whether USPS can cover its expenses and financial obligations, (2) USPS's opportunities to rightsize its retail and mail processing networks, and (3) what options and trade-offs need to be considered to address mail volume and revenue declines. It is based on GAO's past work and updated information on USPS's finances and networks. We asked USPS for comments on our statement. USPS generally agreed with the accuracy of our statement and provided technical comments, which we incorporated where appropriate.