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Committee Chair: USPS Finances Near Critical

The chairman of a Senate committee examining the U.S. Postal Service's finances decried the agency's fiscal status at a hearing yesterday and said problems may be worse than they appear.

The USPS' projected 2001 losses of $1.6 billion to $2.4 billion are based on the U.S. economy performing better than it is now, and the actual losses could be much higher, said Sen. Fred Thompson, R-TN, chairman of the Senate Committee on Governmental Affairs.

Thompson's comments reflected a General Accounting Office report issued in April flagging the USPS' problems as high risk. The GAO also reported that the postal service's productivity has increased only 11 percent in the past 30 years.

Such figures are evidence that the USPS system created by the 1970 Postal Reorganization Act is near the breaking point, Thompson said.

“It's obvious the ox is in the ditch — big time,” he said.

Thompson also echoed GAO comptroller general David M. Walker's call for the USPS to develop a comprehensive plan for structural changes within the postal service. Thompson and Walker said incremental rate increases would not solve the postal service's problems, but they questioned whether the needed overhaul of the USPS would come before the agency's problems reach crisis levels.

“The day of reckoning is going to come,” said Walker, who also spoke at the hearing. “The question is, when are we going to deal with it?”

Postmaster general William J. Henderson, who will retire at the end of this month, and Bob Rider, chairman of the USPS Board of Governors, both said preliminary work on a comprehensive plan has been completed and forwarded to Congress.

Henderson said he foresaw a time when the USPS might be completely or partially privatized. But he rejected the possibility that new services involving e-commerce would bring in needed revenues. The USPS' future hinges on its core businesses, Henderson said.

“The postal service is a $65 billion organization,” Henderson said. “It's not going to reinvent itself into another $65 billion organization.”

Henderson denied a statement made by George Omas, vice chairman of the Postal Rate Commission, that the USPS had failed to give clear evidence for the losses it is projecting this year. The Board of Governors last week approved the USPS' request for a July 1 rate increase of an average of 1.6 percent. The July increase is in addition to the average 4.6 percent increase that was approved by the PRC last year and took effect Jan. 7.

“What was going on was obvious,” Henderson said. “Our appeal stated quite clearly that our revenues just went south.”

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