USPS Designated as 'High Risk'

Officials look to relieve projected $7 billion deficit.

by staff writer
- Jul 31, 2009

The U.S. Postal Service is officially in crisis. The Government Accountability Office has added the agency to its list of "high risk" federal programs—and it's looking more likely that delivery days will be reduced.

Having experienced a drastic drop in mail volume, the Postal Service is expected to post a record-high deficit of $7 billion in 2009. "The GAO High Risk List announcement accurately reflects our current financial reality," the U.S. Postal Service notes.

Jordan Small, USPS acting vice president for network operations, says switching to fewer delivery days is "the last big option" to reduce costs and help USPS's financial crisis. Officials have been discussing this possibility for months. Saturday deliveries are the most likely to be cut, which could save the service between $1.9 billion and $3.5 billion a year.

"I think that the finances are very sobering," says Rep. Stephen F. Lynch, D-Mass. "There are not a lot of options here."

Congress has the final say in deciding if USPS can eliminate a day in its delivery schedule.

"Congress certainly seems to be saying 'no way' [to fewer delivery days], but what happens when they have another $6 to $7 billion operating debt next year?" says Dan G. Blair, the chairman of the Postal Regulatory Commission, the agency that oversees the Postal Service.

USPS has tried several approaches to reduce costs, including instituting a hiring freeze since spring 2008, cutting more than 1,000 management positions and offering early retirement to 150,000 of its employees.

Still, the agency's debt to the U.S. Department is expected to surpass $10 billion this year and could reach $15 billion, CNN reports. Experts say 2010 won't be much better.

The Postal Service will also review 1,000 post offices nationwide for possible closures. Earlier this year the organization began looking at more than 3,000 locations and reported that 1,000 of those needed "further review," the Federal Times reports.

While union officials don't like the option of closing post offices, USPS says this would make sense since about 30 percent of stamps are sold elsewhere.

Stabilizing the Postal Service's finances will also require adjusting retiree health benefits prefunding, the postal service notes. Currently the agency is required to pay about $5 billion a year for the retirement of its employees. It's the only government agency required to make such a payment, notes Postmaster General John Potter.

"The Postal Service urgently needs to restructure," says Phillip Herr, the GAO's director of physical infrastructure issues.

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