U.S. Postal Service: Strategies and Options to Facilitate Progress toward Financial Viability
Published: 2010-04-12T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Postal Accountability and Enhancement Act of 2006 required GAO to evaluate strategies and options for reforms of the United States Postal Service (USPS). USPS's business model is to fulfill its mission through self-supporting, businesslike operations; however, USPS has experienced increasing difficulties. Due to volume declines, losses, a cash shortage, and rising debt, GAO added USPS's financial condition to its high-risk list in July 2009. GAO's objectives were to assess (1) the viability of USPS's business model, (2) strategies and options to address challenges to its business model, and (3) actions Congress and USPS need to take to facilitate progress toward financial viability. GAO primarily drew on its past work; other studies; USPS data; interviews with USPS, unions, management associations, Postal Regulatory Commission, and mailing industry officials; and stakeholder input.
section_title: What GAO Found
paragraphs: USPS's business model is not viable due to USPS's inability to reduce costs sufficiently in response to continuing mail volume and revenue declines. Mail volume declined 36 billion pieces (17 percent) over the last 3 fiscal years (2007 through 2009) with the recession accelerating shifts to electronic communications and payments. USPS lost nearly $12 billion over this period, despite achieving billions in cost savings by reducing its career workforce by over 84,000 employees, reducing capital investments, and raising rates. However, USPS had difficulty in eliminating costly excess capacity, and its revenue initiatives have had limited results. USPS also is nearing its $15 billion borrowing limit with the U.S. Treasury and has unfunded pension and retiree health obligations and other liabilities of about $90 billion. In 2009, Congress reduced USPS's retiree health benefit payment by $4 billion to address a looming cash shortfall, but USPS still recorded a loss of $3.8 billion. Given its financial problems and outlook, USPS cannot support its current level of service and operations. USPS projects that volume will decline by about 27 billion pieces over the next decade, while revenues will stagnate; costs will rise; and, without major changes, cumulative losses could exceed $238 billion. This report groups strategies and options that can be taken to address challenges in USPS's business model by better aligning costs with revenues (see table on next page). USPS may be able to improve its financial viability if it takes more aggressive action to reduce costs, particularly compensation and benefit costs that comprise 80 percent of its total costs, as well as increasing revenues within its current authority. However, it is unlikely that such changes would fully resolve USPS's financial problems, unless Congress also takes actions to address constraints and legal restrictions. Action by Congress and USPS is urgently needed to (1) reach agreement on actions to achieve USPS's financial viability, (2) provide financial relief through deferral of costs by revising USPS retiree health benefit funding while continuing to fund these benefits over time to the extent that USPS's finances permit, and (3) require that any binding arbitration resulting from collective bargaining would take USPS's financial condition into account. Congress may also want assurance that any financial relief it provides is met with aggressive actions by USPS to reduce its costs and increase revenues, and that USPS is making progress toward addressing its financial problems. USPS's new business plan recognizes immediate actions are needed, but USPS has made limited progress on some options, such as closing facilities. If no action is taken, risks of larger USPS losses, rate increases, and taxpayer subsidies will increase. To facilitate progress in these difficult areas, Congress could set up a mechanism, such as one similar to the military Base Realignment and Closure Commission, where independent experts could recommend a package of actions with time frames. Key issues also need to be addressed related to what changes, if any, should be made to delivery or retail services; to allow USPS to provide new products or services in nonpostal areas; and to realign USPS operations, networks, and workforce.

section_title: Letter
paragraphs: The Postal Accountability and Enhancement Act (PAEA) of 2006 required  GAO to evaluate strategies and options for the long-term structural and  operational reform of the United States Postal Service (USPS). At that  time, USPS was given additional pricing flexibility and required to develop  service standards, while PAEA reconfigured certain financial obligations.  These changes provided additional tools to improve its effectiveness and  accountability in an increasingly competitive delivery and communications  marketplace. Recent developments have highlighted deficiencies in  USPS’s business model, which is to fulfill its mission through self- supporting, businesslike operations. As mail volume declined in fiscal  years 2007 through 2009, USPS financial viability deteriorated, and it was  not able to cut costs fast enough to offset the accelerated decline in mail  volume and revenue. These volume declines have been brought on by  customers’ changing use of the mail and have been accelerated by the  recession and continuing difficulties in the economy. In fiscal year 2009,  total mail volume declined by a record 26 billion pieces, while revenue  dropped nearly $7 billion. USPS has incurred close to $12 billion in losses  in fiscal years 2007 through 2009 and is rapidly approaching its statutory  debt limit. Furthermore, a looming cash shortfall at the end of fiscal year  2009 necessitated last-minute congressional action that deferred costs by  reducing USPS’s mandated retiree health benefit payments. On the basis of  these challenges, in July 2009, we testified that a restructuring of USPS  was needed to enhance its current and long-term financial viability and  placed USPS’s financial condition on our high-risk list.
USPS’s financial outlook is poor. In fiscal year 2010, USPS expects a  record loss of over $7 billion, its outstanding debt to increase to $13.2  billion, and limited cash flow that will continue to constrain capital  investment. USPS projections show losses growing over the next decade  as mail volume declines further and costs rise. USPS remains the largest  civilian federal agency (employing about 712,000 employees at the end of  fiscal year 2009), has a nationwide network of about 38,000 facilities, and  provides 6-day-per-week mail delivery to most of the nation’s 150 million  addresses.
PAEA required that GAO complete this report by December 2011. Because  of USPS’s financial crisis and our assessment that restructuring is urgently  needed, our work has been accelerated at the request of Members of  Congress and is presented in this report. Our objectives were to assess   (1) the viability of USPS’s business model, (2) strategies and options to  address the challenges to USPS’s current business model, and (3) actions  Congress and USPS need to take to facilitate progress toward USPS’s  financial viability.
In conducting our work related to assessing the viability of USPS’s  business model and strategies and options to solve its challenges, we  relied on our past work and USPS financial and operating data. We  interviewed various USPS officials, including the Postmaster General, the  Deputy Postmaster General, the former and current Chairmen of the  Board of Governors, and headquarters and field staff. We reviewed USPS’s  Action Plan released March 2010 and its financial and volume  projections. We did not assess the validity of USPS’s financial and mail  volume projections due to time and resource constraints. We reviewed  USPS’s current legal and regulatory framework and relevant congressional  testimonies and hearings. We also reviewed the results of retiree health  valuations provided to us by the Office of Personnel Management (OPM)  in March 2010, which were based on USPS employee population  projections. We did not assess the reasonableness of these projections or  OPM’s actuarial assumptions and methodology. We utilized OPM’s  valuation results to analyze the financial impacts of selected options for  funding USPS’s retiree health benefit obligations.
We also examined studies performed by other postal stakeholders,  including the Postal Regulatory Commission (PRC), USPS Office of  Inspector General (OIG), the 2003 President’s Commission on the United  States Postal Service, and other mailing industry experts. We met with  PRC commissioners and staff, representatives of the four major employee  unions and three major management associations, USPS OIG, members of  the mailing industry, economists, and other stakeholders. We distributed a  list of questions to over 60 organizations to collect additional information  on actions that could be taken to improve USPS’s business model and the  potential impacts of these actions. The organizations represented various  sections of the postal community, such as postal unions and management  associations; small and large mailers; and mailers across various segments  (e.g., First-Class Mail, Standard Mail, Periodicals, parcels, newspapers, and  nonprofit mail); and other companies in the mailing industry. They were  selected on the basis of several factors, including testifying before  Congress on postal issues; submitting comments to the 2003 President’s  Commission; submitting comments to PRC on universal service, the postal  monopoly, and the new regulatory structure for ratemaking; and  submitting comments to the Federal Trade Commission (FTC) on  differences in the legal status between USPS and its competitors.
We gathered and evaluated relevant strategies and options on the basis of  a variety of criteria, including their potential to reduce USPS costs, realign  its operations, and increase revenues, in light of USPS’s current and  projected financial condition. In this report, we present selected options  that could be considered to address USPS’s financial viability on the basis  of these criteria. Some options are consistent with actions we have  discussed in our past work, while others have been discussed in  congressional hearings, regulatory proceedings, and major studies. We  analyzed the options on the basis of the criteria that we have previously  listed, including available cost and revenue data. Furthermore, assessing  certain options related to a comprehensive restructuring of USPS’s legal  and regulatory framework was limited because it is still too soon to see  the full impact of the changes from PAEA. We also plan to address the  experiences of foreign postal administrations in a separate report.
We conducted this performance audit from August 2009 to April 2010 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. Appendix I contains a detailed discussion of  our scope and methodology. We requested comments on a draft of this  report from USPS, and its comments are discussed later in this report and  reproduced in appendix II.
subsections: section_title: Background
paragraphs: Over the last 40 years, Congress has considered several business models to  provide postal services to the nation and moved USPS toward a more  businesslike entity but has simultaneously placed constraints on its  operations. Until 1970, the federal government provided postal services via  the U.S. Post Office Department, a government agency that received  annual appropriations from Congress. Congress was involved in many  aspects of the department’s operations, including the selection of  managers (e.g., postmasters), and in setting postal rates and wages. A  presidential commission (The Kappel Commission) reported to the  President in 1968 on the crisis facing the department, which included  financial losses, management problems, service breakdowns, low  productivity, and low employee morale. The Kappel Commission’s basic  finding was that “the procedures for administering the ordinary executive  departments of Government are inappropriate for the Post Office.”  Furthermore, it concluded that  “a transfer of the postal system to the private sector is not feasible,  largely for reasons of financing…but the possibility remains of private  ownership at some future time, if such a transfer were then considered  to be feasible and in the public interest…. We recommend, therefore,  that Congress charter a Government-owned Corporation to operate the  postal service. The corporate form would permit much more  successful operation of what has become a major business activity  than is possible under present circumstances.”
The Postal Reorganization Act (PRA) of 1970 replaced the department  with the current USPS model—an independent establishment of the  executive branch designed to be self-sustaining by covering its operating  costs with revenues generated through the sales of postage and postal- related products and services. USPS receives no appropriations for  purposes other than revenue forgone on free and reduced rate mail.
In 1996, Congress again began considering the merits of postal reform and  ultimately enacted PAEA in 2006. A number of factors encouraged reform,  including financial challenges, such as growing cash-flow problems and  debt. A second presidential commission examined USPS’s future and  issued a report in 2003 that recommended a number of actions to ensure  the viability of postal services. Additionally, the Postal Civil Service  Retirement System Funding Reform Act of 2003 was enacted after OPM  determined that USPS was overfunding its employees’ pensions. This law  required the amounts achieved by reducing the previous pension  contributions to be used toward USPS’s debt to the U.S. Treasury and set  aside any remaining amounts in an escrow account. Congress addressed  how the escrowed funds should be used—along with many of USPS’s  other financial and operational challenges—in PAEA. Key requirements  and flexibilities provided in PAEA are detailed in table 1.
PAEA also made changes to USPS’s regulatory and oversight structure. In  addition to responsibilities for reviewing pricing and nonpostal services  described in table 1, the newly created PRC gained additional oversight  responsibilities, including responsibility for making annual determinations  of USPS compliance with applicable laws, developing accounting practices  and procedures for USPS, reviewing the universal service obligation, and  providing transparency through periodic reports. The USPS Board of  Governors, which has responsibilities similar to a board of directors of a  publicly held corporation, directs the exercise of the powers of USPS,  directs and controls its expenditures, reviews its practices, conducts long- range planning, and sets policies on all postal matters. PAEA added new  qualifications and lengths of term for new board members.
section_title: USPS’s Business Model Is Not Viable
paragraphs: USPS’s business model is not viable due to its inability to reduce costs  sufficiently in response to continuing declines in mail volume and revenue.  Mail volume declined 36 billion pieces over the last 3 fiscal years, 2007  through 2009, due to the economic downturn and changing use of the mail,  with mail continuing to shift to electronic communications and payments.  USPS lost nearly $12 billion over this period, despite achieving billions in  cost savings, reducing capital investments, and raising rates. However,  USPS had difficulty in eliminating costly excess capacity, and its revenue  initiatives had limited results. To put these results into context, until  recently, USPS’s business model benefited from growth in mail volume to  help cover costs and enable it to be self-supporting. In each of the last 3  fiscal years, USPS borrowed the maximum $3 billion from the U.S.  Treasury and incurred record financial losses (see fig. 1). A looming cash  shortfall led to congressional action at the end of fiscal year 2009 that  deferred costs by reducing USPS’s mandated retiree health benefit  payment. Looking forward, USPS projects continued mail volume decline  and financial losses over the next decade.
subsections: section_title: USPS Faces Reduced Mail Volume from Changes in Mail Use
paragraphs: In fiscal year 2009, USPS’s mail volume declined to 17 percent below its  peak of 213 billion pieces in fiscal year 2006. USPS projects that total mail  volume will decline to 167 billion pieces in fiscal year 2010—the lowest  level since fiscal year 1992 and 22 percent less than its fiscal year 2006  peak. USPS and many mailers who provided information for this study do  not expect volume to return to its former levels when the economy  recovers. By fiscal year 2020, USPS projects further volume declines of 15  percent to about 150 billion pieces, the lowest level since fiscal year 1986  (see fig. 2).
