Restructuring the U.S. Postal Service to Achieve Sustainable Financial Viability

Why It's High Risk

Amid challenging economic conditions, a changing business environment, and declining mail volumes, the U.S. Postal Service (USPS) finds itself without sufficient revenues to cover its expenses and financial obligations. From fiscal year 2006 through fiscal year 2010, mail volume declined about 20 percent, from 213 billion pieces to 171 billion pieces, and USPS expects it to drop to about 150 billion pieces by 2020. As this trend indicates, USPS can no longer rely, as it once did, on growth in mail volume to help cover costs. Actions taken by USPS to improve its financial condition have been limited in part by statutory and regulatory requirements, such as those related to closing unneeded facilities.

^ Back to topWhat We Found

USPS cannot fund its current level of service and operations from its revenues and urgently needs to restructure to reflect changes in mail volume, revenue, and use of the mail.

• Although USPS reports $12.5 billion in cost savings since fiscal year 2006, it has not been able to cut costs fast enough to offset the large decline in mail volume and revenue—particularly costs related to its workforce, retail and processing networks, and delivery services.
• Furthermore, its revenue initiatives have had limited results. USPS can borrow up to $3 billion from the Treasury annually but expects to reach its statutory $15 billion borrowing limit in fiscal year 2011.
• USPS must align its costs with revenues, generate sufficient funding for capital investment, and manage its growing debt (see table).

In March 2010, USPS issued a 10-year Action Plan, as we suggested when we added USPS to our High-Risk List in 2009. USPS's plan calls for the following actions

• restructuring USPS's retiree health benefits payments,
• eliminating Saturday delivery,
• expanding access to retail services,
• establishing a more flexible workforce, and
• expanding products and services.

In April 2010, we reported on strategies and options for USPS to generate revenues, reduce costs, and increase efficiency (GAO-10-455). Options include

• reducing compensation and benefit costs—which constitute about 80 percent of expenses—and
• optimizing networks to eliminate excess capacity

Several bills introduced in 2010 included provisions for congressional action to restructure USPS's benefit payments and address barriers to implementing its Action Plan. These bills were not enacted

^ Back to topWhat Needs to Be Done

Congress needs to approve a comprehensive package of actions that would improve USPS's financial viability by

• facilitating USPS cost reduction, such as by modernizing and optimizing postal networks and its workforce;
• modifying its retiree health benefit cost structure in a fiscally responsible manner; and
• requiring any binding arbitration in the negotiation process for USPS labor contracts to take USPS's financial condition into account.

^ Back to topKey Reports

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