Is Reform Closer Than Expected?

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WASHINGTON -- The U.S. Postal Service may be one step closer to postal reform after the subject was discussed at a congressional hearing this week.


Lawmakers used the hearing, called by the House Government Reform Committee, to review the agency's finances and operations. Another hearing is set for the first week of May, and mailers may be called to testify about how reform and another rate increase would affect their businesses.


Rep. Dan Burton, R-IN, who chairs the committee, questioned the news coming from postal officials that "they are predicting a $2 [billion] to $3 billion loss this fiscal year, the same year that they raised rates." He also expressed concern that the postal service intends to file for another rate increase in a few months.


"I have been critical of the postal service because their first response to every financial shortfall appears to be to raise rates," he said. "An increase of the magnitude proposed -- between $6 [billion] and $8 billion total revenue -- is astronomical. That represents a 10 percent increase in overall revenue. This kind of increase would drive business away. Some mailers would be forced to seek alternative means of communication. Others may be driven to bankruptcy."


The postal service is working under 31-year-old laws. Last year, the Postal Modernization Act, H.R. 22, never passed the full committee. Burton said he has talked with ranking minority member Rep. Henry Waxman, D-CA, about the need "to work out a bipartisan solution to this crisis. I believe he feels it is a necessity as well."


Many attendees expressed hope that reform would be passed this year.


"Unlike previous years, it seems like there is a real sense of urgency," said Lee Garvey, a former postal employee who is now a managing partner at e-business consulting firm GRS Associates Inc., Arlington, VA.


Ed Gleiman, who served as chairman of the Postal Rate Commission and who is spearheading the Direct Marketing Association's campaign for reform, said the USPS must be "granted the ability to be financially viable, especially in this era when there are so many competitive options."


However, it was not all good news. Comptroller general David M. Walker said in testimony that the General Accounting Office has added the USPS and its problems to its high-risk list, which flags government programs susceptible to waste, fraud, abuse and mismanagement.


"We believe that the [postal] service's deteriorating financial situation calls for prompt, aggressive action, particularly in the areas of cutting costs and improving productivity," he said.


Walker recommended the following actions:


· The USPS should develop a comprehensive plan along with Congress and other postal stakeholders -- including postal unions, management associations, customers and the Postal Rate Commission -- to identify the actions needed to address the problems and to establish a time frame for results.


· The USPS should provide quarterly summary financial reports to Congress and the public that present detailed information so stakeholders can understand the postal service's financial condition, how its outlook might have changed since the previous quarter and its progress toward achieving objectives in its comprehensive plan.


· The GAO will work with Congress and the USPS to identify improvement options and will continue to analyze the USPS' financial condition.


· The GAO, a nonpartisan congressional agency, began its high-risk list in 1990. In its January report to Congress, it designated 22 areas as high risk, including information security, program management for Medicare and the Internal Revenue Service's tax systems modernization and financial management. The GAO removes the high-risk designation when the listed agency makes progress toward resolving the problem.


"The current financial situation -- as exemplified by inclusion on the high-risk list, the consideration of eliminating Saturday delivery and talk of a double-digit rate case being filed this June or July -- shows how fragile the postal service is to volume and economic changes," Gleiman said. "If there ever was a time to find solutions to updating the 31-year-old federal statute under which the USPS operates, it is now."


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