First-Class Mail volume has declined 19 percent since it peaked in fiscal  year 2001, and USPS projects that it will decline by another 37 percent  over the next decade (see fig. 3). This mail is highly profitable and  generates over 70 percent of the revenues used to cover USPS overhead  costs.
Standard Mail (primarily advertising) volume has declined 20 percent  since it peaked in fiscal year 2007, and USPS projects that it will remain  roughly flat over the next decade. This class of mail is profitable overall  but lower priced, therefore, it takes 3.4 pieces of Standard Mail, on  average, to equal the profit from the average piece of First-Class Mail.
Standard Mail volume was affected by large rate increases in 2007 for flat- sized mail, such as catalogs, and by the recession that affected advertising,  such as mortgage, home equity, and credit card solicitations. These  solicitations appear unlikely to return to former levels. Standard Mail also  faces growing competition from electronic alternatives, increasing the  possibility that its volume may decline in the long term.
One reason that mail volumes declined is because businesses and  consumers have moved to electronic payment alternatives over the past  decade (see fig. 4).
Looking forward, the use of electronic alternatives for communications  and payments, including broadband and mobile technology, is expected to  continue to grow. Nearly two-thirds of American households had  broadband service in fiscal year 2008, up from 4.4 percent in less than a  decade (see fig. 5). Expanded availability and adoption of broadband  technology is being facilitated by federal spending under the American  Recovery and Reinvestment Act.
section_title: USPS Has Made Progress in Reducing Costs but Still Faces Major Cost Pressures
paragraphs: USPS achieved nearly $10 billion in cost savings in the 3 fiscal years 2007  through 2009, primarily by cutting nearly 201 million work hours. Work- hour savings were achieved by workforce reductions of over 84,000 full-  and part-time employees, primarily through retirements; reduced overtime;  and changes to postal operations. For example, USPS reached agreement  with the National Association of Letter Carriers to realign delivery routes,  and with the American Postal Workers Union and the National Postal Mail  Handlers Union on early retirement incentives. However, USPS’s cost  savings and added revenue from rate increases and other actions to  generate revenues were insufficient to fully offset the impact of declines in  mail volume and rising personnel-related costs. Thus, USPS revenues  declined by $4.7 billion during this period of time, while its costs declined  $7 million.
USPS also has large financial liabilities and obligations that totaled over  $88 billion in fiscal year 2009. Over the last 2 fiscal years, total liabilities  and obligations have increased by nearly $14 billion (see table 2). USPS  debt to the U.S. Treasury, over this same period, increased by $6 billion  and pension obligations changed by over $8 billion—from a $5.3 billion  surplus to $2.8 billion in unfunded obligations. To put these liabilities and  obligations into context, they increased from 100 percent of USPS  revenues in fiscal year 2007 to 130 percent of revenues in fiscal year 2009.
section_title: USPS’s Financial Outlook Is Poor
paragraphs: Declines in mail volume and revenue, large financial losses, increasing  debt, and financial obligations will continue to challenge USPS. For fiscal  year 2010, USPS is projecting a record loss of over $7 billion and  additional pressures to generate sufficient cash to meet its obligations.  Furthermore, it has halted construction of most new facilities and has  budgeted $1.5 billion in capital cash outlays (mostly for prior  commitments), which is down from the average of $2.2 billion in the  previous 5 fiscal years. USPS also expects to borrow $3 billion in fiscal  year 2010, which would bring its total outstanding debt to $13.2 billion,  close to its $15 billion statutory limit.
Looking forward, USPS projects that, absent additional action, annual  financial losses will escalate over the next decade to $33 billion in fiscal  year 2020 (see fig. 6). According to USPS, its projected losses will result  from declining mail volume, stagnant revenue (despite rate increases),  large costs to provide universal service, and rising workforce costs. These  projections are the most pessimistic in many years. Stakeholder interviews  reinforce the conclusion that the recent recession was a “tipping point”  that has accelerated the diversion of mail to electronic alternatives,  particularly among business mailers who generate the most mail volume  and revenues, leading to sobering financial results.
section_title: Strategies and Options That Address Challenges to USPS’s Current Business Model
paragraphs: Making progress toward USPS’s financial viability would primarily involve  taking action on strategies and options to rightsize operations, cut costs,  and increase revenues. USPS does not need—and cannot afford to  maintain—its costly excess infrastructure capacity. USPS has achieved  noteworthy cost reductions, but much more progress is needed. Making  the necessary progress would require (1) taking more aggressive actions to  reduce costs and increase revenues within its current authority, using the  collective bargaining process to address wages, benefits, and workforce  flexibility, and (2) congressional action to address legal restrictions and  resistance to realigning USPS operations, networks, and workforce. Key  strategies and options, some of which would require statutory changes, fall  into the following three major categories:  reducing compensation and benefits costs,  reducing other operations and network costs and improving efficiency,  and    generating revenues through product and pricing flexibility.
Ultimately, Congress may want to examine other options that would alter  the ownership structure of USPS. For example, USPS might be moved  back to being a federal agency funded in part by taxpayer support, or it  might be moved to a corporate model. This report does not address the  ownership issue because of an array of functional and operational  options—discussed throughout this report—that need to be examined  immediately. The resolution of some of these more pressing issues might  afford a better understanding of whether the ownership structure should  be modified.
subsections: section_title: Options to Reduce Compensation and Benefits Costs
paragraphs: USPS has options to reduce its compensation and benefits costs in the  following four key areas: workforce size, to be aligned with reduced  workload; wages, which continue to be a key component of costs;  benefits, which in some cases are more generous than those provided by  other federal agencies; and workforce flexibility, including the mix of full-  and part-time employees and work rules that govern what tasks employees  can perform. Changes in these areas would need to be negotiated with  employee unions and would involve tradeoffs between reducing costs and  addressing union concerns that reducing workforce size and  compensation and benefits would erode the number of well-paying jobs.
About 85 percent of USPS employees are covered by collective bargaining  agreements, which correspond with major crafts (see table 3). USPS and  its employee unions will begin negotiations for new agreements in 2010  and 2011. If USPS and its unions are unable to agree, binding arbitration by  a third-party panel will ultimately be used to establish agreement. USPS is  also required to consult with its management associations that represent  postmasters and supervisors. About 78 percent of USPS employees are full  time and receive salary increases and cost-of-living adjustments based on  predetermined levels. These employees are generally scheduled in 8-hour  shifts and can earn overtime pay, except for rural mail carriers, who are  generally paid a salary without overtime. Managers are not covered by  collective bargaining agreements and are compensated under a pay-for- performance program. About 90 percent of city carriers are full time, while  about 55 percent of rural carriers are full time.
USPS has not achieved significant reductions in compensation and  benefits, in part due to the following challenges:    USPS is required by law to maintain compensation and benefits  comparable to the private sector. The application of the comparability  standard to postal employees—that is, whether a compensation premium  exists between postal employees and private-sector employees who do  comparable work—has been a source of disagreement between  management and postal unions in negotiations and interest arbitration.
Career USPS employees participate in federal pension and benefits  programs, including health care and life insurance. USPS collective  bargaining agreements include provisions to reduce USPS’s contribution  to health care premiums by 1 percent a year from 85 percent in fiscal year  2007 to 81 percent in 2011 or 80 percent in 2012, depending on the  agreement. Nevertheless, USPS covers a higher proportion of employee  premiums for health care and life insurance than most other federal  agencies. The law requires USPS’s fringe benefits to be at least as  favorable as those in effect when the PRA of 1970 was enacted.
USPS is also required by law to participate in the federal workers’  compensation program and ensure coverage for injured employees.  Some benefits provided under the federal program exceed those provided  in the private sector. For example, injured USPS employees with  dependents receive 75 percent of their salary compared with the 66  percent of pay private employers covered under state workers’  compensation laws typically provide.  Furthermore, USPS employees  receiving this benefit often do not opt to retire when eligible, staying  permanently on the more generous workers’ compensation rolls.
Current collective bargaining agreements include provisions related to  compensation, leave, workforce composition, and work rules. They also  include some provisions that allow USPS to make changes, such as  relocating employees, but other provisions limit USPS’s flexibility to  manage work efficiently and rightsize its workforce. For example, current  collective bargaining agreements  limit the percentage of part-time and contract workers who help USPS  match its workforce to changing workload;  limit managers from assigning work to employees outside of their  crafts, such as having a retail clerk deliver mail;  limit outsourcing for city delivery routes; and    contain “no-layoff” provisions for about 500,000 employees and require  USPS to release lower-cost part-time and temporary employees before  it can layoff any full-time workers without layoff protection.
Currently, if the collective bargaining process reaches binding arbitration,  there is no statutory requirement for USPS’s financial condition to be  considered. In 2009, proposed Senate legislation included language that  would require any binding arbitration in the negotiation of postal contracts  to take the financial health of the Postal Service into account.
subsections: section_title: Workforce Size
paragraphs: The 2003 President’s Commission reported that “far more than individual  benefits, the size of the  workforce determines the cost of the  workforce.” USPS has worked to reduce the size of its workforce through  regular retirements and early retirements in response to recent separation  incentives and through a hiring freeze. USPS’s workforce of career and  noncareer employees declined by nearly 21 percent—from 901,238 at the  end of fiscal year 2000 to 712,082 at the end of fiscal year 2009 (see fig. 7).  Career employees continued to comprise most of the total workforce  throughout this period. USPS has a window of opportunity to reduce the  cost and size of its workforce through the large number of upcoming  retirements, minimizing any need for layoffs. In this regard, about 5  percent of USPS employees will be eligible and expected to retire each  year through 2020—a total of approximately 300,000 employees. Key  issues include what size workforce is needed to reflect changes in mail  volumes, revenues, and operations; how quickly changes can be made in  this area; whether separation incentives should be offered and are  affordable; and to what extent and under what terms should outsourcing  be considered.
Options to reduce the size of USPS’s workforce include the following:    Retirement and separation incentives: According to USPS officials,  incentives could accelerate the rate of attrition, but it needs to have  sufficient cash to fund them.
Outsourcing: Determine which functions would be cost-effective to  outsource (using companies or individuals). At the end of fiscal year 2009,  USPS had about 36,500 retail facilities, 3,000 of which were contract postal  units and 800 of which were community post offices staffed by nonpostal  employees. USPS also has long outsourced most of its long-distance air  and ground transportation. In delivery operations, contractors deliver to  less than 2 percent of USPS’s delivery points. Postal labor unions and  some Members of Congress have previously resisted outsourcing. For  example, after USPS attempted to contract out some city delivery routes in  2007, legislation was introduced in both Houses of Congress on this  matter. USPS and the National Association of Letter Carriers  subsequently agreed to a moratorium on outsourcing city carrier delivery  through November 2011. Looking forward, the outsourcing issue could  involve consideration of the tradeoffs between the loss of government jobs  paying middle-class wages and benefits to achieve savings by shifting the  work to private-sector jobs that may pay lower wages and not have  guaranteed benefits.
Layoffs: USPS could implement layoffs as a last resort if it has too few  positions to offer employees affected by restructuring. For example, USPS  could implement layoffs as part of shifting from 6-day delivery to 5-day  delivery. However, under current collective bargaining agreements, any  layoffs of covered employees not protected by no-layoff clauses must first  be applied to noncareer employees, such as temporary employees, whose  average wages are less than full-time career employees.
section_title: Wages
paragraphs: USPS wages were $39 billion in fiscal year 2009—about one-half of its  costs. Increasing wages have been a key driver of additional costs,  expected to add $1 billion in fiscal year 2010. Wages have traditionally  increased on the basis of cost-of-living allowances keyed to the Consumer  Price Index. Rising wages also increase benefit costs, such as pensions.  Key issues include how USPS can improve its compensation systems to  balance the need for fair compensation with reducing costs and increasing  incentives to become more competitive. In this regard, a recent legislative  proposal would have required that USPS’s financial condition be  considered if collective bargaining reaches binding arbitration. One  option would be a two-tier pay system that would pay new hires lower  wages, while “grandfathering” current employees under the current pay  structure.
section_title: Benefits
paragraphs: USPS makes payments to fund its liabilities and obligations for retiree  health and pension benefits, health and life insurance premiums, and  workers’ compensation. Benefits cost USPS almost $17 billion in fiscal  year 2009, over 23 percent of its total costs. The cost would have been  nearly $21 billion if Congress had not reduced USPS payments for retiree  health benefits by $4 billion to address a looming cash shortfall. Key issues  are assigning financial responsibility for benefits to USPS, its employees,  and current and future ratepayers and balancing USPS’s poor financial  condition, while keeping rates affordable, meeting legal requirements for  employee benefits, and minimizing risk to the taxpayer if USPS would be  unable to meet its responsibilities.
