U.S. POSTAL SERVICE

Urgent Action Needed 

to Achieve Financial 

Sustainability

Statement of Gene L. Dodaro

Comptroller General of the United States

Testimony

Before the Committee on Oversight and 

Government Reform, U.S. House of 

Representatives

For Release on Delivery 

Expected at 9:30 a.m. EDT

Wednesday, April 17, 2013

GAO-13-562T

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-13-562T, a testimony 

before the Committee on Oversight and 

Government Reform, U.S. House of 

Representatives

April 17, 2013

U.S. POSTAL SERVICE

Urgent Action Needed to Achieve Financial 

Sustainability 

Why GAO Did This Study

USPS is in a serious financial crisis as 

its declining mail volume has not 

generated sufficient revenue to cover 

its expenses and financial obligations. 

First-Class Mail—which is highly 

profitable and generates the majority of 

the revenues used to cover overhead 

costs—declined 33 percent since it 

peaked in fiscal year 2001, and USPS 

projects a continued decline through 

fiscal year 2020. Mail volume decline is 

putting USPS’s mission of providing 

prompt, reliable, and efficient universal 

services to the public at risk. 

This testimony discusses (1) USPS’s 

financial condition, (2) initiatives to 

reduce costs and increase revenues, 

and (3) actions needed to improve 

USPS’s financial situation. The 

testimony is based primarily on GAO’s

past and ongoing work, its analysis of 

USPS’s recent financial results, and 

recent information on USPS’s proposal 

for a change in delivery service. 

In previous reports, GAO has provided 

strategies and options that USPS and 

Congress could consider to better align 

USPS costs with revenues and 

address constraints and legal 

restrictions that limit USPS’s ability to 

reduce costs and improve efficiency.

GAO has also stated that Congress 

and USPS need to reach agreement 

on a comprehensive package of 

actions to improve USPS’s financial 

viability.

What GAO Found

The U.S. Postal Service (USPS) continues to incur unsustainable operating 

deficits, has not made required payments of $11.1 billion to prefund retiree health 

benefits, and has reached its $15 billion borrowing limit. Thus far, USPS has 

been able to operate within these constraints, but now faces a critical shortage of 

liquidity that threatens its financial solvency and ability to finance needed capital 

investment. USPS had an almost 25 percent decline in total mail volume and net 

losses totaling $40 billion since fiscal year 2006 (see table). While USPS 

achieved about $15 billion in savings and reduced its workforce by about 

168,000 over this period, its debt and unfunded benefit liabilities grew to $96 

billion by the end of fiscal year 2012. USPS expects mail volume and revenue to

continue decreasing as online bill communication and e-commerce expand.

Table: USPS Financial and Operational Information, Fiscal Years 2006 through 2012

Fiscal 

year

Net income

($ in billions)

Annual savings

($ in billions)

Total mail volume

(billions)

Career employees

(thousands)

2006 $0.9 $0.3 213 696

2007 (5.1) 1.2 212 685

2008 (2.8) 2.0 203 663

2009 (3.8) 6.1 177 623

2010 (8.5) 3.0 171 584

2011 (5.1) 1.4 168 557

2012 (15.9) 1.1 160 528

Source: USPS. 

USPS has several initiatives to reduce costs and increase its revenues. To 

reduce costs, USPS announced a 5-year business plan in February 2012 with 

the goal of achieving $22.5 billion in annual cost savings by the end of fiscal year 

2016, which included a proposed change in the delivery schedule. USPS has 

now put all changes in delivery service on hold, which will reduce its ability to 

achieve the full 5-year business plan savings. USPS has begun implementing 

other parts of the plan, which includes needed changes to its network. To 

achieve greater savings, USPS’s Board of Governors recently directed postal 

management to accelerate these efforts. To increase revenue, USPS is pursuing 

55 initiatives. While USPS expects shipping and package services to continue to 

grow, such growth is not expected to fully offset declining mail volume. 

USPS needs to reduce its expenses to avoid even greater financial losses, repay 

its outstanding debt, continue funding its retirement obligations, and increase 

capital for investment, including replacing its aging vehicle fleet. Also, Congress 

needs to act to (1) modify USPS’s retiree health benefit payments in a fiscally 

responsible manner; (2) facilitate USPS’s ability to align costs with revenues 

based on changing workload and mail use; and (3) require that any binding 

arbitration resulting from collective bargaining takes USPS’s financial condition 

into account. No one action in itself will address USPS’s financial condition; GAO 

has previously recommended a comprehensive package of actions. If Congress 

does not act soon, USPS could be forced to take more drastic actions that could 

have disruptive, negative effects on its employees, customers, and the 

availability of postal services. USPS also reported that it may need to prioritize 

payments to employees and suppliers ahead of those to the federal government.

