For Immediate Release: August 6, 2009
Contact: Bette Phelan (202) 224-2441
Opening Statement: "The U.S. Postal Service in Crisis"
Subcommittee On Federal Financial Management, Government Information, Federal Services, And International Security
My thanks to our witnesses and guests for joining us today. This hearing is the latest in a series of hearings over the past half-dozen years that this subcommittee has held on the Postal Service’s struggles to adapt to a changing mailing and communications industry and, now, to a deeply troubled economy.
As we all know, the economic crisis that our country is currently battling has had an impact on just about every family and business. This downturn has impacted the Postal Service and some of its biggest customers far more than most.
The financial data the Postal Service released yesterday for the third quarter of the current fiscal year bear this out. This data also tell me that the title of this hearing is accurate. Our Postal Service is, indeed, in crisis.
According to the Postal Service, mail volume was down last quarter more than 14 percent when compared to the third quarter of last year. This led to a loss of some $2.4 billion, an amount that nearly equals the Postal Service’s total loss for all of fiscal year 2008. This latest quantity loss brings the Postal Service’s year-to-date loss to $4.7 billion. Current projections point to a record loss of more than $7.1 billion by the end of the fiscal year. And this projected loss takes into account some $6 billion in annual savings the Postal Service is expected to achieve by the end of this September.
These numbers are sobering. Alarming, even. But I should point out that the Postmaster General has said, and I’m sure will say again today, that the mail will continue to be delivered as it always has been and postal employees will continue to be paid. I would also add that the path out of this situation we find ourselves in is – at least in my estimation – clear.
First, it is imperative that the Postal Service be given next month a prudent measure of financial relief. Not a bailout. Not lip service. Not a berating. A prudent measure of financial relief and, perhaps, a bit of tough love.
I mentioned earlier the Postmaster General’s assurances that the mail will continue despite the dire financial projections we’ll be discussing today. Having said that, absent some action from Congress and the President in the very near term, we cannot promise that that will always be the case.
In recent months, a number of us have come to the conclusion that the most appropriate way to give the Postal Service a measure of relief in the throes of this deep recession is to restructure the aggressive retiree health pre-funding schedule that was imposed on it in 2006. That schedule has the Postal Service paying enormous payments of more than $5 billion per year through 2016 to pre-fund its future health care obligations to its retirees. This is on top of regular payments of $2 billion or more for current retirees’ premiums. The combination would be enough to sink many businesses in the economic downturn that has buffeted our nation and our world in the past year..
Senator Lieberman and I have introduced legislation – S. 1507, the Postal Service Retiree Health Funding Reform Act – to restructure the Postal Service’s retiree health payment schedule to give it the financial breathing room to get through the next several years. Our proposal works much like a mortgage renegotiation would for a family in which someone has lost a job and needs to find a way to keep their family home.
Our bill, or something very similar to it, must pass and be signed into law before the current fiscal year ends in September.
That said, our bill is not a silver bullet. It does not solve all of the Postal Service’s problems. It merely sets the stage for the work that needs to be done in a number of areas to streamline postal operations and bring back at least some of the business that has been lost.
Much of the cost-cutting discussion since our last hearing in January has focused on the Postal Service’s proposal to move from six-day to five-day delivery, probably by eliminating Saturday delivery.
The Postal Service estimates that making this change could save it upwards of $3 billion per year. Based on recent polling, a clear majority of the American public would not oppose the elimination of Saturday delivery. And Congress unanimously endorsed language included in the postal reform bill in 2006 that gave the Postal Service the authority to make the business decision to reduce delivery frequency if it felt like it needed to do so.
But every year, Congress – through language included in an annual appropriations bill – has decided to prevent the Postal Service from exercising this authority. With the situation the Postal Service is facing now, it’s time for us to re-evaluate this prohibition.
Congress also needs to re-evaluate the position it often takes on facility closures. The Postal Service currently maintains more than 35,000 retail outlets and more than 400 processing plants around the country. This network was developed for a time before e-mail, before electronic bill pay, before any number of communications revolutions in our society. We simply don’t need all of those facilities in this day and age. But, all too often, we in Congress put up roadblocks whenever the Postal Service even mentions that it might be time to close or consolidate some facilities. We just can’t afford to do that anymore.
The Postal Service itself needs to continue to find new ways over time to make the products and services it offers more relevant and to increase demand for them. We did give the Postal Service some new commercial flexibility in our 2006 postal reform law. They’ve been able to take advantage of that flexibility in some areas. For instance, the “flat-rate box” promotion that I’m sure many of us have seen commercials for on television has been successful. And, I understand that the response has been good for the so-called “summer sale” that the Postal Service hopes will bring additional advertising and other commercial mail back into the system in the coming weeks. But I’m certain that more can be done in building a new entrepreneurial spirit at the U.S. Postal Service and we’ll explore that today.
Finally, I would be remiss if I didn’t mention labor costs. All four major postal unions’ contracts are set to expire in 2010 and 2011. It is my hope that these unions will continue to work constructively with the Postal Service through those negotiations to adjust pay, benefits and work rules to reflect the reality that the Postal Service faces in the mailing and communications market today.
I look forward to today’s discussion. I hope it can provide the Postal Service and all of us the momentum that we need to tackle the work that lies ahead.
###