GAO: Postal Service in financial disarray

The United States Postal Service (USPS) is in financial disarray, with plummeting levels of mail being sent and heathcare costs for retirees increasing, according to a report released Thursday by an investigative arm of Congress.

The Government Accountability Office report comes on the heels of the GAO’s decision to place the Postal Service on its high-risk list because the agency “has not been able to cut costs fast enough to offset the accelerated decline in mail volume and revenue.”

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The USPS is experiencing its largest percentage decline in mail sent since the severe drop it took during the Great Depression. Largely affected by the rise in e-mail, the agency has had a nearly 14 percent decrease in mail in fiscal year 2009 — decreasing from about 203 billion pieces to 175 billion.

The decline is expected to result in a net loss of $7 billion, with total outstanding debt levels reaching $10.2 billion, and an expected $13.2 billion in debt by the close of fiscal year 2010. On Wednesday, the USPS posted a loss of $2.4 billion for the most recent quarter, which ended June 30.

The GAO called for the USPS to restructure its priorities by developing and implementing a concrete set of time-frames to address both the short-term and long-term challenges it faces.

In the near future the USPS needs to trim its costs to offset its loss of revenue beyond the unprecedented $6 billion in cost cuts that it ordered earlier this fiscal year, the GAO report stated. Since 2001, the cost cuts have ranged between $900 million and $2 billion.

Earlier this week Del. Eleanor Holmes Norton (D-D.C.) made similar calls on the USPS to restructure its business model.

“The Postal Service needs a business model in keeping with 21st century technology,” she said in a statement. “The post office as we have known it has been gone for some time, but the Postal Service is mandated by the U.S. Constitution and must survive.”

The rising popularity of paying bills electronically has also contributed to the Postal Service’s dismal financial condition. Since 2000, the number of people paying bills by postal mail has decreased by 23 percent, while electronic payment has increased 27 percent.

The USPS has proposed changing the funding requirements for retiree health benefits and reducing mail delivery, from six to five days a week, to try and offset the fiscal losses it has endured. Both actions would require congressional approval.

The GAO report said the Postal Service needs to renegotiate with the largest postal employee unions to reduce its compensation and benefit packages, which make up about 80 percent of its costs — compared to about 72 percent of costs at other federal agencies.

The GAO report also suggested consolidating “retail and processing networks and field structure.”

There are approximately 38,000 postal facilities throughout the country and the USPS employs more than 625,000 career employees, who assist in the delivery of mail to nearly 150 million addresses.