According to OPM estimates, at the end of fiscal year 2009, the actuarially  determined obligation for USPS’s future retiree health benefits was about  $87.5 billion. At that time, the dedicated Postal Service Retiree Health  Benefits Fund (the RHB Fund) had a balance of $35.5 billion, and,  therefore, unfunded obligations of $52.0 billion remained. These unfunded  obligations developed largely because, prior to the enactment of PAEA in  2006, USPS financed its share of the health insurance premiums for its  retirees on a pay-as-you-go basis, rather than on the annual accrued cost of  future benefits attributable to the service of current employees. PAEA  required USPS to begin prefunding its retiree health benefit obligations  with annual payments to the RHB Fund, while continuing to pay its share  of the retiree health premiums of current retirees to the Federal  Employees Health Benefits Fund (the FEHB Fund).
Since PAEA was enacted, mail volume has declined, USPS’s financial  condition has deteriorated, and it has had difficulty in making its required  payments to prefund its retiree health benefit obligations. In fiscal year  2009, a looming cash shortfall led to last-minute congressional action that  deferred costs by reducing USPS’s required prefunding payment from $5.4  billion to $1.4 billion. At the end of fiscal year 2009, USPS had about  463,000 annuitants and survivors participating in the Federal Employees  Health Benefits Program. Furthermore, 162,000 USPS career employees  are eligible for regular retirement this fiscal year, and this number is  projected to increase to about 300,000 career employees over the next  decade. For fiscal year 2010, USPS has reported that it is “highly  uncertain” whether it will have sufficient cash to cover its required  prefunding payment of $5.5 billion that is due by September 30, 2010.  According to USPS’s fiscal year 2010 budget, by making the required  prefunding payment, it will end the fiscal year with a cash balance of only  $200 million. However, USPS officials have said that this cash balance  would likely be inadequate to finance operations in October 2010, when it  must make three payroll payments of close to $2 billion each, as well as a  payment for workers’ compensation costs expected to exceed $1 billion.  In response to these likely conditions, USPS has requested that Congress  revise the required schedule for retiree health benefits payments as part of  a package to improve its financial viability.
There are multiple options for funding USPS’s retiree health benefit  obligations. In addition to the current prefunding approach, where the  obligations are paid prior to when USPS’s share of retiree health premiums  are due, there are two broad approaches—(1) a “pay-as-you-go” funding  approach, where USPS’s share of retiree health premiums are paid as they  are billed for current retirees, and (2) an actuarial funding approach,  where payments include amounts for “normal costs” to finance the future  retiree health benefits attributed to the service of current employees and  amortization amounts to liquidate unfunded obligations over a 40-year  period. The impact of these various approaches on USPS’s payments  would depend on whether its share of retiree health premiums would be  paid directly by USPS to the FEHB Fund or whether the premiums would  be paid from the RHB Fund. Depending on which option is selected,  changes could also impact the federal budget deficit. PAEA’s approach to  funding USPS’s retiree health benefit obligations is a combination of the  prefunding and pay-as-you-go approaches that we have previously  described. Specifically, PAEA requires USPS to make two payments  annually over fiscal years 2010 through 2016:    a payment to the FEHB Fund to cover its share of the premiums for    a statutorily determined payment to the RHB Fund to prefund obligations  for future retirees.
Starting in fiscal year 2017—after the last statutorily scheduled prefunding  payment—PAEA requires that USPS’s share of retiree health premiums be  paid from the RHB Fund and requires OPM to determine future payments  to the RHB Fund. Each annual payment to the RHB Fund starting in fiscal  year 2017 will be the sum of the two amounts that finance the following:  the annual accrued cost of future benefits attributable to the service of  current USPS employees, which OPM refers to as “normal costs,” and    amortization payments over 40 years to liquidate any unfunded obligations.
Table 4 shows USPS payments from fiscal years 2010 through 2020, based  on updated estimates that OPM provided to us for this report. Total USPS  payments are estimated to increase from $7.8 billion in fiscal year 2010 to  $10.3 billion in fiscal year 2016. The payments are estimated to decline to  $6.4 billion in fiscal year 2017 and increase to $7.3 billion in fiscal year  2020. Based on GAO analysis, assuming that USPS made these payments  through 2020, estimated unfunded obligations of about $33 billion would  remain.
In 2009, proposed legislation was introduced in both houses of Congress  that would have revised the payment schedule for postal retiree health  benefits. The House legislation (H.R. 22) would have shifted  responsibility for payments for current retiree health premiums from  USPS to the RHB Fund for fiscal years 2009 through 2011. Such action  would result in USPS needing to pay additional amounts to the RHB Fund  in the future due to the use of those RHB funds for current retiree health  premiums. The Congressional Budget Office (CBO) estimated that  enacting the House legislation would have a net cost to the federal budget  of $2.5 billion over fiscal years 2010 through 2019. The Senate legislation  (S. 1507) would have extended and revised prefunding payments to the  RHB Fund, with the payment amounts increasing from $1.7 billion in fiscal  years 2009 and 2010 to $5.3 billion in fiscal year 2019. CBO estimated that  enacting S. 1507 would have a net cost to the federal budget of $2.8 billion  over both fiscal years 2010 through 2019 and fiscal years 2009 through  2014. Ultimately, Congress acted at the end of September 2009 to reduce  costs by deferring USPS’s prefunding payment for retiree health benefits in  fiscal year 2009 by $4 billion.
We strongly support the principle that USPS should continue to fund its  retiree health benefit obligations to the maximum extent that its finances  permit. Deferrals of funding such benefits would serve as financial relief.  Such deferrals, however, increase the risk that in the future USPS will not  be able to pay these obligations as its core business continues to decline  and if sufficient actions are not taken to restructure operations and reduce  costs. With these considerations, the current statutory approach for  funding USPS’s retiree health benefit obligations can be revised along the  lines of the two broad approaches to funding retiree health obligations— pay-as-you-go and actuarial. The approaches vary in the amount of annual  payments, which, in turn, impact the unfunded obligation, lower annual  payments, and result in higher unfunded obligation balances. For  comparison purposes, we present the estimated unfunded balance for  USPS’s retiree health obligations in fiscal year 2020. These approaches to  revising the current statutory approach are presented in the following text  to illustrate the wide range of possible options.
Approach #1: Pay-as-you-go approach to funding retiree health benefit  obligations  In March 2010, USPS proposed “to shift to a ‘pay-as-you-go’ system [for its  retiree health benefits], paying premiums as they are billed” for current  retirees. Estimated annual USPS payments under one possible pay-as-you- go approach are shown in table 5. Under this approach, USPS would make  payments to the FEHB Fund for its share of retiree health premiums. The  RHB Fund would not make or receive payments, but would continue to  earn interest. Based on GAO analysis, USPS’s unfunded obligations would  be an estimated $99 billion in fiscal year 2020, or about $66 billion more  than they would be under current law. This level of unfunded obligations  would increase the risk that, absent future events that could reduce  USPS’s retiree health premiums, USPS’s operations in the future may not  be able to support the future payments that are expected. However, in  such a circumstance, a mechanism could be created to pay a portion of  premium payments from the assets that have accumulated in the RHB  Fund once a threshold was reached, such as when the pay-as-you-go  premium payments reach a particular percentage of postal revenues. Using  the RHB Fund to pay a portion of retiree health premiums would reduce  USPS’s payments to the FEHB Fund and increase USPS’s unfunded  obligations by a corresponding amount. Such a mechanism could, if  implemented carefully, provide some assistance to USPS in meeting its  obligation to pay retiree health premiums.
Different variations on a “pay-as-you-go” approach are also possible, such  as using the RHB Fund to pay USPS’s share of retiree health premiums for  current retirees until the RHB Fund is exhausted and then reverting to  USPS funding future premiums from its operations by paying the FEHB  Fund directly. Under this alternative, USPS’s payments would be  suspended until the RHB Fund is exhausted, which would be  approximately fiscal year 2025.
Approach #2: Actuarial approach to funding retiree health benefit  obligations  An actuarial funding approach for USPS retiree health benefit obligations  could provide a financing mechanism that allows the RHB Fund to remain  self-sustaining in the long term. Under one such approach, unfunded  retiree health benefit obligations would be reamortized starting in fiscal  year 2010, instead of fiscal year 2017, as required under current law.
Specifically, starting in fiscal year 2010, USPS would make payments to  the RHB Fund that finance the following:  the annual accrued cost of future benefits attributable to the service of  current USPS employees, which OPM refers to as “normal costs,” and    amortization payments over 40 years to liquidate any unfunded  obligations.
Under this actuarial funding approach, USPS would make annual  estimated payments that total about $80 billion from fiscal years 2010  through 2020 (see table 6). Based on GAO analysis, in fiscal year 2020, the  estimated unfunded obligations under this method would be about $48  billion, or about $15 billion more than they would be under current law.
PAEA’s funding requirements represent a significant financial commitment  for USPS, especially in light of the current economic environment and the  major challenges it faces. As we have testified, we continue to be  concerned about those options that would greatly reduce payments in the  short term, only to defer payments into the future. Specifically, we are  concerned that deferring these payments or some portion into the future  increases the risk that USPS may have difficulty in making the future  payments, particularly if mail volumes continue to decline. Because its  retirees are eligible to receive the same health benefits as other federal  retirees, if USPS cannot make its required payments, the U.S. Treasury,  and hence the taxpayer, would still have to meet the federal government’s  obligations.
USPS employees participate in the federal government’s two civilian  pension plans—the Civil Service Retirement System (CSRS) and the  Federal Employees’ Retirement System (FERS)—that are administered by  OPM. As of the end of fiscal year 2009, approximately 80 percent of USPS’s  employees were enrolled in FERS, while 20 percent were enrolled in CSRS  or the Dual Civil Service Retirement System and Social Security (Dual  CSRS). As an agency employer, USPS is required by law to make certain  payments to the Civil Service Retirement and Disability Fund (CSRDF) to  fund its share of CSRS and FERS pension costs. In addition to providing  an annuity at retirement based on years of service and “high-3” average  pay, FERS also consists of Social Security and the government’s Thrift  Savings Plan (TSP). As such, USPS contributes the employer’s share of  Social Security taxes and the required contributions to its employees’ TSP  accounts.
Because USPS’s pension, Social Security, and TSP contributions are in  part a function of employee wages as defined for these programs, changes  in total employee wages will have a corresponding effect on USPS’s costs  for these items. USPS’s retirement expenses were $5.9 billion in fiscal year  2009. As we have previously mentioned, most USPS employees are full  time, can receive overtime pay, and receive pay increases and cost-of- living adjustments as set forth in collective bargaining agreements with  various unions. Other USPS employees, typically managers and  postmasters, are compensated under pay-for-performance programs.  USPS’s ability to reduce the size of its workforce and the number of  workhours, the strategies and options for which are described elsewhere  in this report, will affect the pension, Social Security, and TSP benefit  costs it incurs for most of its employees.
Furthermore, the methods and rates at which USPS funds pension benefit  costs are set forth in law. In 2002, OPM estimated that, under statutory  pension funding requirements applicable to USPS at the time, USPS was  on course to overfund its CSRS pension obligations. Congress responded  by enacting the Postal Civil Service Retirement System Funding Reform  Act of 2003, which changed the prior method of estimating and funding  the USPS CSRS pension obligations. The act required USPS to contribute  the employer’s share of “dynamic normal cost” to the CSRDF, plus an  amount to liquidate any underfunding, or “postal supplemental liability,”  both as determined by OPM. In July 2003, OPM submitted to Congress its  plan enumerating the actuarial methods and assumptions by which OPM  would make its determinations. In 2004, OPM and the Board of Actuaries  for the CSRDF reconsidered OPM’s methodology at the request of USPS  and concluded that OPM’s methodology was in accordance with  congressional intent. OPM also rejected an alternative methodology  offered by USPS.
