USPS Bailout Request May Reach $10 Billion

Postmaster general John E. Potter is expected to tell a Senate appropriations panel today why the U.S. Postal Service needs billions of dollars — somewhere between $6 billion and $10 billion — because of additional costs and lost revenue since Sept. 11.

Meanwhile, Potter met with CEOs of several mailing companies yesterday to assure consumer confidence in the safety and integrity of the postal system. Attendees pledged their ongoing support of the USPS.

“As we enter the holiday season, we want Americans to know they can send, open and read their mail safely,” said Michael Sherman, president of Fingerhut Companies Inc., Minnetonka, MN. “We in the mailing industry are making changes in the way we prepare mail and we are actively working with the postal service in the development of short and long-term solutions to protect the nation’s mail system.”

Industry leaders also addressed long-range goals for creating a “smart” envelope, standardizing mail preparation and other strategies that could be used to enhance mail security. Gary Mulloy, chairman/CEO of ADVO Inc., Windsor, CT, said his company would add another $250,000 to the USPS and FBI’s $1 million reward for the capture and conviction of any anthrax terrorist.

At today’s hearing, Potter is sure to discuss the postal service’s gloomy financial picture linked to the economic downturn and terrorist attacks. Technology costs in the fight against bioterrorism could top $3 billion, and operating the new equipment to sanitize the country’s mail is estimated at $1 billion a year.

Revenue in the past two months fell $900 million below forecast, officials told the USPS’ board of governors earlier this week, and mail volume was down 6.6 percent in September. October was even worse as mail volume may have dropped as much as 10 percent. Potter is expected to offer more information at the Senate hearing.

Postal officials seem to be patterning their bailout model after the airline industry, making the case that it suffered losses directly related to the government’s order to ground planes. Airlines received $5 billion in direct compensation, but Congress required them to prove their losses. Airlines were given an additional $10 billion in loan guarantees.

President Bush has already given $175 million to help defray the USPS’ costs of new equipment, including irradiation technology to sanitize the mail, gloves and masks for workers and vacuum systems to clean mail-sorting machines.

Mailing groups support the agency’s plea for a bailout.

“The Postal Service is the most important partner in our industry's continued success,” H. Robert Wientzen, president/CEO of the Direct Marketing Association, said in a statement. “It is imperative that Congress grant the USPS the financial resources to undertake a security overhaul program to reassure the American public about the safety of mail.”

More than ever, “America needs a postal system that is safe, secure and financially stable,” said Nina Link, president/CEO of the Magazine Publishers of America. “We agree wholeheartedly with [board chairman Robert F.] Rider that, in the national interest, the service should be made whole for the extraordinary costs it has been incurring as a result of terrorist acts.”

However, critics said the entire structure of the USPS and its continuing links to government need to be examined before a bailout or future rate hikes are approved. Tom Schatz, president of Citizens Against Government Waste, joined other taxpayer groups in a letter to President Bush, saying, “Now is precisely the wrong time to simply throw more money at the longstanding problems facing the USPS or to allow the current crisis to be used to precipitate ill-advised legislative changes.”

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