Potter Reaffirms Steady Rates Until 2006

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Aggressive cost cutting produced $8.3 billion in savings during the past three years, postmaster general John E. Potter said yesterday, letting him reiterate his commitment to maintain current postage rates until 2006.

"The postal service will continue to focus on the strategies identified in our Transformation Plan, and we will continue to deliver the plan's commitments ahead of schedule," Potter said at the U.S. Postal Service Board of Governors monthly meeting in Boston.

The Transformation Plan identifies actions needed to address the postal service's financial, operational and human capital challenges to effect major change. It can be found in its entirety at www.usps.com.

USPS chief financial officer Richard J. Strasser Jr. also spoke, saying next year's financial plan requires continuing cost reductions of $1.4 billion, which include a reduction of 23 million work hours, and a sixth straight year of increased productivity.

"Since 1999, the postal service has reduced total work hours by a cumulative 728 million," he said.

Career postal employment is virtually at the level it was in 1984, just over 700,000, while mail volume has increased by 65 billion pieces with an additional 48 million addresses.

These fiscal year 2005 cost reductions offset health benefit increases of $750 million, contractually required cost-of-living allowance increases of $650 million and the costs of delivery network expansion, he said. FY 2005 total expenses are to rise 3.9 percent.

Despite a decline in First-Class volume and persistently high fuel costs, Strasser said, the USPS projects a sound outlook for fiscal year 2005, essentially balancing a projected $68 billion budget.

"For the first time in history, Standard mail volumes will exceed First-Class mail volumes," he said. "Total mail volume should grow by 1.4 billion pieces, a 0.7 percent growth rate."

Forecasts indicate a 2.1 billion-piece decline in First-Class volume in FY 2005, which starts Oct. 1, while Standard is expected to grow by nearly 3.8 billion pieces.

Reflecting priorities outlined in the Transformation Plan, the USPS plans to commit $3.3 billion for capital investment, including $1.9 billion for equipment projects.

Strasser said the FY 2005 plan fulfills the requirements of the Postal Civil Service Retirement Funding Reform Act of 2003. The act changed how the USPS funds its Civil Service pension obligations and requires the postal service to use savings it realizes from that change to pay down debt and maintain current rates through 2005.

"However," he said, "with FY 2005, those 'savings' have been completely consumed in absorbing cost inflation."

Strasser also submitted a preliminary FY 2006 appropriations request to the board seeking $945 million in previously authorized federal funding for free and reduced-rate mail services mandated by Congress and for its emergency preparedness equipment. The USPS has not requested this public-service-costs appropriation since 1984, choosing to operate solely from revenue generated from products and services.

In other action, the board approved:

· Funding to buy 210 automatic induction systems for the Automated Flat Sorting Machine 100, which can decipher hard-to-read addresses while sorting three times as fast as previous equipment. AFSM 100s sort flats weighing up to 20 ounces at up to 17,000 pieces per hour. The systems will reduce the number of operators from three to one.

· Funding to buy 142 cargo vans with lift gates and for an upgrade of the Postal Vehicle Service Fleet Management system for the 2,014 cargo vans already approved for purchase by the board.


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