In January 2010, the USPS OIG issued a report on funding the USPS’s  CSRS pension responsibility. This report asserted that, despite the  changes brought about in the 2003 Act, the current method of allocating  the pension costs for post-1971 pay increases results in the inequitable  allocation of pension obligations to USPS. The USPS OIG proposed an  alternative allocation methodology that its actuaries estimated would, if  implemented, change the funded status of USPS’s CSRS pension  obligations from a current $10 billion underfunding to a $65 billion  overfunding. This alternative allocation methodology is the same  methodology that OPM rejected in 2004. Application of the USPS OIG’s  proposed methodology would result in a shift of pension funding costs  from USPS to the U.S. Treasury.
Health and life insurance: Health insurance premiums for current  employees comprise a growing share of USPS expenses, rising from $2.2  billion (3.5 percent of total expenses) in fiscal year 2000 to $5.3 billion (7.4  percent) in fiscal year 2009. Collective bargaining agreements require  USPS to pay a more generous share of employees’ health and life  insurance premiums than most other agencies. For example, USPS paid,  on average, 81 percent of health benefit premiums in fiscal year 2009  compared with 72 percent by other federal agencies. It also paid 100  percent of employee life insurance premiums, while other federal agencies  pay about 33 percent. One option would be to increase employee premium  payments for health and life insurance premiums. USPS’s share of the  health and life insurance premium payments could be reduced to levels  paid by most federal agencies, which would increase the employees’  annual premium payments and, according to USPS estimates, would have  saved about $615 million in fiscal year 2009.
Workers’ compensation: The 2003 President’s Commission recommended  making USPS’s workers’ compensation program more comparable to  programs in the private sector to control costs, still provide adequate  benefits, and address USPS’s unfunded liability in this area. The  commission recommended that USPS be allowed to (1) transition  employees receiving workers’ compensation to its pension plan on the  basis of when the employee (if not injured) would be retirement eligible  and (2) limit benefits from the current 75 percent for employees with  dependents to two-thirds of the maximum weekly rate—the rate that  applies to employees without dependents.
section_title: Postal Workforce Mix and Work Rules
paragraphs: Limitations on the workforce mix of full-time and part-time postal  employees and workforce flexibility rules contained in contracts with  USPS’s unions are key determinants of how postal work is organized and,  thus, of its cost. USPS officials told us that as mail volume declines, it  would be more efficient to have a much higher proportion of part-time  workers than is currently allowed under the existing agreements. These  part-time employees would have flexible schedules and responsibilities  and lower pay than full-time career employees. A key issue is how USPS  can obtain greater flexibility through the collective bargaining process so  that it can adjust its workforce more quickly to adapt to changing volume  and revenue. Some options for postal workforce mix and work rules  include the following:    Part-time workers: Increase the percentage of part-time employees, who  could work more flexible schedules, including less than an 8-hour shift.  Such flexibility could help match USPS’s workforce to the changing  workload, which varies greatly depending on the day of the week and the  time of the year.
Job Flexibility: Increase the flexibility to use employees in different  assignments. Changes in the skill requirements of some jobs and the needs  of operations have made it more feasible and necessary for employees to  be trained in different tasks and work in different areas, depending on  daily needs. Under current collective bargaining agreements, USPS can  assign employees to “cross crafts” and perform different duties, but the  agreements require managers to consider wage level, knowledge, and  experience before asking employees to perform duties outside of their  normal purview.
section_title: Options for Reducing Operational and Network Costs and Improving Efficiency
paragraphs: Another area where USPS can reduce operational costs is by optimizing its  mail processing, retail, and delivery networks; eliminating growing excess  capacity and maintenance backlogs; and improving efficiency. Declines in  mail volume and continuing automation have increased costly excess  capacity that was a problem even when mail volume peaked in fiscal year  2006. USPS no longer needs—and can no longer afford—to maintain all of  its retail and mail processing facilities. For example, USPS has reported  that it has 50 percent excess plant capacity in its First-Class Mail  processing operations.
Although USPS has begun efforts to realign and consolidate some mail  processing, retail, and delivery operations, additional efforts are urgently  needed to overcome obstacles. USPS has faced formidable resistance to  facility closures and consolidations because of concerns about how these  actions might affect jobs, service, employees, and communities,  particularly in small towns or rural areas. According to some Members of  Congress and postmaster organizations, among others, post offices are  fundamental to the identity of small towns, providing them with an  economic and social anchor. Another issue is that inadequate USPS  financial resources could impede efforts to optimize postal mail  processing, retail, and delivery networks by limiting available funding for  transition costs.
Reducing operational and network costs would require navigating  statutory requirements, regulations, procedures, and service standards,  including the following:    USPS is required by law to provide adequate, prompt, reliable, and  efficient services to all communities, including a maximum degree of  effective and regular services in rural areas, communities, and small towns  where post offices are not self-sustaining. USPS is specifically prohibited  from closing small post offices “solely for operating at a deficit.”  Statutory requirements also specify the process and criteria for post office  closings, including appellate review by PRC. Also, USPS regulations  prescribe processes for closing, consolidating, and relocating post offices.
PAEA requires USPS to develop and use procedures for providing public  notice and input before closing or consolidating any mail processing or  logistics facilities.
Appropriations provisions restrict post office closures and mandate 6-day  delivery.
Service standards drive operations at mail processing facilities. In this  regard, PAEA requires USPS to establish and maintain modern delivery  standards. USPS standards currently call for delivery of most local First- Class Mail overnight and most long-distance First-Class Mail in 2 to 3 days.
A PRC hearing and advisory opinion are required when USPS submits a  proposal to make changes that would generally affect service on a  nationwide or substantially nationwide basis.
subsections: section_title: Mail Processing Operations
paragraphs: In 2006, PAEA encouraged USPS to expeditiously move forward in its  streamlining efforts, recognizing that USPS has more processing facilities  than it needs. USPS has begun efforts to consolidate some mail  processing operations, but much more needs to be done. Since 2005, USPS  has closed only 2 of its 270 processing and distribution centers. Over this  period, it also has closed some facilities, such as 68 Airport Mail Centers  and 12 Remote Encoding Centers. Between fiscal years 2005 and 2009,  the Area Mail Processing (AMP) process has been used to implement 13  consolidations, saving a projected $31 million, but 39 under consideration  were canceled, according to a recent USPS OIG report. This report also  noted that another 16 AMP consolidations have been approved, while 30  remained under consideration.
When determining whether to close a particular mail processing facility,  key factors include the role of the facility in providing secure and timely  delivery in accordance with its service standards as well as the expected  cost reductions or productivity gains. Furthermore, we have reported that  the process for governing such decisions should be clearly defined and  transparent, and include public notice and meaningful engagement with  affected communities, mailers, and employees. In 2005, we recommended  that USPS enhance transparency and strengthen accountability of  realignment efforts to assure stakeholders that such efforts would be  implemented fairly and achieve the desired results. We have since  testified that USPS took steps to address these recommendations and  should be positioned for action. Individual facility decisions are best  made in the context of a comprehensive, integrated approach for  optimizing the overall mail processing network. Key process issues in this  area include how to better inform Congress and the public about the  purpose and scope of USPS’s optimization plans, address possible  resistance to consolidating operations and closing facilities, and ensure  that employees will be treated fairly.
Options in the mail processing area include the following:    Close major mail processing facilities: The Postmaster General and other  stakeholders have recently said that USPS could close many major mail  processing facilities while maintaining current standards for timely  delivery. Some stakeholders have estimated that roughly over one-half of  these facilities are not needed.
Relax delivery standards to facilitate closures and consolidations: USPS  officials and experts have also noted that additional major processing  facilities could be closed if delivery standards were relaxed. For example,  one senior USPS official estimated that about 70 processing facilities could  be eliminated if local First-Class Mail were to be delivered in 2 days  instead of overnight.
Introduce a discount for destination-entry of First-Class Mail: Some  mailers favor having USPS introduce a discount for entering First-Class  Mail at facilities that are generally closer to the mail’s final destination. For  mail sent to distant recipients, such destination entry would be expected  to bypass some mail processing facilities and some USPS transportation.  However, USPS officials told us that they did not believe that USPS could  capture the potential cost savings from creating such a discount, because  of existing excess capacity. If such a discount were to be applied to mail  that is already locally entered—which comprises much First-Class Mail  volume—that could reduce revenues with little corresponding cost  savings.
section_title: Retail Operations
paragraphs: USPS’s retail network has remained largely static, despite expanded use of  retail alternatives and population shifts. USPS continues to provide service  at about 36,500 post offices, branches, and stations and has not  significantly downsized its retail operations in recent years. Furthermore,  USPS has a maintenance backlog for its retail facilities. USPS officials  stated that maintenance has historically been underfunded, causing it to  focus on “emergency” repairs at the expense of routine maintenance.  USPS has limited its capital expenditures to help conserve cash, an action  that may affect its ability to make progress on its maintenance backlog.
USPS recognizes the need to adjust its retail network to provide optimal  service at the lowest possible cost and has expanded its use of alternatives  to traditional post offices. In 2009, customers could also access postal  services at more than 63,000 physical locations, such as purchasing stamps  at drug stores and supermarkets. By fiscal year 2009, nearly 30 percent of  retail transactions were conducted in locations other than USPS retail  facilities. In addition, self-service options, such as Automated Postal  Centers, are located in postal retail facilities. Opportunities to consolidate  retail facilities are particularly evident in urban and suburban areas, where  USPS retail locations are close to one another, customers have more  options, and facilities are expensive to operate and maintain.
Some of the key issues in the retail area include whether USPS should  retain its current retail network and find sources of revenue to support it  other than through the sale of postal products, or whether it should  eliminate unnecessary facilities, modernize its retail services, and partner  with the private sector to provide services in other locations, such as  shopping malls. Another issue is whether USPS should provide other  governmental services in postal facilities and, if so, whether it would  receive reimbursement.
Options in the retail area include the following:    Optimize USPS’s retail facility network by expanding retail access and  closing unneeded facilities: In March 2010, USPS stated that it plans to  expand customer access while reducing costs through new partnerships  with retailers and other options, such as self-service kiosks. USPS  explained that post offices are often less convenient for customers in  terms of hours and accessibility, and cost two to three times more than  alternatives. USPS also noted that it has more retail locations than  McDonalds, Starbucks, Walgreens, and Walmart combined, but the  average post office provides service to about 600 customers weekly—or  about 1/10th in comparison to Walgreens. Additional postal retail locations  could be located within drug stores, grocery stores, and other retail chain  stores, such as those in shopping centers and local malls. These retail  stores are often open 7 days a week, for longer hours than postal retail  facilities. According to USPS officials, stores that could provide access to  postal retail services pay their employees less than postal retail clerks who  currently earn an average of over $40 per hour in compensation and  benefits. USPS stated that it would reduce redundant retail facilities as  customers continue to shift to alternatives, but noted that proposals to  close facilities have led to protests and resistance. USPS called for  Congress to eliminate the statutory prohibition on closing small post  offices solely for operating at a loss, and stated that changes would be  needed to the regulatory review process for closing post offices. USPS also  called for reduced constraints on the decision-making process for  providing access to postal services. If USPS is not able to streamline its  retail operations, it may need to make major reductions in the hours that  post offices and retail facilities are open for window service.
Leverage the USPS retail network: USPS could maintain current retail  facilities and leverage this network by providing other nonpostal goods or  services. Such activities might be performed by USPS or private-sector  partners and other government agencies. For example, these partners and  agencies could lease unused space in USPS facilities. Stakeholders  suggested many options for diversifying into nonpostal retail areas, which  could include selling nonpostal products at postal retail facilities and  providing services for other federal, state, or local government agencies.
While this option may increase the use of USPS’s retail network, it may  raise costs if facility modifications are needed, such as measures to  maintain mail security at a facility where other business partners are  colocated. Also, some competitors may raise concerns about USPS’s legal  advantages. For example, according to a 2007 report to Congress by FTC,  USPS is exempt from state and local taxes and fees and some other state  and local statutes and regulations.
section_title: Delivery Operations
paragraphs: USPS has opportunities to reduce delivery costs, which is its most costly  operation. More than 320,000 carriers account for close to one-half of  USPS salary and benefit expenses. Because USPS delivers 6 days per week  to most of its 150 million addresses, regardless of mail volume, it is  difficult to reduce delivery costs commensurate with declining mail  volume. In fiscal year 2000, carriers delivered an average of about 5 pieces  of mail per day to every address, which fell to about 4 pieces in fiscal year  2009—a decline of 22 percent. This trend is continuing as mail volume  declines and the delivery network continues to expand. Over 900,000  delivery points were added in fiscal year 2009—increasing costs by over  $190 million, according to an USPS estimate.
In addition to the number of delivery points, the efficiency and cost of  delivery operations depend on a variety of other factors, including the type  of carrier route or the location of the receptacle where mail is delivered.  For example, most customers (about 87 percent) receive their mail via  one of the three different types of carrier routes identified in table 7. These  routes are served by carriers under different compensation systems, which  largely account for the differences in their costs.