View GAO-13-562T. For more information, 

contact Lorelei St. James at (202) 512-2834 

or stjamesl@gao.gov. 
Page 1 GAO-13-562T 

United States Government Accountability Office

Washington, DC 20548

Chairman Issa, Ranking Member Cummings, and Members of the 

Committee:

We appreciate the opportunity to be here today to discuss the status of 

U.S. Postal Service’s (USPS) financial condition and actions needed to 

address USPS’s financial challenges. We added USPS’s financial 

condition to our High Risk List in 2009, and USPS continues to face a 

serious financial crisis as its mail volume declines. USPS has not 

generated sufficient revenue to cover its expenses and financial 

obligations. While USPS must continue its efforts to align costs with 

revenues, congressional action is needed to facilitate necessary changes 

and help USPS begin to transition to financial sustainability.

This testimony discusses (1) USPS’s financial condition, (2) USPS’s 

initiatives to reduce costs and increase revenues, and (3) actions needed 

to improve USPS’s financial situation. This testimony is based primarily 

on our past and ongoing work examining various aspects of USPS’s 

operations and our analysis of USPS’s recent financial results, and recent 

information on USPS’s proposal for a change in delivery service that we 

reviewed from February 2013 to April 2013. This testimony is based on 

work conducted in accordance with generally accepted government 

auditing standards. Those standards require that we plan and perform the 

audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We 

believe that the evidence obtained provides a reasonable basis for our 

findings and conclusions based on our audit objectives.

USPS faces a dire financial situation and does not have sufficient 

revenues to cover its expenses, putting its mission of providing prompt, 

reliable, and efficient universal services to the public at risk.1 USPS 

continues to incur operating deficits that are unsustainable, has not made 

required payments of $11.1 billion to prefund retiree health benefit 

liabilities,2

 

1

39 U.S.C. § 101(a).

and has reached its $15 billion borrowing limit. Moreover, 

USPS lacks liquidity to maintain its financial solvency or finance needed 

2

The Postal Accountability and Enhancement Act (PAEA) required USPS to make fixed 

annual payments (ranging from $5.4 billion to $5.8 billion per year from fiscal years 2007 

through 2016) to begin prefunding the cost of future retiree health benefits accrued by 

current employees and retirees. Pub. L. No. 109-435, § 803, 120 Stat. 3198 

(Dec. 20, 2006). 

 

USPS’s Financial 

Condition 
 

Page 2 GAO-13-562T 

capital investment. As presented in table 1, since fiscal year 2006, USPS 

has achieved about $15 billion in savings and reduced its workforce by 

about 168,000, while also experiencing a 25 percent decline in total mail 

volume and net losses totaling $40 billion.

Table 1: USPS Financial and Operational Information, Fiscal Years 2006 through 

2012

Fiscal year

Net income

($ in billions)

Annual savings

($ in billions)

Total mail

volume

(billions)

Career 

employees

(thousands)

2006 $0.9 $0.3 213 696

2007 (5.1) 1.2 212 685

2008 (2.8) 2.0 203 663

2009 (3.8) 6.1 177 623

2010 (8.5) 3.0 171 584

2011 (5.1) 1.4 168 557

2012 (15.9) 1.1 160 528

Source: USPS. 

Note: Annual savings are those reported by USPS. 

As a result of significant declines in volume and revenue, USPS reported 

that it took unprecedented actions to reduce its costs by $6.1 billion in 

fiscal year 2009. Also in 2009, a cash shortfall necessitated 

congressional action to reduce USPS’s mandated payment to prefund 

retiree health benefits from $5.4 billion to $1.4 billion.3

 In 2011, USPS’s 

$5.5 billion required retiree health benefit payment was delayed until 

August 1, 2012.4

USPS continues to face significant decreases in mail volume and 

revenues as online communication and e-commerce expand. While 

remaining among USPS’s most profitable products, both First-Class Mail 

and Standard Mail volumes have declined in recent years as illustrated in 

figure 1. First-Class Mail—which is highly profitable and generates the 

majority of the revenues used to cover overhead costs—declined 33 

percent since it peaked in fiscal year 2001, and USPS projects a 

continued decline through fiscal year 2020. Standard Mail (primarily 

USPS missed that payment as well as the $5.6 billion 

that was due by September 30, 2012.

 

3

Pub. L. No. 111-68, § 164(a), 123 Stat. 2053 (Oct. 1, 2009).

4

Pub. L. No. 112-74, § 632, 125 Stat. 786, 928 (Dec. 23, 2011).
 

Page 3 GAO-13-562T 

advertising) has declined 23 percent since it peaked in fiscal year 2007, 

and USPS projects that it will remain roughly flat through fiscal year 2020. 

