Us Postal Service Key Postal Transformation Issues

U.S. Postal Service: Key Postal Transformation Issues

The President established this Commission to examine the state of the U.S. Postal Service (the Service) and submit a report by July 31, 2003, with a proposed future vision for the Service and recommendations to ensure the viability of postal services. GAO has provided congressional committees with many reports and testimonies on postal matters, and this testimony is based largely on these prior reports and testimonies. In April 2001, GAO put the Service's long-term financial outlook and transformation on its High-Risk List for several reasons. The Service was experiencing significant deficits, severe cash-flow pressures, rising debt, cost growth outpacing revenue increases, limited productivity gains, and liabilities in excess of assets. Under its 1970s-era business model, the Service was relying on raising rates and incrementally reducing costs to carry out its mission. GAO concluded that this business model was not sustainable in today's competitive environment. The Commission's report will be an important guide for comprehensive postal transformation. In this testimony, GAO presents key issues the Commission should consider to enhance the long-term financial viability of the Service by making it a more results-oriented and efficient organization.

The U.S. Postal Service (USPS) faces major challenges that collectively call for a structural transformation if it is to remain viable in the 21st century. This testimony discusses USPS' current financial outlook, actions that USPS has taken or planned to take, and the transformation issues that will need to be addressed. GAO concludes that structural transformation is essential if USPS is to overcome its financial, operational, and human capital challenges. It is at a growing risk of being unable to continue providing universal postal service at reasonable rates while remaining self-supporting through postal revenues. Although USPS has announced steps to address its mounting problems, it lacks a comprehensive plan to address its various financial, operational, or human capital challenges. USPS needs to develop a transformation plan in conjunction with Congress and other stakeholders that would address the key transformation issues facing USPS.

The U.S. Postal Service's (USPS) financial condition and outlook deteriorated significantly during FY 2009. USPS was not able to cut costs fast enough to offset declining mail vol. and revenues resulting from the economic downturn and changing mail use. USPS would not be able to make the $5.4 billion payment to prefund postal retiree health benefits that was due by the end of the year. This testimony: (1) updates USPS's financial condition and outlook; (2) describes changes made by the Postal Account. and Enhancement Act of 2006 that provided USPS with greater flexibility to generate revenues; (3) outlines USPS's revenue-generation actions and results using this flexibility; and (4) discusses options to generate increased revenues in the future.

The recession accelerated declines in mail volume in FY 2008 and flattened revenues despite postal rate increases. That year, mail volume fell by 9.5 billion pieces, or 4.5%, and resulted in a net loss of $2.8 billion. USPS's financial condition has continued to deteriorate in the first 5 months of FY 2009, with accelerating declines in mail volume and financial losses. This testimony updates that info. 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. Illus.