Cost differences also exist related to the location of the mail receptacle  (see table 8).
We have reported on USPS’s ongoing efforts to increase the efficiency of  mail delivery. USPS has begun to install 100 machines for its $1.5 billion  Flats Sequencing System to sort flat-sized mail into delivery order. USPS  expects this system to eliminate costly manual sorting, thereby improving  delivery efficiency, accuracy, consistency, and timeliness. USPS is also  realigning city carrier routes to remove excess capacity, which is expected  to generate more than $1 billion in annual savings. This effort is expected  to result in reduced facility space needs, increased employee satisfaction,  and more consistent delivery service. Route realignment has been made  possible by collaboration between USPS and the National Association of  Letter Carriers and is continuing this fiscal year. In addition, USPS may  have additional opportunities to further increase delivery route efficiency,  such as by promoting the use of more efficient delivery modes for new  delivery points.
Options in the delivery area include the following:    Decrease delivery frequency from 6 days a week to 5 days a week: USPS  favors eliminating Saturday delivery to provide substantial financial  savings. According to USPS studies, its savings would be primarily  achieved by eliminating work performed by city and rural letter carriers.  Additional savings would be realized from reducing the use of delivery  vehicles as well as reducing the scope of mail processing activities that  support Saturday delivery. However, concerns have been raised about the  impact on customers, who may need to wait longer to receive time- sensitive mail or go to USPS retail facilities to pick up mail; senders, who  may have to change when they send mail; and USPS, which may lose the  competitive advantage of delivering on Saturdays. According to USPS,  eliminating Saturday delivery is estimated to result in annual savings of  about $3 billion. PRC reported in 2009 that eliminating Saturday delivery  would result in estimated annual savings of about $2.2 billion, on the basis  of somewhat different assumptions regarding the likely effects on mail  volume and costs. For this option to be implemented, Congress would  need to exclude statutory restrictions that mandate 6-day delivery from  USPS annual appropriations. USPS filed a request on March 30, 2010, for a  PRC advisory opinion on its proposal to eliminate Saturday delivery,  which would lead to a public proceeding that would include input by  interested parties.
Allow USPS to determine delivery frequency on the basis of local mail  volume: A related option would be to change delivery frequency to match  mail volumes to demand, which could change by season as well as by local  area. For example, USPS could have less frequent delivery in low-volume  summer months than the high-volume holiday season. Some residents  already do not receive 6-day delivery, particularly those located in remote  or seasonal vacation areas. A consequence of this option could be more  frequent delivery to areas with higher mail volume, which could be in  higher-income areas, which tend to receive much more mail. However,  low-income residents and others, such as the elderly and disabled, may  rely more on mail delivery. This option may also be criticized as  inconsistent with current statutory requirements. USPS is required by law  to provide prompt, reliable, and efficient services to patrons in all areas.  It is also required by law to provide a maximum degree of effective and  regular postal services to rural areas, communities, and small towns where  post offices are not self-sustaining.
Expand the use of more cost-efficient modes of delivery for new  addresses, including cluster boxes and curbline delivery: USPS has  recently estimated that this option could annually save around $2.5 billion  by moving certain door deliveries to centralized deliveries. However, USPS  officials told us that they and some mailers are concerned that this option  would lead to residents picking up their mail less frequently, which could  delay remittances and lower the value of advertising mail. It also would  affect access to mail, particularly for customers who currently have  mailboxes attached to their homes.
section_title: Streamline Field Structure
paragraphs: Further streamlining of USPS’s field structure could help reduce facility  and personnel costs. USPS has the authority to review the need for field  administrative offices and streamline its field structure. For example, in  fiscal year 2009, it closed 1 of its 9 area offices and 6 of its 80 district  offices.
section_title: Options to Generate Revenues
paragraphs: USPS has many opportunities to generate additional net revenue,  particularly from postal products and services; however, as it has noted,  results from actions to generate revenue other than rate increases are  likely to be limited compared with its expected losses. Aside from rate  increases, USPS projects that it can increase profits by $2 billion by fiscal  year 2020 through product and service initiatives. For example, according  to USPS, it will work to increase direct mail use among small and medium- sized businesses and increase volumes in both First-Class Mail and  advertising mail through targeted promotions. USPS also will continue to  leverage its “last-mile” network to transport and deliver packages to their  final destinations and work to grow other retail services, such as passport  services provided by USPS and Post Office box rentals.
Key challenges in the area of revenue generation include the following:    The short-term results will likely be limited by the economic climate as  well as the ongoing diversion to electronic alternatives.
The potential for some actions will be limited because they will apply to  mail or services that generate only a small fraction of revenues.
USPS projects that its revenue will stagnate in the next decade despite  further rate increases. Its revenue peaked at $75 billion in fiscal year 2007  but is projected to decline to $66 billion in fiscal year 2010, and to reach  $69 billion in fiscal year 2020—growth that is below expected inflation.
subsections: section_title: Rate Increases for Market- Dominant and Competitive Products
paragraphs: Rate increases for market-dominant products, such as First-Class Mail and  Standard Mail, would address pressing needs for revenue and could be  used to better align rates and discounts with the costs, profitability, and  price-sensitivity of mail. In the coming decade, rate increases for market- dominant products up to the price cap could raise significant revenues  since these products currently generate 88 percent of revenue, while  competitive products comprise nearly all other revenue.
Some key issues include the following:    At what point are rate increases self-defeating, potentially triggering large,  permanent declines in mail volume?
How does USPS balance increasing rates to generate revenues with the  impact on mailers and the long-term effects on volume, revenues, and the  broader mailing industry?
Would an “exigent” increase in postal rates over the price cap be justified,  considering that it is limited by law to extraordinary or exceptional  circumstances?
Some options include the following:  “Exigent” rate increases over the price cap: USPS projects that its annual  losses will increase greatly, even if rates for market-dominant products  increase by the maximum allowed under the price cap. To improve its  financial viability, USPS announced in March 2010 that it would seek “a  moderate exigent price increase” for its market-dominant products that  would be effective in 2011. An exigent rate increase over the price cap may  produce a large short-term revenue boost. However, a very large rate  increase could be self-defeating by increasing incentives for mailers to  accelerate diversion to electronic alternatives, thereby lowering revenues  in the long run and adding to USPS excess capacity. In 2009, USPS cited  the potential impact on mail volume and the mailing industry when it ruled  out an exigent rate increase for 2010—a year when the inflation-based  price cap was zero—and announced that rates would not change for  market-dominant products.
Rate increases for competitive products: USPS annually increased rates in  2008, 2009, and 2010 for competitive products, including Priority Mail and  Express Mail. Major USPS competitors, such as United Parcel Service  (UPS) and FedEx, also have a history of annual rate increases.
section_title: Volume-Based Incentives for Specific Types of Market- Dominant Mail
paragraphs: USPS plans to pursue more volume-based rate incentives to stimulate  additional mail use and take advantage of its excess capacity. For  example, USPS reported that volume-based incentives can stimulate more  advertising mail sent for sales, customer acquisition, and customer  retention purposes, which should lead to greater mail use in the future.  The additional mail volume can take advantage of USPS’s large excess  operational capacity. However, results to date suggest that such incentives  can increase net income, but they appear to have limited potential  compared with USPS losses. For example, a 2009 “summer sale” for  Standard Mail that offered lower rates for volumes over mailer-specific  thresholds reportedly had little effect on USPS’s overall financial results  for the fiscal year. USPS has estimated that about 38 percent of the volume  qualifying for reduced “summer sale” rates would have been sent in the  absence of the incentive, which reduced the profitability of this initiative.  USPS plans to implement a similar initiative for summer 2010.
Some mailers have said that USPS should enter into more negotiated  service agreements (NSA) with individual business mailers of market- dominant products. NSAs generally specify mutual agreements between  USPS and mailers involving the preparation, presentation, acceptance,  processing, transportation, and delivery of mailings under particular rate,  classification, and service conditions, and restrictions that go beyond  those required of other mailers. USPS did not generate net income from its  seven NSAs in fiscal years 2007 through 2009 combined. These NSAs  generally offered mailers lower rates for volumes that exceeded  thresholds and had provisions to reduce some USPS costs, such as not  returning undeliverable advertising mail and using electronic  communications to provide this information to mailers. In comparison,  USPS has negotiated about 100 contracts with business mailers of  competitive products. Like NSAs for market-dominant products, contracts  for competitive products are generally volume-based. These contracts also  have provisions intended to lower USPS’s mail-handling costs. PRC has  reported that the contracts it approved in fiscal years 2008 and 2009 are  expected to improve USPS’s net revenue.
In December 2009, USPS officials told us that after PAEA was enacted,  USPS preferred to pursue the volume-based incentive programs for  market-dominant products that we have previously described, instead of  pursuing NSAs. In theory, NSAs can increase net income by incentives  tailored to each mailer’s business needs, mailing practices, and  opportunities to reduce USPS costs. In practice, it may be costly and time- consuming to negotiate NSAs and have them reviewed by PRC. The  potential profitability of NSAs has been scrutinized in the past and is listed  in PAEA as a factor for PRC to consider, along with (1) issues of fair  competition, such as the availability of NSAs to similarly situated mailers,  and (2) whether NSAs would cause unreasonable harm to the  marketplace. These issues relate to the broader issue of whether USPS  should have additional pricing flexibility and less PRC review of rates for  its market-dominant products. USPS has suggested that regulatory and  legal restrictions in this area need to be removed to provide greater  flexibility, explaining that NSAs provide mailers with the opportunity to  increase volume at a reasonable price.
section_title: Develop New Postal Products and Product Enhancements
paragraphs: During 2009, USPS considered options for developing new postal products  and product enhancements, such as (1) “hybrid” mail that could be created  online and printed and sent close to its final destination, which might  involve USPS partnerships with private companies, and (2) new, low-cost  ways for handling consumer electronics and other items that are being  returned for recycling or disposal. As an example of recent product  enhancements, USPS introduced new flat-rate boxes for Priority Mail,  which it reports has met customer needs and generated volume growth.  Consistent with USPS’s stated strategy of providing greater value to its  customers, some stakeholders told us that USPS should better understand  and meet the needs and revenue growth opportunities of diverse mailers,  in part through greater customer focus and improving the value of mail.
section_title: Increase Focus on Volume Growth in the Growing but Competitive Parcel Delivery Market
paragraphs: Competitive products are a promising growth opportunity for USPS,  especially packages mailed by businesses to consumers. USPS forecasts  that the volume of competitive products will increase 40 percent over the  next decade. However, this volume growth is expected to have limited  impact on losses, in part because competitive products generate only 12  percent of revenues. USPS is working to increase revenues from  competitive products by increasing its market share in the growing  package delivery market as well as by delivering more packages of  competitors, such as “last-mile” delivery of packages that UPS or FedEx  transport close to the destination and provide to USPS for final delivery. A  key issue is what the net return would be if USPS pursues a growth  strategy requiring costly additional investment to upgrade its automation  and tracking capabilities in an area with formidable competitors.
section_title: Simplify Complex Rules for Mail Preparation and Entry
paragraphs: USPS may have opportunities to increase volume by reducing mailers’  costs to prepare and enter mail as well as allowing more creative mail use  for advertising and communications. However, this option could also risk  additional costs to handle mail and provide assurance that discounted mail  meets the necessary requirements. Some mailer groups and mailers have  criticized USPS requirements that they consider to be impediments to  volume and revenue growth. These stakeholders said that these  requirements are costly for mailers but only yield marginal benefits for  USPS, delay delivery, limit the effectiveness of mail, or are enforced in an  overly stringent manner. USPS counters that (1) these requirements are  needed to limit its handling costs and ensure that discounted mail meets  the necessary requirements and (2) there are limited opportunities for it to  increase revenues by simplifying its requirements. Some parties have said  that USPS should strike a balance between requirements necessary for its  operations and the need to provide mailers with flexible, low-cost methods  to prepare and submit mail. USPS and mailers have long engaged in  collaborative efforts to help define appropriate requirements. Redoubling  efforts in this area could produce important benefits for USPS and the  mailing industry.
section_title: New Nonpostal Products and Services
paragraphs: In 2009, USPS asked Congress to change the law so that it can diversify  into nonpostal areas to find new opportunities for revenue growth, and  some stakeholders have also supported diversification. USPS and  stakeholders we collected information from offered many options for  diversification into nonpostal areas, either on its own or in partnership  with other private firms or government agencies. New nonpostal products  and services that were identified include providing banking, financial, and  insurance services; selling nonpostal products at its retail facilities;  providing services for other federal, state, or local government agencies;  carriers delivering nonpostal items or providing contract services (such as  meter reading); advertising at USPS facilities; and providing electronic  commerce. Diversification could involve entering new areas or earning  revenues from business partners who sell nonpostal products at USPS  retail facilities.
