NCPA - National Center for Policy Analysis

GAO: Postal Service's Financial Condition Deteriorating

May 17, 2001

The U.S. Postal Service "faces major challenges that collectively call for a structural transformation if it is to remain viable," David M. Walker, Comptroller General of the United States, told the Senate Committee on Governmental Affairs earlier this week.

The USPS has been put on the General Accounting Office's (GAO) High Risk List, in major part due to its deteriorating financial condition. USPS operates as an independent agency whose revenues are supposed to cover its expenses. However, said Walker:

  • The Service's debt is approaching the $15 billion statutory ceiling set by Congress without any debt reduction plan.
  • The Service currently estimates its fiscal year (FY) 2001 deficit will range from $1.6 billion to $2.4 billion and its FY 2002 deficit will be $1.5 billion to $2.5 billion, even with the increase in most postal rates (except First Class mail under one ounce) to take effect July 1, 2001.
  • Furthermore, the USPS has deferred capital investment to conserve cash, delaying needed infrastructure improvements.

Potential losses in First-Class Mail volume over the next decade could create large financial deficits, leading to a situation where universal postal service -- the delivery of mail to every address every day at uniform nationwide rates -- could ultimately be threatened. Prices would likely increase at a much faster rate, and other options would need to be explored.

The Service is subject to several statutory and other restrictions that serve to limit its efforts to reorganize, notes Walker, such as the requirement for binding arbitration, the rate-setting process, and restrictions on closing facilities.

Source: David M. Walker (comptroller general of the United States), "U.S. Postal Service: Financial Outlook and Transformation Challenges", GAO-01-733T, Testimony, May 15, 2001, Senate Committee on Governmental Affairs.

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