Postal Reform Page: 4 of 15
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MOST RECENT DEVELOPMENTS
President Bush issued an executive order establishing a Commission on the Postal
Service on December 11, 2002. Its nine members do not have previous involvement in
postal affairs. The commission is charged with reporting by July 31, 2003 on "how the
Postal Service should adapt to pressures from customers, competitors, and technology, and
best fulfill its mission in the 21St century."
On November 5, 2002, the Office of Personnel Management (OPM) announced that a
review of USPS payments to the Civil Service Retirement Fund for pension obligations to
employees on board before 1984 revealed a much more positive picture than previously
believed. Because past contributions have been earning interest at a higher rate than
presumed in the statutory funding formula, the deferred liability for pension obligations is
only $5 billion instead of $32 billion. If USPS continues to make payments based on the
latter figure, the liability will eventually be over funded by $71 billion. A report by the
General Accounting Office [http://www.gao.gov/new.items/d03448r.pdf] said that the
overpayment was even higher, as much as $103 billion. Bills were introduced in the House
(H.R. 735) and the Senate (S. 380) to change the statutory funding formula and allow USPS
to reduce its contribution to the retirement fund. While welcoming the prospect of added
funds, Postmaster General John Potter said that the development does "not in any way
obviate the fundamental flaws in the Postal Service business model," and urged
undiminished attention to postal reform.
On June 30, 2002, USPS implemented a 7.7% rate increase, its third in 18 months.
Large mailers agreed to the increase because they believed USPS faced both a short-term and
a long-term financial crisis. The added revenues, aggressive cost cutting, and a freeze on
new facilities improved the Service's financial position somewhat, reducing the loss for
FY2002 to $676 million. USPS has predicted a return to profitability in FY2003, but that
is dependent on reversing the recent trend toward volume losses. Data from the first quarter
of FY2003 indicate that first class mail volume is still depressed.
BACKGROUND AND ANALYSIS
The U.S. Postal Service has been operating in a mode of financial crisis since February
2001. Despite three rate increases in two years, it is mired in losses. Its deficit rose from
$199 million in FY2000 to $1.68 billion in FY2001. It predicted a $1.35 billion deficit for
FY2002 (more than Amtrak's) even before anthrax was discovered in letters to several public
figures. The reaction to that event both added billions to USPS costs and cut deeply into
revenues as mail was diverted, slowed down, shunned by some, and actively discouraged by
certain government agencies as a dependable means of communication. An accelerated and
negotiated rate increase in June, 2002, combined with radical cost cutting measures, cut the
eventual FY2002 loss to$676 million.
Both the House and the Senate held hearings early in 2001 on the deteriorating financial
condition of the Postal Service. The General Accounting Office (GAO) has issued a number
of reports that portray a steadily growing sense of urgency. Among the indicators of the
crisis are the following:
Here’s what’s next.
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Postal Reform, report, February 25, 2003; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc806221/m1/4/: accessed December 19, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.