GAO Agrees With Chairman Collins That Comprehensive Postal Reform Is “Urgently Needed”

WASHINGTON, D.C.—In a letter sent to Senate Governmental Affairs Committee Chairman Susan Collins (R-ME), the General Accounting Office (GAO) today agreed with her assessment that comprehensive—not incremental—postal reform is needed now to ensure the U.S. Postal Service’s future viability. Senator Collins’ Committee, which has jurisdiction over the U.S. Postal Service, has been leading the drive for postal reform and she plans to introduce bipartisan reform legislation with Senator Tom Carper (D-DE) later this year.

During several Governmental Affairs Committee hearings on postal reform, Senator Collins has pointed out the important role the Postal Service plays in the U.S. economy. The Postal Service is the 11th largest enterprise in the nation and accounts for nearly 9% of the country’s Gross Domestic Product. It also employs more than 730,000 career employees, and is the linchpin of a $900 billion mailing industry that employees nine million Americans in diverse fields.

“There is no question about the need for postal reform,” said Senator Collins. “Companies across the nation—and their employees—count on the Postal Service’s affordable rates and universal access for their survival. As the Comptroller General has confirmed to me, Congress must act or risk disaster.”

In his letter to Senator Collins, GAO Comptroller General David Walker wrote, “Comprehensive postal reform is urgently needed. The ability of the service to remain financially viable is at risk because its current business model—which relies on mail volume growth to cover the costs of its expanding delivery network—is not well aligned with 21st century realities.

“We do not believe that incremental steps toward postal transformation can resolve the fundamental and systemic issues associated with the Service’s current business model. To avoid the risk of a significant taxpayer bailout or dramatic postal rate increases, we believe that Congress should enact comprehensive postal reform that includes the Service’s overall statutory framework, resolution of issues regarding the Service’s pension and retiree health benefits obligations, and whether there is a continued need for an escrow account.”

In his letter, Walker pointed out the trends that necessitate the need for reform. These trends, which have been discussed during Committee hearings, include the following:

— Declining mail volume. First Class mail, which covers more than two-thirds of the Postal Service’s institutional costs, declined by a record 3.2 percent in Fiscal Year 2003.

— Increased competition from private delivery companies. Once a highly profitable growth product for the Service, Priority Mail volume is declining as the highly competitive parcel market turns to lower-priced ground shipment alternatives.

— Significant financial liability and obligations. The Service is presently paying down $6.5 billion in debt to the U.S. Treasury, and its long-term liabilities are enormous—nearly $7 billion for Workers’ Compensation claims, $5 billion for retirement costs, and as much as $45 billion to cover retiree health care costs. In addition, revenues are not expected to increase.

In July 2003, the Presidential Commission on the U.S. Postal Service completed its report on the challenges facing the Postal Service and recommended solutions to ensure its long-term viability and increased efficiency. To date, the Committee has held four hearings that examined the recommendations and plans to hold three additional hearings in March.