Amidst a crippling financial battle, Postal Service sees an uncertain future

The check must be in the mail.

As the Postal Service continues to suffer from a steep recession and a historic downward trend of mailing services, people from within the Postal Service, Congress and the private sector are exploring ways to save the struggling organization.

While some have suggested diversifying its services as a way to solve its problems, others see a future more bleak, and have recommended everything from banking services to massive layoffs to save it from an uncertain future.

Yvonne Yoerger, a spokeswoman for the Postal Service, said that the organization is exploring all options in dealing with its financial problems. She pointed to recent cost-cutting efforts and new revenue programs as steps in the right direction.

She said that without substantial changes though, the Postal Service will hit its debt limit by the end of 2011, and that no one really knows what would happen if it ran out of money.

“It’s not quite clear from anyone’s standpoint what would happen,” Yoerger said.

She added that the Postal Service is “exploring all its options” and said that receiving greater government support or moving away from a for-profit model is also an alternative. She also said cutting Saturday delivery was a possibility.

“It all depends on how the American people and Congress want us to proceed while providing universal service,” Yoerger said.

The Postal Service posted a loss of $3.8 billion this year, after being allowed to defer a $4 billion payment to its retiree health benefits program. Operating revenue was down to $68.1 billion from $74.9 billion a year earlier.(GAO) USPS Budget Deficits/Surpluses by Year(GAO) USPS Budget Deficits/Surpluses by Year

The Postal Service also saw a 12.7 percent decline in mail delivered in 2008 which translates to a drop of 28 billion pieces from 203 billion. It also cut 40,000 employees from its workforce of about 620,000 and has an outstanding debt of $10.2 billion. The Postal Service is allowed a $15 billion debt limit and can borrow $3 billion a year under current law.

The Government Accountability Office report released Nov. 5 said that the Postal Service will reach its debt limit in 2011, and projects continuing cash shortfalls in the years to follow.

Rep. Stephen Lynch, D-Mass., the chairman of the Subcommittee for Federal Workforce, Postal Service, and the District of Columbia, said that he was not convinced a five day system would help the Postal Service meet its financial goals.

He added that any gain in savings might be offset by a reduction in service and use by customers, but he would wait for reliable numbers before making a final decision.

Lynch said that the Postal Service also needed to increase its cost-cutting efforts, but he also said that the employees are its best asset and he would first look at reducing the number of postal facilities. There are currently more than 37,000 post offices and facilities around the country.(GAO Report) Revenue by Type of Mail and Services(GAO Report) Revenue by Type of Mail and Services

That is more than every McDonald’s restaurant, Subway restaurant and Wal Mart in the United States combined.

He said that the major problem he has seen has been that plans for a financial recovery lack specificity, and that new shipping rates and programs alone won’t solve the problems the postal service faces.

“You can’t fix that problem by selling greeting cards,” Lynch said. “We need transformational change that will protect postal employees’ wages and benefits but allows us to meet these new challenges.

Phillip Herr, the Director of Physical Infrastructure Issues at GAO, said that recent efforts to generate additional revenue, with programs such as flat-rate shipping and bulk mail pricing, have had limited results.

He compared the Postal Service’s situation to “swimming against the tide” and said that when mail is down by more than 20 billion pieces in a year, it’s an incredible challenge to meet.    

He said that the recession caused advertising mailers and related revenue to plummet, and that a slow recovery could keep that number down for years. Herr said he was unsure of what would happen if the Postal Service reaches its debt ceiling; an event that Herr said is just a matter of time.

Earlier GAO reports during 2009 highlighted the same debt problems, and pointed toward an aging workforce nearing retirement as a chance to cut some costs and reorganize its employees.

It also suggested consolidating its operation centers and improving its delivery services to cut costs and improve efficiency. As of July, 2009, the Postal Service had closed one of out every 400 of its locations. The report also highlighted a change to its carrier routes that is projected to help save the Postal Service $1 billion annually.

Steve Swasey, a spokesman for mail-order DVD rental company Netflix, said that the company does not comment on ongoing Postal Service activities. But he added that current plans that include a five day delivery week are still just in the planning stages.

Netflix ships about 2 million DVDs a day, but recent efforts by Netflix include focusing on streaming more content online. A recent partnership with Sony allows people who buy certain TVs to stream Netflix content directly.

It is into this marketplace that the Postal Service must enter, said Robert Reisner, a former vice president for technology applications for the Postal Service, and consumers are looking for more than just postal products.

Reisner said in congressional testimony in November that by offering a wider array of services and products, people will use the Postal Service more for shipping, packaging products and more.

“If we make the modern Postal Service relevant to this multichannel internet marketplace, they will generate more mail,” Reisner said. “This is a real revenue opportunity.”

Rep. Jason Chaffetz, R-Utah, the ranking Republican on the Subcommittee for Federal Workforce, Postal Service, and the District of Columbia, also said that the Postal Service needs to be more relevant, and he imagines partnerships with private companies as a possible future.

But he also noted the difficulties facing the organization, listing fuel prices and an expanding customer base that makes cutting overall costs hard to accomplish.

Chaffetz said that there could be ways to leverage its numerous locations and add more functionality in the same way that passports encourage people to use their local post office.

While he said he was open to cutting a few delivery days from the overall year, Chaffetz does not support a move to a five-day delivery week, arguing that it’s not a long-term solution to the Postal Service’s problems.

Ruth Goldway, the chairwoman of the Postal Regulatory Commission, suggested at a congressional hearing that lawmakers could change the formula for determining the Postal Service’s payments into its retiree health benefits program. She said that a small change would allow the organization to still meet its obligation but save a significant amount of money.

Goldway also said she supported the idea of cross-functionality with other government agencies to help the Postal Service achieve financial stability. She highlighted a national parks pass that is now sold in post offices as a way to offer more unique products and bring in more revenue.

“I was pleased to see the Subcommittee’s support for expanded Postal Service partnerships with Federal and state agencies that would provide increased convenience for citizens, while enhancing the relevance and revenue of the Postal Service,” Goldway said to Congress.

Norman Scherstrom, a media relations specialist for the Postal Regulatory Commission, said that if the Postal Service reaches its statutory debt limit in 2011, it could ask Congress to raise its limit. He added that there was still time in the short term to keep that from happening.

He said that the Postal Regulatory Commission had not yet vetted the idea of combining census operations with postal services, but that they will be looking at various ideas in the future that will allow the Postal Service to leverage its nationwide presence.