USPSJanuary 2011Page 2
The USPS faces a number of financial challenges due to the combined effects of the economicrecession, increased use of electronic communications, and its legislatively-mandated obligationto prepay Retiree Health Benefits.In the face of these financial challenges, the USPS has responded aggressively, saving over $1billion every year since 2001, including $6.1 billion savings in 2009 alone. A loss of more than$7 billion is projected for 2010, and with current trends expected to worsen over the decade, theUSPS will be pushed more deeply into crisis. Without fundamental change through legal,legislative, and regulatory action, cumulative losses could reach more than $238 billion by 2020.To avoid potential insolvency, the USPS has developed an ambitious but achievable plan,taking steps allowed under current law to reduce the projected gap by $123 billion. Thesesavings would be unprecedented, even by the standards set over the last several years; andeven if its plan was to succeed in every action that present legislation allows, the USPS wouldstill face unsustainable losses of at least $115 billion by 2020.The remaining gap can be closed, and the USPS can continue to fulfill its mission at no cost toAmerican taxpayers, but only with additional flexibility that would have to come throughlegislative changes.
Legislative & Regulatory Priorities
The USPS will work with Congress to address the prepayment of retiree health benefits, changefrequency of delivery, and restructure price caps mandated by the
Postal Act of 2006
.Restructuring prepayment of retiree health benefits and changing delivery frequency provide thegreatest costs savings opportunities. These two changes could reduce cumulative costs by asmuch as $90 billion by 2020.The following bullets provide specifics on each of the legislative priorities:
Restructuring Retiree Health Benefits Prefunding
Restructure retiree health benefits payments to “pay-as-you-go,” comparable to what isused by the rest of the federal government and the private sector. This will add anaverage of $5.6 billion in cash flow every year.
Adjusting Delivery Frequency
Adjust delivery days to better reflect current and anticipated volumes and changing patterns in customer use. Survey data show that the public favors 5-day delivery over using taxpayer funds and other alternatives. In FY 2000, $1.80 in revenue wasgenerated per delivery stop daily, based on six days of delivery. In FY 2009, $1.40 inrevenue was generated per delivery stop. That number is expected to drop to $1 by 2020. Under current law, the Postal Service cannot determine the number of days todeliver mail, regardless of costs or declining revenue.