The Postal Service needs a major overhaul to avoid threats to the universal mail service Americans expect, Postmaster General William Henderson said Wednesday.
The Postal Service, battered by slowing business and billions in projected losses, recently announced an array of cutbacks and is exploring the possibility of ending some Saturday mail delivery and closing some post offices and facilities.
Henderson, called to testify before the House Government Reform Committee, said in prepared remarks that during the holiday season first-class mail volume dropped for the first time in years and Priority Mail is also in decline.
"A seriously weakening postal system would find it more and more difficult to carry the full load of universal service," Henderson said. "Can we reasonably expect at this point that the Postal Service will regain the steady progress it made in the 1990s without a major modernizing reform? I doubt it."
The agency's campaign for more freedom from regulations went into high gear last month, with a barrage of press releases announcing the cancellation or postponement of hundreds of construction projects. Most of the releases were targeted to local media.
Among the regulations from which the Postal Service would like to be freed is the cumbersome process of changing postal rates. Its rate prposals must be submitted to the independent Postal Rate Commission, which can (and usually does) take up to ten months for a decision. Those decisions often overrule the USPS' rate requests.
"Without an ability to probe for new ways of doing business and to rapidly adjust to forces of demand and competition, the postal system will become increasingly outmoded," said Henderson, who will be leaving the agency next month.
The price of a one-ounce first-class letter went up a penny to 34 cents in January. Postal managers plan to apply this summer for another rate increase, to take effect next year.
Rep. Dan Burton, R-Ind., the committee chairman, said he agreed on the need for an overhaul.
"I think this situation is akin to the current energy crisis in California," Burton said. "Nobody took the steps necessary to fix the problems early on. We're in the early stages of a similar crisis in the Postal Service. If we take the necessary steps now to fix the problems, maybe we can avoid a similar crisis over the next few years."
With rising costs, postal officials say they face a loss of $2 billion to $3 billion this fiscal year despite a postage rate increase three months ago. After five years in the black, the post office had a $199 million loss last fiscal year.
"You could simply raise rates and deal with the short term problem but that's dealing with the symptom rather than dealing with the disease," testified Comptroller General David Walker, who heads the General Accounting Office.
He added that e-mail and other electronic substitutes for traditional mail are putting the Postal Service under "extreme financial pressure."
Among the problems cited by the Postal Service are wage rate increases larger than the rate of infltion, rising fuel costs, greater competition and increasing use of electronic alternatives like the Internet. There also has been a drop in mail volume because of the slowing economy, further reducing anticipated income.
Tuesday, the Postal Service announced a study of options to dig out of its hole, such as eliminating Saturday mail delivery, except for overnight mail, and consolidating some operations.
The American Postal Workers Union, which has 366,000 members nationwide, said it would vigorously oppose such changes, which would require congressional approval.
"The effect of such activity on the APWU membership would be dramatic as the number of duty assignments would be reduced and employees would be required to relocate to more distant locations," William Burrus, the union's executive vice president, said in a statement.
The financial savings of going to five-day service could be substantial, said S. David Fineman, vice chairman of the post office's governing board and one of those scheduled to testify.
"It could offset the amount of the loss that we have, and we would hope that whatever actions we take will be able to cause us to ask for less of a rate increase," he said.
Critics questioned the purpose of the new study.
"They go from a $100 million profit projection to a two and three billion dollar deficit," Rick Merritt of Postal Watch told CBS News Correspondent Howard Arenstein.
With about 798,000 employees, the U.S. Postal Service is the nation's largest civilian employer, and, with about 40,000 post offices nationwide, has more retail outlets than Sears.
By Lloyd A. de Vries
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