Standard Mail is profitable overall, but it takes about three pieces of 

Standard Mail, on average, to equal the profit from the average piece of 

First-Class Mail. First-Class Mail and Standard Mail also face competition 

from electronic alternatives, as many businesses and consumers have 

moved to electronic payments over the past decade in lieu of using the 

mail to pay bills. For the first time, in 2010, fewer than 50 percent of all 

bills were paid by mail.

Figure 1: Actual and Projected First-Class Mail and Standard Mail Volume, Fiscal 

Years 2000 through 2020

In addition to lost mail volume and revenue, USPS also has incurred 

financial liabilities, that totaled $96 billion at the end of fiscal year 2012, 

that included unfunded pension and retiree health benefit liabilities. Table 

2 shows the amounts of these liabilities over the last 6 fiscal years. One 

of these liabilities, USPS’s debt to the U.S. Treasury, increased over this 

period from $4 billion to its statutory limit of $15 billion. Thus, USPS can 

no longer borrow to maintain its financial solvency or finance needed 

capital investment. USPS continues to incur unsustainable operating 

deficits. In this regard, the USPS Board of Governors recently directed 
 

Page 4 GAO-13-562T 

postal management to accelerate restructuring efforts to achieve greater 

savings.

Table 2: Selected USPS Liabilities and Unfunded Pension and Health Benefit Liabilities, Fiscal Year End 2007 through 2012

(Dollars in billions)

Fiscal 

Year

Liabilities Unfunded retiree health benefit and pension liabilities

Total

Outstanding debt at the 

end of the fiscal year

Workers' compensation 

liabilities

Unfunded liabilities for 

retiree health benefits

Unfunded 

CSRS 

liabilities 

(surplus)

Unfunded 

FERS 

liabilities 

(surplus) a 

2007

a

4.2 7.7 55.0 3.1 (8.4) 61.6

2008 7.2 8.0 53.5 3.3 (8.8) 63.2 

2009 10.2 10.1 52.0 9.6 (6.8) 75.1

2010 12.0 12.6 48.6 7.3 (6.9) 73.6

2011 13.0 15.1 46.2 (1.7) (11.4) 61.2

2012 15.0 17.6 47.8 18.7 (3.0) 96.1

Source: USPS.

a

The Civil Service Retirement System (CSRS), which became effective on August 1, 1920, 

established a retirement system for certain federal employees. It was replaced by the Federal 

Employees Retirement System (FERS) for federal employees who first entered covered service on 

and after January 1, 1987. FERS and CSRS projections are sensitive to the economic and 

demographic assumptions used and have fluctuated from year to year due to actual economic and 

demographic outcomes (such as investment returns, salary increases, and mortality) being different 

than those predicted by the assumptions, and to changes in the assumptions themselves.

These selected USPS liabilities increased from 83 percent of revenues in 

fiscal year 2007 to 147 percent of revenues in fiscal year 2012 as 

illustrated in figure 2. This trend demonstrates how USPS liabilities have 

become a large and growing financial burden.
 

Page 5 GAO-13-562T 

Figure 2: Selected USPS Liabilities and Unfunded Pension and Health Benefit 

Liabilities as a Percentage of USPS Revenues

USPS’s dire financial condition makes paying for these liabilities highly 

challenging. In addition to reaching its limit in borrowing authority in fiscal 

year 2012, USPS did not make required prefunding payments of $11.1 

billion for fiscal year 2011 and 2012 retiree health benefits. At the end of 

fiscal year 2012, USPS had $48 billion in unfunded retiree health benefit 

liabilities. 

Looking forward, USPS has warned that it suffers from a severe lack of 

liquidity. As USPS has reported: “Even with some regulatory and 

legislative changes, our ability to generate sufficient cash flows from 

current and future management actions to increase efficiency, reduce 

costs, and generate revenue may not be sufficient to meet all of our 

financial obligations.”5

 

5

United States Postal Service, 2012 Report on Form 10-K (Washington, D.C.: 

Nov. 15, 2012) 10.

 For this reason, USPS has stated that it continues

to lack the financial resources to make its annual retiree health benefit 

prefunding payment. USPS has also reported that in the short term, 

should circumstances leave it with insufficient liquidity, it may need to 

prioritize payments to its employees and suppliers ahead of those to the 
 

Page 6 GAO-13-562T 

federal government. For example, near the end of fiscal year 2011, in 

order to maintain its liquidity, USPS temporarily halted its regular 

contributions for the Federal Employees Retirement System (FERS) that 

are supposed to cover the cost of benefits being earned by current 

employees. However, USPS has since made up those missed FERS 

payments. USPS’s statements about its liquidity raise the issue of 

whether USPS will need additional financial help to remain solvent while it 

restructures and, more fundamentally, whether it can remain financially 

self-sustainable in the long term.

