Without Reform, USPS Set to Accelerate Cost Reductions

WASHINGTON, DC—The Postal Service Board of Governors met last month to discuss a wide range of accelerated cost-cutting and revenue-generating measures in the face of what it terms an unprecedented set of financial challenges, heightened by the inability of Congress to pass comprehensive postal legislation.

Citing the fact that the U.S. Postal Service (USPS) cannot wait indefinitely for legislation, the board of governors has directed management to accelerate the restructuring of Postal Service operations to further reduce costs in order to strengthen its finances. Specifically, the board approved restructuring initiatives and instructed the USPS to revise its 2012 five-year comprehensive plan to account for current financial and liquidity conditions.

The USPS is currently implementing major cost reduction efforts throughout its retail, delivery and mail processing operations. Since 2006, the organization has reduced its annual cost base by approximately $15 billion and reduced the size of its career workforce by 168,000 people, or 24 percent. During these cost-cutting initiatives, the USPS contends it continued to deliver record levels of service to its customers.

Despite achieving record growth in its package business and stabilization of other revenues, the Postal Service continues to operate with an inflexible business model that hinders its ability to be self-sufficient. In Fiscal Year 2012, it was forced to default on $11.1 billion in mandated payments to the U.S. Treasury, which contributed to a recorded loss of $15.9 billion.

The USPS continues to seek legislation to provide it with greater flexibility to control costs and generate new revenue, and has urged the 113th Congress to make postal reform legislation an urgent priority.