Whether USPS should be allowed to engage in nonpostal activities should  be carefully considered, including its poor past performance in this area,  as should the risks and fair competition issues. We have previously  reported the following:    USPS lost nearly $85 million in fiscal years 1995, 1996, and 1997 on 19 new  products, including electronic commerce services, electronic money  transfers, and a remittance processing business, among others.
In 2001, we reported that none of USPS’s electronic commerce initiatives  were profitable, and that USPS’s management of these initiatives—such as  an electronic bill payment service that was eventually discontinued—was  fragmented, with inconsistent implementation and incomplete financial  information.
In enacting PAEA, Congress restricted USPS from engaging in new  nonpostal activities. PAEA also required PRC to review USPS’s existing  nonpostal services to determine whether they should be continued or  terminated. PRC recently found the intent of this requirement was to  concentrate USPS’s focus on its core responsibilities and away from  nonpostal services that are not justified by a public need that cannot be  met by the private sector. Allowing USPS to diversify into nonpostal  activities would raise a number of issues, including whether it should  engage in nonpostal areas where there are private-sector providers and, if  so, under what terms. Other issues relate to concerns about unfair  competition; whether USPS’s mission and role as a government entity with  a monopoly should be changed; as well as questions regarding how it  would finance its nonpostal activities, what transparency and  accountability provisions would apply; whether USPS would be subject to  the same regulatory entities and regulations as its competitors; and  whether any losses might be borne by postal ratepayers or the taxpayer.
USPS reported in March 2010 that even if it could enter nonpostal areas,  such as banking or selling consumer goods, its opportunities would be  limited by its high operating costs and the relatively light customer traffic  of post offices compared with commercial retailers. USPS also stated that  the possibility of building a sizable presence in logistics, banking,  integrated marketing, and document management is currently not viable  because of its net losses, high wage and benefit costs, and limited access  to cash to support necessary investment. USPS concluded in its Action  Plan that building a sizable business in any of these areas would require  “time, resources, new capabilities (often with the support of acquisitions  or partnerships) and profound alterations to the postal business model.”
section_title: Options to Reform USPS’s Statutory and Regulatory Framework
paragraphs: Addressing challenges to USPS’s current business model may require  restructuring its statutory and regulatory framework to reflect business  and consumers changing use of the mail. While we do not address whether  USPS’s ownership structure should be modified in this report, many other  statutory and regulatory considerations that should help to address the  changing use of mail have been discussed and relate to the following  elements of USPS’s business model:    Mission: What is an appropriate universal service obligation in light of  fundamental changes in the use of mail?
Role: Should USPS be solely responsible for providing universal postal  service, or should that responsibility be shared with the private sector?
Monopoly: Does USPS need a monopoly over delivery of certain types of  letter mail and access to mail boxes to finance—in part or wholly— universal postal service?
Governance and regulation: What is an appropriate balance between  managerial flexibility and the oversight and accountability provided by the  current governance and the regulatory structure?
subsections: section_title: USPS’s Mission
paragraphs: USPS’s statutory mission is to provide postal services to “bind the nation  together through the personal, educational, literary, and business  correspondence of the people.” It is required by law to provide prompt,  reliable, and efficient services to patrons in all areas and postal services to  all communities. These and related requirements are commonly referred to  as the universal service obligation. PRC has reported that universal postal  service has seven principal attributes (see table 9).
Key questions regarding universal postal service include the following:    How much postal service does the nation need and how should it be  funded?
Should the costs of providing universal service be borne by postal  ratepayers, or should taxpayers subsidize some unprofitable aspects of  universal service that benefit the nation?
If USPS cannot be financially viable without reducing universal postal  service, what changes would be needed?
Who should determine whether changes should be made to universal  service (e.g., Congress, USPS, or PRC)?
In addition, issues have been raised about whether all postal products  should be required to cover their costs, even if they provide social  benefits, or receive a subsidy through appropriations. Historically, some  types of mail were designed to channel broad public goals, such as  furthering the dissemination of information, the distribution of  merchandise, and the advancement of nonprofit organizations. For  example, Periodicals (mainly, mailed magazines and newspapers) have  historically been given favorable rates, consistent with the view that they  help bind the nation together, but this class has not covered its costs for  the past 13 fiscal years. Losses from Periodicals increased from $74 million  in fiscal year 1997 to $438 million in fiscal year 2008 and to $642 million in  fiscal year 2009. These escalating losses have provoked growing concern  and controversy. Postal stakeholders are currently debating what  corrective actions, if any, are warranted, and their possible impact on  Periodicals.
Other money-losing types of mail with social benefits include the  following:    Single-piece Parcel Post was introduced in 1913 to provide affordable  parcel delivery; this opened up the mail order merchandise market,  especially in rural areas.
Media Mail, or “book rate,” as it was formerly known, was initially  designed in 1938 to provide lower rates for mailed books and encourage  the mailing of educational materials.
Library Mail was introduced in 1928 as a preferential rate for books sent  by or to libraries and was later expanded to schools, colleges, and  universities in 1953.
According to a Congressional Research Service report, when Congress put  USPS on a self-sustaining basis in 1971, it continued to subsidize the  mailing costs of such groups as the blind, nonprofit organizations, local  newspapers, and publishers of educational material, by providing an  appropriation to cover the revenues that were given up, or “forgone,” in  charging below-cost rates to these groups. Appropriations for these  subsidies mounted as postage rates and the number of nonprofits grew,  approaching $1 billion annually in the mid-1980s. Successive  administrations sought to cut these costs by reducing eligibility and having  other mailers bear more of the burden. Questions continue about how  these money-losing types of mail should be funded.
All money-losing market-dominant products lost $1.7 billion collectively in  fiscal year 2009, up from $1.1 billion in fiscal year 2008 (see table 10). In  addition to the $642 million lost from Periodicals in fiscal year 2009, the  largest money-losing product was Standard Mail Flats ($616 million).  Losses from Standard Mail Flats have nearly tripled over the past fiscal  year. In its Annual Compliance Determination report for fiscal year 2009,  PRC discussed actions that could be taken to deal with these and other  money-losing products. Some of the losses from Standard Mail are due to  unprofitable mail sent by nonprofit organizations. By law, rates for  nonprofit Standard Mail are 60 percent of the rates for the most closely  corresponding type of for-profit Standard Mail. However, nonprofit rates  benefit charitable and religious organizations, and Congress has long  required preferential rates for nonprofit mail.
If Congress were to decide that all market-dominant products should  cover their costs, it could also revisit other legal requirements that  constrain USPS’s pricing flexibility for these products. First, the price cap  requirement may need to be revisited to enable some types of mail to be  increased over the cap without resorting to the exigent rate increase  process. For example, the average rate increase for the Periodicals class is  limited to inflation under the price cap. Similarly, single-piece Parcel Post,  Media Mail, and Library Mail are a significant part of the Package Services  class that is also covered by the price cap. In addition, USPS could  continue to gradually implement a rate structure for Periodicals that is  based more on costs, which could involve rate increases for mail that is  more costly to handle (e.g., mail provided to USPS in sacks, rather than on  pallets). However, such a rate structure could disproportionately affect  some small-circulation magazines.
Issues regarding which entity should consider and decide on changes to  universal service—including Congress, PRC, or USPS—have long been  debated. Because many aspects of universal service are required by law,  Congress would have to make any changes in these areas. For example,  Congress would have to redefine certain aspects of universal postal  service that are required under current law, such as 6-day delivery, revised  statutory preferences for nonprofit mail, and restrictions on closing small  post offices. For some aspects of universal service, such as related pricing  issues, PRC has the authority to act by establishing regulations that govern  postal pricing and overseeing USPS compliance with legal requirements.  USPS has flexibility to act on some other aspects, such as establishing and  maintaining service standards for timely mail delivery.
section_title: USPS’s Role
paragraphs: Another issue is whether postal services are an inherently governmental  function, and whether USPS should be the only entity responsible for  universal postal service. The federal government’s responsibility for postal  services is detailed in Title 39 of the United States Code. A possible  rationale for sharing this responsibility would be to allow private  companies to provide postal services, with the idea that competition could  give some customers more choices that better meet their needs, through  lower cost products and expanded services. A related consideration is that  some aspects of postal service, particularly mail delivery, are considered  to have economies of scale, meaning that, in theory, one provider might  fulfill this function more economically than multiple providers. In practice,  multiple providers—including USPS and numerous companies—already  deliver mail (e.g., contractors who provide long-distance mail  transportation and deliver mail to households located along sparsely  populated highway routes).
Another question is whether USPS should continue to fulfill other roles, or  whether these roles should be discharged by other agencies. For example  whether USPS or some other law enforcement body should enforce postal  laws was considered in the postal reform debate—specifically, whether  the Postal Inspection Service that enforces mail fraud and other statutes  should be transferred to another federal law enforcement agency. Another  example is USPS’s involvement in responding to national disasters,  including hurricanes and terrorist attacks. In this regard, a recent  executive order stated that USPS has the capacity for rapid residential  delivery of medical countermeasures across all U.S. communities, and that  the federal government will use USPS to implement national medical  countermeasures in the event of a large-scale biological attack.
section_title: USPS Monopoly
paragraphs: USPS has two types of monopolies to (1) deliver certain letter mail and   (2) have exclusive access to mailboxes.
USPS has a monopoly over the delivery of certain letter mail to help  ensure that it has sufficient revenues to carry out public service mandates,  including universal service. USPS has promulgated regulations to identify  exceptions to the postal monopoly. Some key exceptions include  “extremely urgent” letters (generally, next-day delivery) and outbound  international letters. Most mail volume is covered by this monopoly,  regulated as market-dominant mail, and subject to the price cap. Over the  years, Congress has reevaluated the need for the mail monopoly,  broadening and reducing it at various times, including in PAEA.
For over 200 years, USPS and its predecessor, the former U.S. Post Office  Department, operated with a statutory mail monopoly, which restricted  the private delivery of most letters. Congress created the mail monopoly as  a revenue protection measure to help enable the former Post Office  Department to fulfill its mission. A rationale for the mail monopoly is to  prevent private competitors from engaging in an activity known as cream- skimming, that is, offering service on low-cost routes at prices below those  of USPS, while leaving USPS with high-cost routes. Furthermore, allowing  private companies to compete for mail now covered by the monopoly  could lead to additional declines in mail volume and revenue, thereby  increasing excess capacity and reducing USPS’s net income.
According to PRC, the most frequent argument against the mail monopoly  is that, assuming a legal framework continues to exist to protect public  interest and the provision of universal service, competitive markets might  produce more efficient, innovative, flexible, and fairer services to buyers  and producers. Narrowing or eliminating the monopoly could increase  consumer choice and provide incentives for USPS to become more  effective and efficient. Critics of the monopoly also cite the experience of  foreign countries that have narrowed, eliminated, or are phasing out their  monopolies.
This restriction prohibits anyone from knowingly and willingly placing  mailable matter without postage into any mailbox. As we have reported,  the purposes of the restriction, which dates back to 1934, were twofold— to stop the loss of postal revenue resulting largely from private  messengers delivering customer bills to mailboxes without paying postage  and to decrease the quantity of extraneous matter being placed in  mailboxes. PAEA did not change the mailbox monopoly.
USPS has stated that continuation of the mailbox monopoly would best  preserve customer service, safety, security, and the value of mail.  According to USPS, the mailbox monopoly helps deter mail theft and  identity theft, facilitates enforcement when violations occur, and is needed  for efficient mail collection and delivery. We have previously reported that  critics of the mailbox monopoly said it impedes competition and infringes  on private property. FTC reported in 2007 that the mailbox monopoly  reduces competition and raised competitors’ costs of delivering products  that otherwise could fit into a mailbox. While FTC recognized mail  security and privacy issues, it concluded that Congress and PRC may want  to consider whether relaxing the mailbox monopoly to allow consumers to  choose to have private carriers deliver competitive products to their  mailboxes would create net benefits. In 2008, PRC stated that it “does not  recommend any changes to the mailbox rule,” citing issues with mail  security and USPS efficiency. PRC also noted that its public proceeding  evidenced broad support for continuing the mailbox monopoly.
section_title: Governance and Regulation
paragraphs: The effectiveness of USPS’s governance and regulatory structure is critical  to its success and to ensuring that quality affordable postal services are  provided to the American people. The 2003 President’s Commission noted  that managerial accountability must come from the top, with USPS being  governed by a strong corporate-style board that holds its officers  accountable. The commission concluded that giving USPS greater  flexibility would require enhanced oversight by an independent regulatory  body endowed with broad authority, adequate resources, and clear  direction to protect the public interest and ensure that USPS fulfills its  duties. A number of regulatory changes were implemented after PAEA was  enacted, and a thorough review of these changes has not been developed.  PAEA required PRC to submit a report to Congress by December 2011  concerning “the operation of the amendments made by ” and any  recommendations for improvements to the U.S. postal laws. Another PRC  report is required by December 2016 to determine whether the system for  regulating rates and classes for market-dominant products is achieving its  objectives.