USPS has also raised the concern that its ability to negotiate labor 

contracts is essential to maintaining financial stability and that failure to 

do so could have significant adverse consequences on its ability to meet 

its financial obligations. Most USPS employees are covered by collective 

bargaining agreements with four major labor unions which have 

established salary increases, cost-of-living adjustments, and the share of 

health insurance premiums paid by employees and USPS. When USPS 

and its unions are unable to agree, binding arbitration by a third-party 

panel is used to establish agreement. There is no statutory requirement 

for USPS’s financial condition to be considered in arbitration. In 2010, we 

reported that the time has come to reexamine USPS’s 40-year-old 

structure for collective bargaining, noting that wages and benefits 

comprise 80 percent of its costs at a time of escalating losses and a 

dramatically changed competitive environment.6 We also reported that 

Congress should consider revising the statutory framework for collective 

bargaining to ensure that USPS’s financial condition be considered in 

binding arbitration. 

USPS has several initiatives to reduce costs and increase its revenues to 

curtail future net losses. In February 2012, USPS announced a 5-year 

business plan with the goal of achieving $22.5 billion in annual cost 

savings by the end of fiscal year 2016. This plan included savings from a 

change in the delivery schedule; however, USPS has now put all changes 

in delivery service on hold, which will reduce its ability to achieve the full 

5-year business plan savings. USPS has begun implementing other parts 

of the plan, which includes initiatives to save:

 

6

GAO, U.S. Postal Service: Strategies and Options to Facilitate Progress toward Financial 

Viability, GAO-10-455 (Washington, D.C.: Apr. 12, 2010). 

USPS Initiatives to 

Reduce Costs and 

Increase Revenues 
 

Page 7 GAO-13-562T 

• $9 billion in mail processing, retail, and delivery operations, 

including consolidation of the mail processing network, and 

restructuring retail and delivery operations; 

• $5 billion in compensation and benefits and non-personnel 

initiatives; and 

• $8.5 billion through proposed legislative changes, such as 

eliminating the obligation to prefund USPS’s retiree health 

benefits. 

o $2.7 billion of this $8.5 billion was estimated savings from 

moving to a 5-day delivery schedule for all types of mail. 

o USPS subsequently proposed a modified reduction in its 

delivery schedule, maintaining package delivery on 

Saturday, with estimated annual savings of $2 billion, but 

as noted, USPS has now put even this proposed change

in service delivery on hold. 

Simultaneously, USPS’s 5-year plan would further reduce the overall size 

of the postal workforce by roughly 155,000 career employees, with many 

of those reductions expected to result from attrition. According to the plan, 

half of USPS’s career employees are currently eligible for full or early 

retirement. Reducing its workforce is vital because as noted 

compensation and benefits costs continue to generate about 80 percent 

of USPS’s expenses. Compensation alone (primarily wages) exceeded 

$36 billion in fiscal year 2012, or close to half of its costs. Compensation 

costs decreased by $542 million in fiscal year 2012 as USPS offered 

separation incentives to postmasters and mail handlers to encourage 

more attrition. This fiscal year, separation incentives were offered to 

employees represented by the American Postal Workers Union (e.g., mail 

processing and retail clerks) to encourage further attrition as processing 

and retail operations are redesigned and consolidated to more closely 

correspond with workload. 

Another key area of potential savings included in the 5-year plan focused 

on reducing compensation and benefit costs. USPS’s largest benefit 

payments in fiscal year 2012 included:

• $7.8 billion in current-year health insurance premiums for 

employees, retirees, and their survivors (USPS’s health benefit 
 

Page 8 GAO-13-562T 

payments would have been $13.4 billion if USPS had paid the 

required $5.6 billion retiree health prefunding payment7

• $3.0 billion in FERS pension funding contributions; 

);

• $1.8 billion in social security contributions; 

• $1.4 billion in workers’ compensation payments; and

• $1.0 billion in Thrift Savings Plan contributions.

USPS has proposed administering its own health care plan for its 

employees and retirees and withdrawing from the Federal Employee 

Health Benefits (FEHB) program so that it can better manage its costs 

and achieve significant savings, which USPS has estimated could be over 

$7 billion annually. About $5.5 billion of the estimated savings would 

come from eliminating the retiree health benefit prefunding payment and 

another $1.5 billion would come from reducing health care costs. We are 

currently reviewing USPS’s proposal including its potential financial 

effects on participants and USPS.

