The Postal Service needs to respond to worsening finances by drastically cutting costs, GAO told the Senate financial management subcommittee recently.
Two areas for further action to reduce costs include compensation and benefits, which is close to 80 percent of its costs, and mail processing and retail networks, according to GAO-09-332T.
It reiterated that excess capacity in USPS’s mail processing infrastructure has impeded efficiency gains, and tabled the option of closing unnecessary retail facilities in order to trim a large maintenance backlog.
In fiscal 2008, mail volume fell by 9.5 billion pieces, fuel prices increased costs by over $500 million, and cost-of-living allowances for postal employees increased costs by $560 million.
Cutting costs by $2 billion largely by cutting over 50 million work hours did not close the gap and the Postal Service posted a $2.8 billion loss in fiscal 2008, while debt increased to $7.2 billion.
USPS has asked Congress for $25 billion over eight years by changing the funding of its retiree health benefits, but GAO recommended that Congress give it $4.3 billion over two years, then revisit the issue later on.
In the long term, USPS action beyond its current cost-cutting efforts is urgently needed to reduce costs and improve efficiency, GAO said.
It said accelerated volume declines and changes in the public’s use of mail indicate that USPS needs to move beyond incremental efforts and take aggressive action to streamline its workforce and network costs to assure its long-term viability.
