GAO in testimony before the House federal workforce subcommittee on the dour financial state of the Postal Service said that closing postal facilities, while controversial, is necessary.
Mail volume declined by a record 9.5 billion pieces — 4.5 percent — in fiscal 2008, leading to a loss of $2.8 billion, largely due to declining mail volume, a slowed economy and a trend toward electronic communication.
Cost-cutting efforts were insufficient to offset the above as well as rising fuel costs and cost-of-living allowances for postal employees.
The USPS is on the way to a $3 billion loss for fiscal 2009, and according to GAO-09-475T, its most immediate challenge is to dramatically reduce costs fast enough to meet its financial obligations.
The USPS has asked Congress for financial relief of $25 billion over eight years by changing the statutory mandate for funding its retiree health benefits. However, GAO said it prefers two-year relief to give Congress a better idea of what that entails.
Action is needed to streamline costs regarding compensation and benefits, which generate close to 80 percent of costs and mail processing and retail networks, which have growing excess capacity, GAO said.
It said the USPS cannot afford to maintain such an extensive network and that closing postal facilities is necessary.
The USPS has already stated plans to close six of 80 district offices and eliminate positions. Postmaster general John Potter said the USPS could pursue a five-day delivery schedule.
He told the committee that in the face of $6 billion in projected losses for 2010 the USPS is trying to remove $5.9 billion from its cost base in 2009.
He turned to mail delivery as an unavoidable casualty. It cannot be substituted with technology and the human component is not easily adjusted in a short time period. It’s the largest single cost center, Potter noted.
He said the USPS plans to cut an additional 100 million work hours in 2009 by pursuing greater efficiencies in every corner of the organization – post offices, sorting plants, administrative offices, vehicle maintenance facilities, and delivery routes.