To increase revenue, USPS is working to increase use of shipping and 

package services. With the continued increase in e-commerce, USPS 

projects that shipping and package volume will grow by 7 percent in fiscal 

year 2013, after increasing 7.5 percent in fiscal year 2012. Revenue from 

these two product categories represented about 18 percent of USPS’s 

fiscal year 2012 operating revenue. However, USPS does not expect that 

continued growth in shipping and package services will fully offset the 

continued decline of revenue from First-Class Mail and other products.

We recently reported that USPS is pursuing 55 initiatives to generate 

revenue.8

 

7

The $5.6 billion is the amount originally due in fiscal year 2012, before the fiscal year 

2011 required payment of $5.5 billion was deferred and added to fiscal year 2012. 

Forty-eight initiatives are extensions of existing lines of postal 

products and services, such as offering Post Office Box customers a suite 

of service enhancements (e.g., expanded lobby hours and earlier pickup 

times) at selected locations and increasing public awareness of the 

availability of postal services at retail stores. The other seven initiatives 

included four involving experimental postal products, such as prepaid 

postage on the sale of greeting cards, and three that were extensions of 

nonpostal services that are not directly related to mail delivery. USPS 

8

GAO, U.S. Postal Service: Overview of Initiatives to Increase Revenue and Introduce 

Nonpostal Services and Experimental Postal Products, GAO-13-216 (Washington, D.C.: 

Jan. 15, 2013). 
 

Page 9 GAO-13-562T 

offers 12 nonpostal services including Passport Photo Services, the sale 

of advertising to support change-of-address processing, and others 

generating a net income of $141 million in fiscal year 2011.9

 Another 

area of potential revenue generation is USPS’s increased use of 

negotiated service agreements10 that offer competitively priced contracts 

as well as promotions with temporary rate reductions that are targeted to 

retain mail volume. We are currently reviewing USPS’s use of negotiated 

service agreements.

As USPS attempts to reduce costs and increase revenue, its mission to 

provide universal service continues. USPS’s network serves more than 

152 million residential and business delivery points. In May 2011, we 

reported that many of USPS’s delivery vehicles were reaching the end of 

their expected 24-year operational life and that USPS’s financial 

challenges pose a significant barrier to replacing or refurbishing its fleet.11

As a result, USPS’s approach has been to maintain the delivery fleet until 

USPS determines how to address longer term needs, but USPS has been 

increasingly incurring costs for unscheduled maintenance because of 

breakdowns. The eventual replacement of its vehicle delivery fleet 

represents yet another financial challenge facing USPS. We are currently 

reviewing USPS’s investments in capital assets.

We have issued a number of reports on strategies and options for USPS 

to improve its financial situation by optimizing its network and 

restructuring the funding of its pension and retiree health benefit liabilities.

To assist Congress in addressing issues related to reducing USPS’s 

expenses, we have issued several reports analyzing USPS’s initiatives to 

optimize its mail processing, delivery, and retail networks.

 

9

Such services were grandfathered by the Postal Regulatory Commission (PRC) after 

enactment of PAEA. PAEA eliminated USPS’s authority to offer nonpostal services unless 

such services were offered as of January 1, 2006, and expressly grandfathered by PRC. 

USPS may, however, offer new nonpostal services and products if they are related to the 

grandfathered nonpostal services. It may also offer experimental postal products that meet 

certain conditions.

10Negotiated service agreements are customized postal rate contracts with individual 

companies that generally provide lower prices on specific mail products in exchange for 

meeting volume targets and mail preparation requirements.

11GAO, United States Postal Service: Strategy Needed to Address Aging Delivery Fleet, 

GAO-11-386 (Washington, D.C.: May 5, 2011).

Actions Needed to 

Improve USPS’s 

Financial Situation 

Network Optimization
 

Page 10 GAO-13-562T 

In April 2012, we issued a report related to USPS’s excess capacity in its 

network of 461 mail processing facilities.

12 We found that USPS’s mail 

processing network exceeds what is needed for declining mail volume. 

USPS proposed consolidating its mail processing network, a plan based 

on proposed changes to overnight delivery service standards for FirstClass Mail and Periodicals. Such a change would have enabled USPS to 

reduce an excess of 35,000 positions and 3,000 pieces of mail 

equipment, among other things. We found, however, that stakeholder 

issues and other challenges could prevent USPS from implementing its 

plan for consolidating its mail processing network. Although some 

business mailers and Members of Congress expressed support for 

consolidating mail processing facilities, other mailers, Members of 

Congress, affected communities, and employee organizations raised 

concerns. Key issues raised by business mailers were that closing 

facilities could increase their transportation costs and decrease service. 

Employee associations were concerned that reducing service could result 

in a greater loss of mail volume and revenue that could worsen USPS’s 

financial condition. We reported that if Congress preferred to retain the 

current delivery service standards and associated network, decisions will 

need to be made about how USPS’s costs for providing these services 

will be paid.

