August 23, 2009 in Nation/World

USPS struggles to slash red ink

Matt Campbell McClatchy
 

KANSAS CITY, Mo. – The familiar U.S. mail that we’ve all known for years – the one that visits your mailbox in person six days a week – is officially “at risk.”

The Government Accountability Office recently slapped that label on the U.S. Postal Service, which is struggling to stay solvent.

Blame the recession or the rise of the Internet, but the volume of mail is plummeting and taking revenue with it. The Postal Service is on track to close fiscal 2009 in a few weeks with a staggering loss of $7 billion or more. It is expected to run out of cash by the end of next month.

“It’s a disaster,” said Richard Watkins, postal spokesman for the Mid-America District.

And that could mean significant changes in the way we get the mail.

The Postal Service has been trying to cope by slashing payroll, closing post offices and consolidating routes. That is saving billions of dollars, but not enough.

Options being discussed within the Postal Service and in hearings this year on Capitol Hill include cutting mail deliveries back to five days a week and raising postage rates yet again.

The ultimate fallback is for the federal government to swallow the losses.

Several steps already are in motion:

•Health benefits. Most immediately, the Postal Service wants Congress to relieve it of the massive burden of pre-paying health benefits for future retirees. That will cost $5.4 billion this year.

Bills to relax the pre-pay requirement are pending in both the House and Senate, but the health care reform debate is consuming lawmakers’ attention.

•Staffing. The Postal Service has already made deep cost savings by closing six of 80 district offices and reducing administrative staff by 15 percent. About 160,000 career work force positions have been eliminated through early retirement and attrition, from a high of 800,000 in 1999. Thousands of urban delivery routes are being consolidated.

•Shutdowns. The Postal Service is looking at nearly 3,200 postal stations and branches for possible consolidations.

But even all that won’t be enough.

Postmaster General John Potter wants permission to reduce delivery to five days a week, as the Canadian post does. Estimated savings are $2.2 billion to $3.5 billion a year. That would take legislation, and many in Congress were cool if not hostile to the idea when it was floated early this year.

The Postal Service is working on a study, due this fall, of how a five-day week could be implemented with minimal disruption.

Another possibility, seen as a last resort, would be to raise postage rates – again.

Rates are allowed to rise within the limits of inflation. The Postal Service may request a rise above the Consumer Price Index in “extraordinary or exceptional circumstances,” but many warn that an attempt to close the revenue gap with rate increases would only drive mail volume and revenue further down.

Just a couple of years ago, the Postal Service processed a record 213 billion pieces of mail. But the projected number this year is down to 175 billion pieces.

The economy had a lot to do with that, but so did mailers switching to other means of communication.

Meanwhile, electronic household bill payment continues to grow, from 11 percent in 2000 to 38 percent now.

Postal observers say mail volume will pick up when the economy rebounds, but many fear it won’t be enough to reverse the larger trend.

Not heard much in congressional testimony is the idea of a federal bailout. The mail used to be a federal department, but reform in 1971 made it a quasi-independent body that was expected to break even with limited government subsidy.


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