USPS wrestles with cutting services or increasing prices

Posted: Wednesday, March 10, 2010

Outside editorial

The following editorial appeared in the Fort Worth Star-Telegram:

Americans' love-hate relationship with the U.S. Postal Service is about to be tested again.

We love to gripe about the shortcomings of one of our most essential institutions. While we wish it would change, we hate for it to.

But change it must - or face a projected $238 billion loss over the next decade.

The Postal Service is an independent agency, overseen by a federally appointed board of governors.

The USPS hasn't received taxpayer money since the early 1980s and relies on income from postage sales. But it's lost money for several years, even as rates have gone up.

The operation can't break even because costs keep increasing faster than revenues. Among other things, mail volume has plummeted because more people are communicating and paying bills online; the economic downturn has forced businesses to reduce direct-mail advertising; and rising fuel costs have made shipping and delivery more expensive.

Responding to fiscal demands is itself challenging. Federal law limits price increases and facility closings, and controls other aspects of the service's operations.

And did we mention that members of Congress are reluctant to allow moves that are unpopular with constituents who don't want their mail service messed with?

The Postal Service made about $6 billion in cuts last year, by trimming the work force, cutting overtime and making other adjustments. But it needs more fundamental restructuring.

In a July report, the Government Accountability Office advised that "addressing USPS's financial viability is critical as USPS plays a vital role in the U.S. economy and in providing postal services to all communities."

A 10-year plan laid out by Postmaster General John Potter includes a five-day delivery week, rate hikes in 2011 and other proposals, some requiring congressional approval.

Everyone was talking about the possibility of no Saturday delivery. But the plan also envisions reducing the 600,000-member work force through attrition and giving the agency more sway on pricing and products.

The public will get to comment before the Postal Regulatory Commission or Congress endorses any changes.

Here are some ideas that make some sense:

Reducing federally mandated six-day delivery would save an estimated $3 billion, the Postal Service says. (Post offices still would offer Saturday counter service and pickup.) Cutting Saturday delivery is better than huge cost increases. But instead of across the board, why not consider eliminating the service only in the lowest-volume areas that cost most to serve?

Locating post offices in commercial locations such as grocery stores and pharmacies could provide more convenient access and hours. This might mean branch closings but also could cut overhead. The GAO recommended streamlining facilities, some of which are deteriorating from years of deferred maintenance.

Changing a requirement that the Postal Service set aside money for retiree health benefits, instead of paying them as needed, would save about $5 billion annually. Congress cut the amount the agency had to prepay last year, but it was a temporary fix. A longer-term solution would help reduce the projected budget shortfall.

The Postal Service delivered 213 billion pieces of mail in 2006 and 177 billion in 2009. The number is expected to fall to 150 billion in 2020. Americans want universal mail service, but they've also demonstrated by their communication habits that they want much more. Congress has to give the Postal Service the flexibility to evolve, and quickly, or there won't be much left to complain about.



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