Over the past several years, USPS has proposed transitioning to a new 

delivery schedule. Most recently, in February of this year, USPS 

proposed limiting its delivery of mail on Saturdays to packages—a 

growing area for USPS—and to Express Mail, Priority Mail, and mail 

addressed to Post Office Boxes.

13 Preserving Saturday delivery for 

packages would address concerns previously raised by some 

stakeholders, such as delivery of needed medications. USPS estimated

that this reduced Saturday delivery would produce $2 billion in annual 

savings after full implementation, which would take about two years to 

achieve, and result in a mail volume decline of less than one percent. 

Based on our 2011 work,14

 

12GAO, U.S. Postal Service: Mail Processing Network Exceeds What Is Needed for 

Declining Mail Volume, 

and recent information from USPS on their

February 2013 estimate, we note that the previous and current estimates 

GAO-12-470 (Washington, D.C.: Apr. 12, 2012).

13Under USPS’s February proposal, post offices open on Saturdays would remain open.

14GAO, U.S. Postal Service: Ending Saturday Delivery Would Reduce Costs, but 

Comprehensive Restructuring Is Also Needed, GAO-11-270, (Washington, D.C.: 

March 29, 2011).

Mail Processing 

Delivery 
 

Page 11 GAO-13-562T 

are primarily based on eliminating city and rural carrier work hours on 

Saturdays. In our prior work, stakeholders raised a variety of concerns 

about these estimates, several of which are still relevant. For example, 

USPS’s estimate assumed that most of the Saturday workload transferred 

to weekdays would be absorbed through more efficient delivery. USPS 

estimated that its current excess capacity should allow it to absorb the 

Saturday workload on Monday. If that is not the case, some of the 

projected savings may not be realized. Another concern stakeholders 

raised was that USPS may have underestimated the size of the potential 

volume loss from eliminating Saturday delivery due to the methodology 

used to develop its estimates. Since mail volume has declined from the 

prior estimate, the accuracy of the estimated additional impact of 

eliminating Saturday delivery is unclear. The extent to which USPS would 

be able to achieve its most recent estimate of $2 billion in annual savings

depends on how well and how quickly it can realign its workforce and 

delivery operations. Nevertheless, we agree that such a change in 

USPS’s delivery schedule would likely result in substantial savings.15

A change to 5-day service would be similar to changes USPS has made 

in the past. USPS is required by law to provide prompt, reliable, and 

efficient services, as nearly as practicable. The Postal Regulatory 

Commission (PRC) has reported that delivery frequency is a key element 

of universal postal service. The Postal Service’s universal service 

obligation is broadly outlined in multiple statutes and encompasses 

multiple dimensions including delivery frequency. Other key dimensions 

include geographic scope, range of products, access to services and 

facilities, affordable and uniform pricing, service quality, and security of 

the mail.16

Following USPS’s most recent proposed change in delivery in February

2013, we issued a legal opinion concerning the proposal in response to a 

 The frequency of USPS mail delivery has evolved over time to 

account for changes in communication, technology, transportation, and 

postal finances. The change to 5-day service would be a similar change. 

Until 1950, residential deliveries were made twice a day in most cities. 

Currently, while most customers receive 6-day delivery, some customers 

receive 5-day or even 3-day-a-week delivery, including businesses that 

are not open 6 days a week; resort or seasonal areas not open yearround; and areas not easily accessible, some of which require the use of 

boats, airplanes, or trucks. 

 

15GAO-11-270. 

16GAO-10-455. 
 

Page 12 GAO-13-562T 

congressional request. As requested, we addressed whether a 

requirement contained in the USPS’s annual appropriations acts for the 

past three decades and contained in its fiscal year 2012 appropriations 

act17—that it continue 6-day delivery of mail “at not less than the 1983 

level”—was still in effect under the partial year Continuing Appropriations 

Resolution.18 We concluded that the Continuing Resolution carried 

forward this requirement, explaining that absent specific legislative 

language, a continuing resolution maintains the status quo regarding 

government funding and operations. Although the 6-day delivery proviso 

is an operational directive, not an appropriation, we saw no language in 

the Continuing Resolution to indicate that Congress did not expect it to 

continue to apply. The full-year 2013 Continuing Resolution that 

Congress then enacted on March 21, shortly after we issued our opinion,

which provided funding through the end of fiscal year 2013, likewise has 

continued the effectiveness of the 6-day proviso. 

On April 10, 2013, the USPS Board of Governors announced that based 

on the language of the March 21, 2013, Continuing Resolution, it would

delay implementation of USPS’s proposed delivery schedule until 

legislation is passed that provides it with the authority “to implement a 

financially appropriate and responsible delivery schedule.” By statute, the 

Board directs the exercise of the power of the Postal Service, directs and 

controls the Postal Service’s expenditures, and reviews its policies and 

practices.19

In April 2012, we reported that USPS has taken several actions to 

restructure its retail network—which included almost 32,000 postal 

managed facilities in fiscal year 2012—through reducing its workforce and 

its footprint while expanding retail alternatives.

