USPS finances serious but solvable

US Postmaster General Megan J Brennan told a Senate Committee hearing that the financial situation of the United States Postal Service is “very serious but solvable.”

Brennan told the US Senate Homeland Security and Governmental Affairs Committee,
“We can return to financial stability through the enactment of prudent legislative reform and a favorable resolution of the 10-year regulatory review.

“We will at the same time continue to pursue cost savings in all aspects of our operations, and growth where it is available, particularly in packages.

“These steps will allow appropriate investment in the future of the organization, so that we can continue to provide prompt, reliable and efficient delivery service to the American public.”

In Brennan’s opinion legislation is essential to enable the USPS to return to financial health:
“Our debt is at an unsustainable level and while we continue to pursue available management actions to reduce our costs even further, there are limited remaining initiatives that will result in substantial cost savings without threatening our ability to continue to provide prompt, reliable, and efficient postal services,” said Brennan.

“The $5.1bn net loss for 2015 represents the ninth consecutive annual net loss the Postal Service has incurred. We have reached our borrowing limit and have a cash reserve that is wholly inadequate for an organization of our size. ”

She believes a four point action plan needs carrying out:

“Require Medicare integration for postal retiree health plans;

Continue the exigent price increase for market-dominant products;

Calculate all retirement benefit liabilities using postal-specific salary growth and demographic assumptions; and

Provide some additional product flexibility.”

Brennan said: “With legislation enacted that includes these provisions, the Postal Service can achieve an estimated $27bn in combined cost reductions and new revenue over the next five years. Together with other important initiatives, this would make us financially stable.”

Later in her testimony, Brennan fleshed out what USPS meant by product flexibility: “Our proposal authorizes the Postal Service to provide non-postal services to state, local and tribal governments, as well as new, commercial non-postal services, so long as the PRC concludes that the provision of such services is consistent with a number of requirements.”