USPS’ Donahoe: Survival Hinges on Law Changes
WASHINGTON, DC—Deep and aggressive cost-cutting steps just aren’t enough for the United States Postal Service (USPS) to survive as an ongoing entity, Postmaster General Patrick Donahoe told a congressional subcommittee on Wednesday. The USPS needs legislative assistance.
Donahoe testified before the Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy on Oversight and Government Reform. He noted that during the last two fiscal years, USPS reduced costs by roughly $9 billion and planned to take out another $2 billion in 2011. But Mr. ZIP 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 stressed “our losses are the result of an inflexible business model due to the laws that govern the Postal Service.” He cited the statutory requirement, in place since 2007, 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 pointed out that during the height of the recession, 2007 and 2008, the USPS would have realized profits of $3.3 billion and $2.8 billion, respectively, had it not been for the prefunding requirement. In addition to seeking 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 USPS 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.