 Thus, the Board, which has the lead responsibility for taking 

actions within the scope of the Postal Service’s existing statutory authority 

to maintain its financial solvency, has determined that full 6-day service 

will continue for the present time. 

20

 

17Pub. L. No. 112-74, 125 Stat. 786, 923 (Dec. 23, 2011).

We also reported on 

concerns customers and other stakeholders have expressed regarding 

18As requested, we considered only whether, during the period of the partial-year 

Continuing Resolution, USPS continued to be bound by the 6-day provision in its 2012 

Appropriations Act, whatever its scope. We did not consider whether the planned service 

changes USPS had announced would comply with that provision. 

1939 U.S.C. §§ 202, 205.

20GAO, U.S. Postal Service: Challenges Related to Restructuring the Postal Service’s 

Retail Network, GAO-12-433 (Washington, D.C.: Apr. 17, 2012).

Retail 
 

Page 13 GAO-13-562T 

the impact of post office closures on communities, the adequacy of retail 

alternatives, and access to postal services, among others. We discussed 

challenges USPS faces, such as legal restrictions and resistance from 

some Members of Congress and the public, that have limited USPS’s 

ability to change its retail network by moving postal services to more 

nonpostal-operated locations (such as grocery stores), similar to what 

other nations have done.21

In November 2011, we reported that USPS had expanded access to its 

services through alternatives to post offices in support of its goals to 

improve service and financial performance and recommended that USPS 

develop and implement a plan with a timeline to guide efforts to 

modernize USPS's retail network, and that addresses both traditional post 

offices and retail alternatives as well.

 The report concluded that USPS cannot 

support its current level of services and operations from its current 

revenues. We noted that policy issues remain unresolved related to what 

level of retail services USPS should provide, how the cost of these 

services should be paid, and how USPS should optimize its retail 

network.

22

(1) criteria for ensuring the retail network continues to provide adequate 

access for customers as it is restructured; 

We added that the plan should 

also include: 

(2) procedures for obtaining reliable retail revenue and cost data to 

measure progress and inform future decision making; and 

(3) a method to assess whether USPS's communications strategy is 

effectively reaching customers, particularly those customers in areas 

where post offices may close. 

In November 2012, we reported that although contract postal units 

(CPUs)—independent businesses compensated by USPS to sell most of 

the same products and services as post offices at the same price—have 

declined in number, they have supplemented post offices by providing 

additional locations and hours of service.23

 

21GAO, U.S. Postal Service: Foreign Posts’ Strategies Could Inform U.S. Postal Service’s 

Efforts to Modernize, 

More than 60 percent of CPUs 

GAO-11-282 (Washington, D.C.: Feb. 16, 2011).

22GAO, U.S. Postal Service: Action Needed to Maximize Cost-Saving Potential of 

Alternatives to Post Offices, GAO-12-100 (Washington, D.C.: Nov. 17, 2011).

23GAO, Contract Postal Units: Analysis of Location, Service, and Financial 

Characteristics, GAO-13-41 (Washington, D.C.: Nov. 14, 2012).
 

Page 14 GAO-13-562T 

are in urban areas where they can provide customers nearby alternatives 

when they face long lines at post offices. In fiscal year 2011, after 

compensating CPUs, USPS retained 87 cents of every dollar of CPU 

revenue. We found that limited interest from potential partners, competing 

demands on USPS staff resources, and changes to USPS's retail network 

posed potential challenges to USPS's use of CPUs. 

To assist Congress in addressing issues related to funding USPS’s 

liabilities, we have also issued several reports that address USPS’s 

liabilities, including its retiree health benefits, pension, and workers’ 

compensation. 

In December 2012, we reported that USPS’s deteriorating financial 

outlook will make it difficult to continue the current schedule for 

prefunding postal retiree health benefits in the short term, and possibly to 

fully fund the remaining $48 billion unfunded liability over the remaining 

decades of the statutorily required actuarial funding schedule.24 

However, we also reported that deferring funding could increase costs for 

future ratepayers and increase the possibility that USPS may not be able 

to pay for some or all of its liability. We stated that failure to prefund these 

benefits is a potential concern. Making affordable prefunding payments 

would protect the viability of USPS by not saddling it with bills later on, 

when employees are already retired and no longer helping it generate 

revenue; it can also make the promised benefits more secure. Thus, as 

we have previously reported, we continue to believe that it is important for 

USPS to prefund these benefits to the maximum extent that its finances 

permit. We also recognize that without congressional or further USPS 

actions to align revenue and costs, USPS will not have the finances 

needed to make annual payments and reduce its long term retiree health 

unfunded liability. No funding approach will be viable unless USPS can 

make the required payments. 

