USPS Needs $100M to Survive Fiscal 2000

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CHICAGO - The U.S. Postal Service needs to continue its program to restore net equity if it hopes to stay afloat in fiscal 2000, according to John Ward, USPS vice president of finance, who spoke at the Fall Postal Forum here this week.


Ward said the agency needs to raise its net income to $100 million for fiscal 2000 even though its fiscal 1999 results are expected to reach more than $300 million - at least $100 million over plan - when its numbers are tabulated in the next few weeks. According to USPS chief financial officer M. Richard Porras, who spoke at the session with Ward, fiscal 1999's higher-than-expected net income results come even after a cost of $300 million for the postal service's Y2K initiatives.


To reach its $100 million mark for fiscal 2000, Ward said the agency must improve productivity and performance. It is pursuing several initiatives, including continuing to aggressively increase worksharing opportunities and negotiated service agreements in the coming rate case; investing another $4 billion in automation; making its package business stronger; continuing its Internet initiatives and overhauling the its infrastructure. The USPS also is planning to work with Internet retailers and offer them package return services.


"Forty percent of the purchasing that is done on the Internet is returned to a retailer," said Ward. "We think we can provide a very competitive option for getting packages returned, and we will be trying to maximize that competitive advantage."


Porras also mentioned the impact the recent pay increase awarded to the National Association of Letter Carriers will have on the USPS. He said the arbitration decision would cost the agency close to $400 million in the third full year of the contract, which takes effect in November 2000. He said this was not expected and "it is a pretty significant increase in our costs for the third year of this contract." Porras also said it may affect the costs of the postal service and its customers.


This week's forum offered no insight into when the USPS' Board of Governors will file the next rate case with the Postal Rate Commission or what the proposed increases will be for specific mailing classes, so rumors circulated on the trade show floor in typical Postal Forum fashion. Some mailers said they heard the case would be filed in November, others said they were sure it would happen in January. Some said they heard there would be a 6 percent increase across the board, and others heard an average 7 percent increase.


"It's a shame that the postal service could not be more open," said Neal Denton, executive director at the Alliance of Nonprofit Mailers, Alexandria, VA. "It will probably be filed in only about three or four months, and it's not fair to the mailers who need this information for planning purposes."
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