The Board of Governors directs the exercise of the powers of USPS,  directs and controls its expenditures, reviews its practices, and conducts  long-range planning. The board sets policy; participates in establishing  postage rates; and takes up various matters, such as mail delivery  standards and some capital investments and facilities projects. By law,  governors are chosen to represent the public interest and cannot be  “representatives of specific interests using the Postal Service.” Despite  the changes made by PAEA, the qualifications of USPS governors continue  to be an issue. Members of the Board of Governors told us that the board  lacks sufficient business and financial expertise. The members also  suggested that some governors should not be politically appointed. In this  regard, the 2003 President’s Commission recommended that the Board of  Governors be comprised of 12 individuals: 3 presidential appointees, 8  independent members selected by the 3 appointees with the concurrence  of the Secretary of the Treasury, and the Postmaster General (who would  be selected by the other 11 members).
Should any of the operational or structural options outlined in this report  be implemented, Congress, USPS, the Board of Governors, PRC, and other  relevant postal stakeholders could consider whether governance and  regulatory structures need to be changed to reflect an appropriate balance  in the oversight roles of these entities. PAEA gave USPS more pricing and  product flexibility, which was balanced by strengthening PRC’s oversight  authority. Among other things, PAEA required PRC to develop the  regulatory structure for postal rates, consult with USPS on establishing  delivery service standards, and annually determine USPS’s compliance  with applicable laws. Also under PAEA, PRC was granted the authority to  issue subpoenas; direct USPS to adjust rates not in compliance with  applicable postal laws; or, in cases of deliberate noncompliance with  applicable postal laws, levy fines.
section_title: Actions Congress and USPS Can Take to Facilitate Progress toward Financial Viability
paragraphs: Action by Congress and USPS is urgently needed on a number of difficult  issues to facilitate progress toward USPS’s financial viability by reducing  costs, increasing efficiency, and generating revenues. The significant  deterioration in USPS’s financial condition over the past 2 years, its  increasing debt, and the grim forecast for declining volume over the next  decade led GAO to add USPS’s financial condition to its high-risk list in  July 2009. We suggested that USPS develop and implement a broad  restructuring plan, with input from PRC and other stakeholders, to identify  specific actions planned, key issues, and steps Congress and other  stakeholders need to take. On March 2, 2010, USPS issued its Action Plan,  which identified seven key areas wherein it would need legislative changes  or support. Many of the options discussed are also options we have  analyzed and included in this report for consideration. USPS forecasts of  mail volume, revenue, and net income over the next decade quantify the  magnitude of the challenges that it faces from continued volume decline to  about 150 billion pieces in fiscal year 2020—about the same as the volume  level in fiscal year 1986—and a projected cumulative $238 billion shortfall  if no additional efficiency or revenue initiatives are undertaken. USPS’s  Action Plan indicates that actions within its control can close $123 billion  of this financial gap, but that actions outside its existing authority— including some involving statutory changes—would be needed to  eliminate the remaining financial gap. Action on these issues will likely  take several years to fully implement once a decision is made on the scope  of needed changes. Therefore, agreement on next steps is urgently needed.
If USPS is to continue being self-financing, Congress, USPS, and other  stakeholders will need to reach agreement on major issues that impede its  ability to implement actions to reduce losses. These issues include funding  postal retiree health benefits; reexamining binding arbitration; realigning  services, operations, networks, and workforce to reflect declining volume;  and changing use of the mail in a dynamic marketplace as well as  generating revenue.
Funding postal retiree health benefits: USPS has said that it cannot afford  its required prefunding payments on the basis of its significant volume and  revenue declines, incurring large losses, nearing its debt limit, and limited  cost-cutting opportunities under its current authority. Several proposals  have been made to defer costs by revising the statutory requirements, and  it is important that USPS fund its retiree health benefit obligations— including prefunding these obligations—to the maximum extent that its  finances permit. In addition to considering what is affordable and a fair  balance of payments between current and future ratepayers, Congress  would also have to address the impact of these proposals on the federal  budget. CBO has raised concerns about how aggressive cost-cutting  measures would be if prefunding payments for retiree health care were  reduced. This concern further indicates the need for broad agreement on  specific realignment actions, the time frame for implementation, and the  expected financial impact.
Binding arbitration: One of the most difficult challenges USPS faces is  making changes to its compensation systems, which will be critical to its  financial condition since wages and benefits comprise 80 percent of its  costs. In this regard, the time has come to reexamine the structure for  collective bargaining that was developed 40 years ago. Since that time, the  competitive environment has changed dramatically and rising personnel  costs are contributing to escalating losses. Thus, it is imperative to ensure  that USPS’s financial condition be considered in upcoming collective  bargaining if the process reaches binding arbitration.
Realigning postal services with changing use of the mail: As mail use by  businesses and consumers continues to change, USPS has stated that it  cannot afford to provide the same level of services and that changes are  needed. USPS has estimated that it could reduce costs by about $3 billion  annually if it could reduce delivery frequency from 6 days to 5 days, but  congressional agreement would be needed to not include a 6-day delivery  requirement in USPS annual appropriations. USPS filed a request on  March 30, 2010, for a PRC advisory opinion on its proposal to eliminate  Saturday delivery.
Generating revenue through new or enhanced product and services: On  the revenue side, a key issue is whether USPS can make sufficient  progress using the pricing and product flexibility provided in PAEA or  whether changes may be needed. The Action Plan stated that USPS needs  additional authority to adjust its pricing to better reflect market dynamics  and proposed some changes. These proposals have not been fully  analyzed, nor have PRC and stakeholders had an opportunity to provide  input. Thus, it is unclear what statutory or regulatory changes should be  made at this time. Another key issue is whether USPS should be allowed  to engage in new nonpostal areas that may compete with private firms.  Congress considered many of the public policy issues in this area related  to fair competition prior to PAEA’s enactment in 2006 and decided at that  time not to let USPS engage in new nonpostal areas. It is not clear what  specific actions USPS would like to take, their expected profitability, or  how they might affect other businesses. USPS’s current financial condition  may limit its expansion into other areas in the short term, but ultimately its  plans in this area could affect its operations.
Realigning operations, networks, and workforce: Once Congress and  USPS have determined what, if any, changes should be made in the  products and services that it provides, corresponding changes will be  needed in postal operations, networks, and workforce. This area involves  some public policy issues that Congress may want to address. USPS will  need to address detailed operational issues related to increasing cost- efficiency. Some of the difficult tradeoffs in this area include USPS’s need  to significantly reduce its size to remain self-financing and keep prices  affordable, versus concerns about whether such reductions could harm  the value of its brand, its network of physical assets, and the social  benefits that it provides as well as the effects of these actions on its  workforce.
USPS has made limited progress in optimizing its networks over the last  decade, particularly in facilities that include public access to retail  operations. For example, in July 2009, USPS initiated a PRC review of over  3,600 retail stations and branches located primarily in urban and suburban  areas for possible consolidation or discontinuance, but fewer than 200  facilities remain under consideration for such actions. PRC issued its  advisory opinion on USPS’s proposed retail consolidations in early March,  which affirmed USPS’s authority to adjust its retail network while  recommending several process improvements. Considering the  numerous statutory and regulatory requirements in this area, it could be  difficult to make rapid changes to rightsize its network of 36,500 retail  facilities. USPS’s Action Plan says that it plans to expand access to retail  service and, as customers shift to these new services, that it will reduce  redundant retail facilities. However, it is unclear what specific changes  would be made, how long it would take to make these changes, and how  much annual cost savings could be achieved. USPS’s Action Plan also  does not address possible closures of large mail processing facilities to  reduce the excess capacity in its mail processing network.
A new approach is urgently needed to make the necessary progress in  realigning postal operations and networks as USPS’s core business  continues to decline. Conducting business as usual is unlikely to produce  significant results, particularly in the rapid time frame that would be  required to avert massive losses. Thus, it will be important for Congress,  USPS, and other stakeholders to reach agreement on the package of  actions that should be taken, the desired operational and financial results,  and the time frames for implementation. Key questions that need to be  addressed include the following:    Universal service issues: What, if any, changes are needed—that is,  should delivery services be changed (e.g., frequency or standards), and  should USPS continue moving retail services out of post offices to  alternative locations?
New products and services: What opportunities are there to introduce  profitable new postal products and enhancements to existing ones?  Should USPS engage in nonpostal areas where there are private-sector  providers? If so, under what terms?
Realigning operations, networks, and workforce: How should USPS  optimize its operations, networks, and workforce to support changes in  services; how quickly can this happen; and how can it work with its  employees and customers to minimize potential disruption?
This is an area where Congress may want to consider an approach similar  to that used by the Department of Defense’s Base Realignment and  Closure (BRAC) Commission, which was established to realign military  installations within the United States. Under the Defense Base Closure and  Realignment Act of 1990, the President can either accept or reject BRAC  recommendations in their entirety. If rejected, the BRAC Commission  could give the President a revised list of recommendations. If the  President accepts the list of recommendations, it is forwarded to Congress  and the list becomes final, unless Congress enacts a joint resolution. Our  report on the 2005 BRAC round noted that the Department of Defense  viewed this BRAC as a unique opportunity to reshape its installations and  realign its forces to meet its needs for the next 20 years.
Congress has previously turned to panels of independent experts to assist  in restructuring organizations that are facing key financial challenges.  These panels have gained consensus and developed proposed legislative  or other changes to address difficult public policy issues. For example, the  District of Columbia Financial Responsibility and Management Assistance  Authority was established to, among other things, (1) eliminate budget  deficits and cash shortages of the District through financial planning,  sound budgeting, accurate revenue forecasts, and careful spending;   (2) ensure the most efficient and effective delivery of services, including  public safety services, by the District during a period of fiscal emergency;  and (3) conduct necessary investigations and studies. This organization  was suspended in 2001 once relevant legal provisions were met, including  achieving a balanced budget for a 4th consecutive year.
Establishing a similar commission or control board of independent experts  could provide a mechanism to assist Congress in making timely decisions  and comprehensive changes to USPS’s business model and operations. A  commission of experts may be more appropriate to facilitate the changes  needed to achieve financial viability while also considering stakeholder  interests. The following questions could assist Congress in developing  such a commission:    What criteria should be used to select commission members, for example,  logistics experience, business restructuring, or labor management  expertise?
How could the commission best ensure that diverse stakeholder interests  are appropriately considered?
What would be the time frame of the commission?
What goals or objectives should guide the commission—for example,  ensuring USPS’s financial viability, and recommending policy and  management changes?
section_title: Conclusions
paragraphs: USPS faces daunting financial losses that it projects could total over $238  billion through fiscal year 2020, unless it can substantially reduce its costs,  including the size of its operations, networks, and workforce to reflect  declining mail volume, and to generate new revenues. USPS’s planned  actions under its existing authority will not be enough to make it  financially viable. Therefore, Congress, USPS, and other stakeholders need  to reach agreement on a package of actions to take so that USPS can  become financially viable. This agreement will need to address difficult  constraints and legal restrictions that continue to hamper progress. Such  an agreement is urgently needed so that Congress and stakeholders have  confidence that the actions USPS takes will be fair to all stakeholders.  Then USPS could begin to plan and make the necessary changes, some of  which may require several years to fully implement and realize potential  cost savings. For example, restructuring operations and networks would  require coordinated actions involving postal employees, mailers, and the  public.
To reach agreement on these difficult issues, Congress could engage a  panel of independent experts to develop a credible and comprehensive  package of specific proposals, including the following:    Potential changes related to adapting universal postal services to the  declining use of mail, such as removing the statutory requirements for   6-day delivery and restrictions on closing post offices.
Changes needed to realign USPS operations, networks, and workforce  with its declining workload, and how to address employee and community  concerns and resistance to facility closures.
Improving opportunities to generate revenues, and whether that should  include allowing USPS to engage in new nonpostal areas.
Due to the urgency of USPS’s deteriorated financial condition and outlook,  and the fact that it is rapidly approaching its statutory debt limit, Congress  may need to provide financial relief, for example, by revising the funding  schedule for retiree health benefits. Another action that Congress could  take in the near term, which would have a longer-term impact, would be to  modify the collective bargaining process to ensure that any binding  arbitration would take USPS’s financial condition into account.  Furthermore, Congress may want assurance through regular reports that  any financial relief it provides is met with aggressive actions to reduce  costs and increase revenues, and that progress is being made toward  addressing its financial problems.
