GAO: Transformation Plan Needs More Detail

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Though the U.S. Postal Service's transformation plan is a good first step toward postal reform, it doesn't adequately address certain issues or include key milestones, the General Accounting Office's comptroller general told a Senate panel.


"Although the transformation plan recommended that Congress give the [postal] service much more flexibility, particularly in the rate-making and new products areas," comptroller general David M. Walker said, "it will be important that any additional flexibility be coupled with an appropriate level of transparency and accountability."


Specifically, he said the plan must address:


· The definition of universal postal service.


· Strategies to deal with human capital matters, such as postal pay, performance management and management bonus arrangements.


· The agency's governance structure, transparency and accountability mechanisms.


"Overall, the [postal] service continues to have significant difficulties in getting its financial house in order," he said.


He testified at a transformation plan hearing of the Senate Governmental Affairs subcommittee on international security, proliferation and federal services.


Despite additional cost-cutting in the first half of the 2002 fiscal year, Walker said, USPS revenue has declined twice as fast as its expenses, in part because of large fixed expenses.


USPS debt is expected to reach $12.9 billion by the end of the 2002 fiscal year, he said, up $1.6 billion from 2001 and only $2.1 billion under the $15 billion statutory limit, yet the agency has no debt reduction plan in place. He also said the postal service has long-term liabilities and obligations estimated at almost $100 billion, including $32 billion for pensions and $49 billion for retiree health benefits.


Postmaster general John E. Potter, who also testified at the hearing, defended the plan and said it "offers the flexibility to give the postal service the long-term tools it needs to carry out its universal service mandate."


The plan identifies three parallel courses of action, Potter said: service and efficiency improvements under current legislation, moderate regulatory and legislative change to help improve USPS management, and comprehensive legislative reform to address future needs.


Senators at the hearing had concerns with the plan.


Sen. Daniel K. Akaka, D-HI, who chaired the hearing, told Potter to return with a step-by-step proposal for reducing the agency's debt.


Sen. Mark Dayton, D-MN, questioned what a postal reinvention might accomplish, given the agency's mandate to provide mail service to all Americans. "I don't see how you can do any better by getting into some sort of transformation," he said.


Sen. Ted Stevens, R-AK, cautioned against proceeding on an immediate transformation effort. Citing trends in demographics and technology, he said the USPS should wait until at least 2015 before trying to reinvent itself. In the interim, he suggested, Congress could consider annual appropriations to ease the agency's debt load.


The House Committee on Government Reform is to have a postal legislative reform proposal set for committee markup May 22. Insiders said the compromise bill will include parts of two postal reform drafts, one sponsored by Rep. Henry Waxman, D-CA, and one by Rep. John McHugh, R-NY.


Waxman's draft calls for a "Super Regulatory Agency" that would delegate almost all authority over postal matters to the Postal Rate Commission. McHugh's proposal would require the PRC to follow specific reform steps. It is not known which parts of both drafts will make it into the compromise bill.


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