USPS Cuts $9 Billion in Costs; Still Needs Law Changes

WASHINGTON, DC—March 2, 2011—The Postmaster General told a congressional subcommittee Wednesday that despite taking aggressive steps to reduce costs, the U.S. Postal Service (USPS) will not survive as a self-financing entity without significant changes to current law.

Testifying before the Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy on Oversight and Government Reform, Postmaster General Patrick R. Donahoe pointed out that during the last two fiscal years, the Postal Service has reduced costs by some $9 billion and the plan is to take out another $2 billion in 2011. But the Postal Service still lost a “staggering” $8.5 billion in 2010 and is projecting to be in the red this year by $6.4 billion.

Conceding that some of these losses can be attributed to Americans’ changing modes of communication, Donahoe said, but mainly “our losses are the result of an inflexible business model due to the laws that govern the Postal Service.”

He cited specifically a statutory requirement that since 2007 has required the Postal Service to prefund retiree health benefits (RHB) in amounts of approximately $5.5 billion per year. Noting that no other entity, public or private, is burdened with this responsibility, Donahoe said that the Postal Service showed a positive net income in each of the four years before RHB was imposed. But, in each of the four years since, “we have seen billion dollar losses.”

Donahoe added, “Even during two of the worst years of the recession, 2007 and 2008, had it not been for the prefunding requirement, the Postal Service would have realized a profit of $3.3 and $2.8 billion respectively. The effect of RHB prefunding is profound.”

In addition to asking for corrective legislation on the RHB prefunding, Donahoe also asked the subcommittee to look favorably on the agency’s proposal to transition to a five-day delivery schedule and to provide the Postal Service with more latitude on the products and services it can offer its customers.

He also told the subcommittee that he is in the process of aligning every aspect of the Postal Service around four key strategies: strengthening the business-to-consumer channel by innovating to enhance the value of mail; improving the customer experience by making every transaction a positive one; competing for the package business; and becoming leaner, faster and smarter by simplifying rules and streamlining its network.

The path forward for the Postal Service will require that all stakeholders embrace fundamental change “and that our employees, the labor unions and management associations, mailing industry customers and business partners (all) play a constructive role shaping our future,” Donahoe said.

About the U.S. Postal Service
A self-supporting government enterprise, the U.S. Postal Service is the only delivery service that reaches every address in the nation, 150 million residences, businesses and Post Office Boxes. The Postal Service receives no tax dollars for operating expenses, and relies on the sale of postage, products and services to fund its operations. With 32,000 retail locations and the most frequently visited website in the federal government,, the Postal Service has annual revenue of more than $67 billion and delivers nearly 40 percent of the world’s mail. If it were a private sector company, the U.S. Postal Service would rank 29th in the 2010 Fortune 500. Black Enterprise and Hispanic Business magazines ranked the Postal Service as a leader in workforce diversity. The Postal Service has been named the Most Trusted Government Agency six consecutive years and the sixth Most Trusted Business in the nation by the Ponemon Institute.

Source: Press release.

  • http://Shirley Shirley

    Seems rather disingenuous to blame pre-funding of RHB – if you have X dollars committed to [anything] – then pay now or pay later, you still have to pay. Paying later only makes the incumbent look better while later leadership has to deal with the fallout.

    If an enterprise is not taking in enough money to pay for a given commitment, maybe said commitment is too lucrative or possibly unwarranted given the enterprise’s performance? Maybe the nature and structure and possibly content & amount of RHB is what needs to be addressed. If the enterprise is not performing well now and cannot ‘pay the bill’ – what makes anyone think it will perform sufficiently well in the future to be able to ‘pay the bill’ – especially with no vision or plan to get there?

    Donahue laments that USPS is held to a higher standard than any other public or private enterprise in this area, yet both public and private enterprises – private of their own volition, public less voluntarily – are restructuring their RHB and doing so often. Especially enterprises who have undergone such dramatic change in both business operations & decline in volume. You can protect & satisfy past commitments while still adjusting future ones.