Ultimately, Congress may want to consider changing USPS’s ownership  structure, but the resolution of these more pressing issues might afford a  better understanding of whether the ownership structure should be  modified. As communications and the use of the mail evolve, Congress will  need to revisit policy issues related to USPS, the services it provides, and  how to best position the organization for the future. The current crisis  presents the opportunity to act and position this important American  institution for the future. If no action is taken, the risk of USPS’s  insolvency and the need for a bailout by taxpayers and the U.S. Treasury  increases.
section_title: Matters for Congressional Consideration
paragraphs: To address USPS’s financial viability in the short term, Congress should  consider providing financial relief to USPS, including modifying its retiree  health benefit cost structure in a fiscally responsible manner. Congress  should also consider any and all options available to reduce USPS costs,  including revising the statutory framework for collective bargaining to  ensure that binding arbitration takes its financial condition into account.  At the same time, to facilitate making progress in difficult areas, Congress  should consider establishing (1) a panel of independent experts, similar to  a BRAC-like commission, to coordinate with USPS and stakeholders to  develop a package of proposed legislative and operational changes needed  to reduce costs and address challenges to USPS’s business model and   (2) procedures for the review and approval of these proposals by the  President and Congress. These proposals could focus on adapting delivery  and retail services to declining mail volumes; making postal operations,  networks, and workforce more cost-efficient; and generating new revenue.
Congress also should consider requiring USPS to provide regular reports  to Congress to ensure that USPS is making progress to improve its  financial condition. These reports could include the actions taken to  reduce costs and increase revenues, the results of these actions, and  progress toward addressing financial problems.
section_title: Agency Comments and Our Evaluation
paragraphs: USPS provided written comments on a draft of this report by a letter dated  April 2, 2010. These comments are summarized below and included in  their entirety in appendix II of this report. In separate correspondence,  USPS also provided technical comments, which we incorporated as  appropriate.
USPS stated that it agreed with many key points in our report and with all  but one of our matters for congressional consideration. First, regarding  revising USPS retiree health benefit funding, USPS said the prefunding  requirement urgently needs to be restructured and agreed that it should  continue to fund its retiree health benefits obligation to the maximum  extent that its finances permit. Second, USPS agreed that Congress should  consider revising the statutory framework for USPS collective bargaining  to ensure that binding arbitration takes its financial condition into  account. Third, USPS agreed that Congress should consider requiring  USPS to provide regular reports to ensure that it is making progress to  improve its financial condition. However, USPS raised concerns about  using a panel of independent experts to develop a package of proposed  legislative and other changes, stating that doing so would add a layer of  bureaucracy and delay to problems that require immediate attention. We  believe that unless Congress and USPS agree on actions to be taken, USPS  will not be able to reduce costs enough to close the revenue gap and  achieve financial stability. Congress has used such panels to successfully  reach agreement regarding other difficult restructuring issues.
We are sending copies of this report to the appropriate congressional  committees, the Postmaster General, the Chairman of the USPS Board of  Governors, the Chairman of the Postal Regulatory Commission, and other  interested parties. In addition, the report will be available at no charge on  GAO’s Web site at http://www.gao.gov.
If you or your staffs have any questions regarding this report, please  contact me at (202) 512-2834 or herrp@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on the  last page of this report. GAO staff who made key contributions to this  report are listed in appendix III.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: The Postal Accountability and Enhancement Act (PAEA) of 2006 required  us to report on strategies and options for the long-term structural and  operational reform of the United States Postal Service (USPS). Because of  USPS’s financial crisis and our assessment that restructuring is urgently  needed, our work has been accelerated at the request of Members of  Congress and is presented in this report. The objectives of this report are  to assess (1) the viability of USPS’s business model, (2) strategies and  options to address challenges to USPS’s current business model, and   (3) actions Congress and USPS need to take to facilitate progress toward  USPS’s financial viability.
To assess the viability of USPS’s business model, we relied on our past work,  including putting USPS’s financial condition on GAO’s high-risk list in July  2009, and on our testimonies regarding its deteriorating financial condition.  We interviewed multiple USPS officials, including the Postmaster General, the  Deputy Postmaster General, the former and current Chairman of the Board of  Governors, and headquarters and field staff during visits to post offices, mail  processing facilities, and other facilities that serve urban and rural areas. We  reviewed USPS financial and operating information, including its Annual  Reports, Integrated Financial Plans, and Comprehensive Statements; other  strategic documents, including its transformation plans, Assessment of U.S.  Postal Service Future Business Model, action plan released March 2010— entitled Ensuring a Viable Postal Service for America: An Action Plan for  the Future (Action Plan)—and the Action Plan’s financial and volume  projections; and collective bargaining agreements. We reviewed USPS’s  current legal and regulatory framework and relevant congressional  testimonies and hearings. We also reviewed the results of retiree health  valuations provided to us by the Office of Personnel Management (OPM) in  March 2010. OPM’s valuations, which include estimates of future obligations,  costs, premium payments, and fund balances, were based on USPS employee  population projections. We did not assess the reasonableness of USPS’s  population projections or OPM’s actuarial assumptions and methodology. We  utilized OPM’s valuation results to analyze the financial impacts of selected  options for funding USPS’s retiree health benefit obligations. We did not  assess the validity of USPS’s financial and mail volume projections due to  time and resource constraints.
Also, we examined reports issued by other postal stakeholders, including the  Postal Regulatory Commission (PRC) (particularly its 2008 report on  Universal Postal Service and the Postal Monopoly), USPS Office of Inspector  General, Congressional Research Service, Congressional Budget Office, the  2003 President’s Commission on the United States Postal Service, and other  mailing industry experts. We also met with PRC commissioners and various  staff members; representatives of the four major employee unions and three  major management associations (the American Postal Workers Union,  National Association of Letter Carriers, National Postal Mail Handlers Union,  National Rural Letter Carriers’ Association, National Association of  Postmasters of the United States, National League of Postmasters, and  National Association of Postal Supervisors); USPS Office of Inspector  General; Military Postal Service Agency; members of the mailing industry;  other postal stakeholders; and economists.
To identify options to address the challenges in the current business  model, we reviewed information from many of the sources that we have  previously mentioned, including (1) past GAO work, (2) relevant  congressional hearings and testimonies, (3) stakeholder studies, and   (4) interviews with stakeholders. We then supplemented this information  by distributing a list of questions to over 60 organizations to gather their  opinions on actions that could be taken to improve USPS’s business model  and the potential impacts of these actions. Organizations were selected on  the basis of a variety of factors, including those who have testified before  Congress on postal issues; submitted comments (1) during the public  comment solicitations as part of the work of the 2003 President’s  Commission on the United States Postal Service, (2) to PRC on universal  service, the postal monopoly, and the new regulatory structure for  ratemaking, and (3) to the Federal Trade Commission on differences in the  legal status between USPS and its competitors; and have been active  participants in various USPS-related activities, including participation in  the Mailers’ Technical Advisory Committee (a joint USPS-industry  workgroup). We also considered the nature of the organization and  selected organizations that represented various sections of the postal  community, including unions, management associations, private printing  and mailing companies, and mailers across various mail segments (e.g.,  large and smaller mailers, First-Class Mail, Standard Mail, Periodicals,  parcels, newspapers, and nonprofit mail). We received responses from 24  mailing associations, 15 private companies, and 4 postal unions and  management associations, which is a response rate of about 70 percent.
We then gathered and evaluated relevant options on the basis of a variety  of criteria, including their potential to reduce USPS costs, realign its  operations, and increase revenues, in light of its current and projected  financial condition. Some options are consistent with actions we have  discussed in our past work—such as optimizing USPS’s retail, delivery,  and mail processing networks—while others have been discussed in  congressional hearings, regulatory proceedings, and major studies. Other  options, some of which would require significant changes to USPS’s legal  framework or to current collective bargaining agreements, were selected  because they would provide useful context into the key restructuring  issues that we have previously described in this report. We did not include  every option that we had identified in this report; rather, we present a  select listing of options that were based on these criteria. We analyzed  each option on the previously mentioned criteria; reviewed available cost  and revenue data; and considered potential impacts on various  stakeholders, including USPS, employees, mailers, and the public.
For reporting purposes, we grouped options according to these following  strategies to align costs with revenues  reducing compensation and benefits costs;  reducing other operations and network costs and improving efficiency; and    generating revenues through product and pricing flexibility.
Our assessment of certain options related to USPS’s business model, such  as in the governance and regulatory areas, was also limited because it is  still too soon to see the full impact of the changes from PAEA.  Furthermore, we did not address whether USPS’s ownership structure  should be altered at this time, but focused instead on the more pressing  issues discussed throughout the report. The resolution of these  operational issues may afford a clearer understanding of whether USPS’s  ownership structure should be modified. We also plan to address the  experiences of foreign postal administrations in a separate report.
The previously mentioned analysis that we performed was also used as a  basis to determine actions that Congress and USPS need to take facilitate  progress toward USPS’s financial viability. We supplemented this analysis  with other GAO work on independent commissions and control boards,  including the Department of Defense’s Base Realignment and Closure  Commission, and the District of Columbia Financial Responsibility and  Management Assistance Authority.
We conducted this performance audit from August 2009 to April 2010 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 based on our audit  objectives.
section_title: Appendix II: Comments from the United States Postal Service
section_title: Appendix III: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Shirley Abel, Amy Abramowitz,  Teresa Anderson, Joseph Applebaum, Gerald Barnes, Joshua Bartzen,  William Dougherty, Patrick Dudley, Brandon Haller, Carol Henn, Paul  Hobart, Kenneth John, Anar Ladhani, Hannah Laufe, Scott McNulty, Daniel  Paepke, Susan Ragland, Amy Rosewarne, Travis Thomson, Jack Wang, and  Crystal Wesco made key contributions to this report.
section_title: Related GAO Products
paragraphs: U.S. Postal Service: Financial Crisis Demands Aggressive Action.  GAO-10-538T. Washington, D.C.: March 18, 2010.
U.S. Postal Service: The Program for Reassessing Work Provided to  Injured Employees Is Under Way, but Actions Are Needed to Improve  Program Management. GAO-10-78. Washington, D.C.: December 14, 2009.
U.S. Postal Service: Financial Challenges Continue, with Relatively  Limited Results from Recent Revenue-Generation Efforts. GAO-10-191T.  Washington, D.C.: November 5, 2009.
U.S. Postal Service: Restructuring Urgently Needed to Achieve Financial  Viability. GAO-09-958T. Washington, D.C.: August 6, 2009.
U.S. Postal Service: Broad Restructuring Needed to Address  Deteriorating Finances. GAO-09-790T. Washington, D.C.: July 30, 2009.
High-Risk Series: Restructuring the U.S. Postal Service to Achieve  Sustainable Financial Viability. GAO-09-937SP. Washington, D.C.:   July 28, 2009.
U.S. Postal Service: Mail Delivery Efficiency Has Improved, but  Additional Actions Needed to Achieve Further Gains. GAO-09-696.  Washington, D.C.: July 15, 2009.
U.S. Postal Service: Network Rightsizing Needed to Help Keep USPS  Financially Viable. GAO-09-674T. Washington, D.C.: May 20, 2009.
U.S. Postal Service: Escalating Financial Problems Require Major Cost  Reductions to Limit Losses. GAO-09-475T. Washington, D.C.: March 25,  2009.
U.S. Postal Service: Deteriorating Postal Finances Require Aggressive  Actions to Reduce Costs. GAO-09-332T. Washington, D.C.: January 28,  2009.
U.S. Postal Service: USPS Has Taken Steps to Strengthen Network  Realignment Planning and Accountability and Improve  Communication. GAO-08-1022T. Washington, D.C.: July 24, 2008.
U.S. Postal Service: Data Needed to Assess the Effectiveness of  Outsourcing. GAO-08-787. Washington, D.C.: July 24, 2008.
U.S. Postal Service Facilities: Improvements in Data Would Strengthen  Maintenance and Alignment of Access to Retail Service. GAO-08-41.  Washington, D.C.: December 10, 2007.
U.S. Postal Service: Mail Processing Realignment Efforts Under Way  Need Better Integration and Explanation. GAO-07-717. Washington, D.C.:  June 21, 2007.
U.S. Postal Service: The Service’s Strategy for Realigning Its Mail  Processing Infrastructure Lacks Clarity, Criteria, and Accountability.  GAO-05-261. Washington, D.C.: April 8, 2005.