GAO report endorses cuts in U.S. Postal Service

By Ed O'Keefe
Washington Post Staff Writer
Monday, April 12, 2010

The U.S. Postal Service's current business model "is not viable," and the mail agency should make deeper job and wage cuts, hire more part-time staff and consider outsourcing some operations, according to a draft of a government audit acquired by The Washington Post.

Auditors also urge Congress to remove restrictions on the Postal Service's ability to close post offices and cut Saturday mail delivery, according to the report, which offers recommendations similar to those proposed in the USPS's 10-year business plan.

Lawmakers requested the Government Accountability Office report, set for a Monday release, as they prepared to consider the USPS plan introduced last month. The proposal also calls for Congress to give the mail agency the ability to raise prices beyond the rate of inflation.

Officials estimate that the Postal Service will lose a record $7 billion in the fiscal year that ends in September, and they say it could lose at least $238 billion in the next decade if Congress fails to act.

Auditors appeared to push beyond the USPS proposal. "If no action is taken, risks of larger USPS losses, rate increases and taxpayer subsidies will increase," the report said.

The Postal Service should provide more lucrative incentive packages to potential retirees in efforts to accelerate attrition, auditors said. They also recommended that USPS consider outsourcing more delivery routes and mail services to contractors, as well as concessions on wages and benefits from its labor unions during negotiations later this year.

The Postal Service employs more than 553,000 people. Proposed delivery cuts for Saturday would trim the equivalent of at least 40,000 full- and part-time jobs through layoffs and attrition, officials said.

Auditors also said lawmakers should revise a 2006 law that requires the mail agency to make prepayments to its retiree health accounts. The arrangement is unique to the Postal Service and costs about $5 billion annually.

Lawmakers also should consider establishing a panel similar to the Defense Base Closure and Realignment Commission to independently recommend changes, the report said. Auditors, however, also suggested that more details are needed about potential delivery cuts and post office closures.

Most lawmakers and regulators have reacted tepidly to proposed changes. Postmaster General John E. Potter is slated to hold meetings this week in Nashville with some of the Postal Service's largest customers, who could suffer from cuts and price increases.

The report concluded that the recession served as the "tipping point" that accelerated a shift away from traditional snail mail for most of the Postal Service's biggest customers, including insurance and banking companies.

Sen. Thomas R. Carper (D-Del.), who will lead postal reform efforts in the Senate, said that if the GAO's conclusions are correct, "it is imperative that Congress, postal management, postal employees, customers and other stakeholders give up on old fights and biases and work together to cut the Postal Service's costs and adjust its operations to meet a changing environment."

Potter said Sunday that he was pleased with the GAO's general conclusions, but concerned with suggestions in the report that further study of the issue is required.

"We've studied this significantly -- the time for study is over, now's the time for action," he said.

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