We reported on options with regard to the FERS surplus, noting the 

degree of uncertainty inherent in this estimate and reporting on the 

implications of alternative approaches to accessing this surplus. 25

 

24GAO, U.S. Postal Service: Status, Financial Outlook, and Alternative Approaches to 

Fund Retiree Health Benefits, 

 The 

estimated FERS surplus decreased from 2011 to 2012, and at the end of 

GAO-13-112 (Washington, D.C.: Dec. 4, 2012).

25GAO, U.S. Postal Service: Allocation of Responsibility for Pension Benefits between the 

Postal Service and the Federal Government, GAO-12-146 (Washington, D.C.: Oct. 13, 2011).

Addressing USPS Benefit 

Liabilities 

Retiree Health Benefits 

FERS Pension Benefits
 

Page 15 GAO-13-562T 

fiscal year 2012, USPS had an estimated FERS surplus of $3.0 billion 

and an estimated CSRS deficit of $18.7 billion.26

In 2012, we reported on workers’ compensation benefits paid to both 

postal and nonpostal beneficiaries under the Federal Employees’ 

Compensation Act (FECA).27 USPS has large FECA program costs. At 

the time of their injury, 43 percent of FECA beneficiaries in 2010 were 

employed by USPS. FECA provides benefits to federal workers who 

sustained injuries or illnesses while performing federal duties and benefits 

are not taxed or subject to age restrictions. Various proposals to modify 

FECA benefit levels have been advanced. At the request of Congress, 

we have provided information to assist them in making decisions about 

the FECA program.

In summary, to improve its financial situation, USPS needs to reduce its 

expenses to close its gap between revenue and expenses, repay its 

outstanding debt, continue funding its retirement obligations, and increase 

capital for investment, such as replacing its aging vehicle fleet. In 

addition, as noted in prior reports, congressional action is needed to (1) 

modify USPS’s retiree health benefit payments in a fiscally responsible 

manner; (2) facilitate USPS’s ability to align costs with revenues based on 

changing workload and mail use; and (3) require that any binding 

arbitration resulting from collective bargaining takes USPS’s financial 

condition into account. As we have continued to underscore, Congress 

and USPS need to reach agreement on a comprehensive package of 

actions to improve USPS’s financial viability. In previous reports, we have 

provided strategies and options, to both reduce costs and enhance 

revenues, that Congress could consider to better align USPS costs with 

revenues and address constraints and legal restrictions that limit USPS’s 

ability to reduce costs and improve efficiency; we have also reported on 

implications for addressing USPS’s benefit liabilities. If Congress does not 

act soon, USPS could be forced to take more drastic actions that could 

 

26USPS is required by law to make certain payments to the Civil Service Retirement and 

Disability Fund to fund its share of CSRS and FERS pension costs. The same federal fund 

finances both CSRS and FERS.

27GAO, Federal Employees’ Compensation Act: Analysis of Proposed Program Changes, 

GAO-13-108 (Washington, D.C.: Oct. 26, 2012), Federal Employees’ Compensation Act: 

Analysis of Proposed Changes on USPS Beneficiaries, GAO-13-142R (Washington, D.C.: 

Nov. 26, 2012), and Federal Employees’ Compensation Act: Effects of Proposed Changes 

on Partial Disability Beneficiaries Depend on Employment After Injury, GAO-13-143R

(Washington, D.C.: Dec. 7, 2012).

Workers’ Compensation 

Benefits

Concluding 

Observations 
 

Page 16 GAO-13-562T 

have disruptive, negative effects on its employees, customers, and the 

availability of reliable and affordable postal services.

- - - - 

Chairman Issa, Ranking Member Cummings, and Members of the 

Committee, this concludes my prepared statement. I would be pleased to 

answer any questions that you may have at this time.

For further information about this statement, please contact Lorelei St. 

James, Director, Physical Infrastructure, at (202) 512-2834 or 

stjamesl@gao.gov. Contact points for our Congressional Relations and 

Public Affairs offices may be found on the last page of this statement. In 

addition to the contact named above, Frank Todisco, Chief Actuary; 

Samer Abbas, Teresa Anderson, Barbara Bovbjerg, Kyle Browning, Colin 

Fallon, Imoni Hampton, Kenneth John, Hannah Laufe, Kim McGatlin, 

Amelia Shachoy, Andrew Sherrill, and Crystal Wesco made important 

contributions to this statement.

GAO Contact and 

Staff 

Acknowledgments 

(544196)
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