USPS reveals financial stabilization plan, including exigent price increase

The US Postal Service unveiled a 10-year plan to return to profitability on March 2. The initiative focuses on aggressive cost-cutting, increased productivity, new products and legislative reform, including a transition to a five-day-per-week delivery schedule. In addition, Postmaster General John Potter said the USPS will seek an exigent price increase that exceeds its inflation-based price cap in 2011.

“We are going to use the exigent price increase,” Potter told more than 300 stakeholders in Washington, DC at the formal unveiling of the USPS’ plan. “We are working with the Board of Governors on the timing of the increase and the size. It will be a modest increase. We are not talking about anywhere near double-digit increases.”

Postal officials described the financial challenges the agency faces in stark terms. Mail volume is projected to decrease by 27 billion pieces in the next decade to an all-time low of 150 billion pieces in 2020, according a forecast prepared by the Boston Consulting Group. Revenue will also drop as first class mail sees a steady decline, according to the report.

If the Postal Service did nothing, it would face a cumulative shortfall of $238 billion by 2020, Potter said. He outlined actions the USPS will take under existing laws to save $123 billion by then, primarily through productivity improvements and new products and services designed to meet a changing marketplace.

However, Potter said he was concerned that Congress might not approve the changes.

“My fear is that oversight steps in when we have to change the network and consolidate facilities,” he said. “If oversight constrains us, it hurts our ability to achieve these cost savings.”

To close the $115 billion gap, the Postal Service will change its business model to act more like a corporate institution, Potter said. Rejecting the option of seeking congressional subsidies, Potter called on Congress to change the USPS’ pension requirement schedule, which calls on the agency to pay $5 billion per year. He also said the agency will modernize and offer more products and services consistent with its mission.

Joseph Corbett, CFO and EVP of the Postal Service, told DMNews that “there is a greater awareness of the situation” in Congress and the executive branch, referring to the Postal Service’s financial difficulties.

“This is a brand new rollout, brand new findings and comprehensive suggestions, and I think it will further focus the Congress and the Obama Administration on the Postal Service and the size of the overall projected deficit,” he said.

Jerry Cerasale, SVP of government affairs at the Direct Marketing Association, said that his group favors a restructuring of the Postal Service pension-payment system, but it is opposed at the moment to the exigent rate increase.

Regarding five-day delivery plans, “DMA membership is not of once voice on it,” he said.

The Postal Regulatory Commission announced March 2 that it will review the USPS’ pension liability system. The US Postal Service’s Office of the Inspector General said in January that the current funding system forced the agency to overpay by $75 billion from 1975 to 2009.

“This is an important study that will provide information regarding the financial health and viability of the Postal Service, and it will assist the commission as it analyzes the mounting financial losses the Postal Service is projecting,” Ruth Goldway, chairwoman of the PRC, said in a statement.

Frank Washkuch contributed to this article.

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