USPS Releases ‘Path to Financial Stability’ Plan; Mentions 50-Cent First-Class Stamp

WASHINGTON, DC—Feb. 17, 2012—The U.S. Postal Service (USPS) released an important update to its business plan for returning to profitability and long-term financial stability. While fundamentally consistent with the approach advanced by the Postal Service over the past year, the plan released today incorporates important refinements of financial projections and recommended legislative reforms.

“The plan we have developed requires a combination of aggressive cost reduction, rethinking the way we manage our healthcare costs, and comprehensive legislation to reform the business model of the Postal Service,” said Postmaster General Patrick Donahoe. “If provided the flexibility to quickly implement this plan, we can return to profitability and better serve the American public. If not, we risk becoming a significant burden to the American taxpayer.”

At its core, the plan requires the reduction of annual costs by at least $20 billion by 2015, rising to more than $22 billion by 2016. This cost reduction is necessary given projected declines in First-Class Mail volume, which has already has dropped by 25 percent since 2006. However, the Postal Service can achieve only a portion of these reductions under current business model constraints; legislative changes are needed to achieve the full $20 billion in cost reductions.

In the absence of legislative reform that quickly enables meaningful operational changes and cost reductions, the Postal Service could incur annual losses as great as $18.2 billion by 2015, and accumulate a total debt of $92 billion by 2016. “These prospective losses would be unsustainable and highly undesirable,” said Donahoe. “Fortunately, as our plan demonstrates, such an outcome is entirely avoidable; the Postal Service can be profitable over the long term and not require taxpayer support.”

The comprehensive five-year plan provides an achievable roadmap to long-term financial stability and independence from taxpayer support, and provides for full repayment of $12.9 billion in debt currently owed to the U.S. Treasury. A central tenet of the plan is that success is not dependent upon achieving a mix or subset of reforms: the scale of the financial challenge requires that all of the major elements be pursued concurrently and fully executed within a short window of opportunity.