In wake of attacks, Postal Service faces uncertain financial future

The U.S. Postal Service is poised to raise its rates again in an effort to generate more revenue for the agency, which incurred millions in costs following last week's terrorist attacks, according to agency sources. On Sept. 10, the Postal Service's board of governors authorized filing for an overall rate hike of 8.7 percent. The rate case could be filed as early as Monday or Tuesday. The move comes at an uncertain time for the nation's economy and the agency's own financial outlook. Earlier in the month, Postal Service officials predicted losses totaling $1.35 billion in fiscal 2002. That was based on projections of 1 percent growth in mail volume, a 3.2 percent rise in expenses and a slight upturn in the economy. But, everything changed on Sept. 11. Not even the agency's chief financial officer, Richard Strasser, knows how the terrorist attacks will affect revenue. Last week, the Postal Service filed a supplemental budget request for $50 million to cover expenses associated with the terrorist attacks. The agency has provided personnel and equipment to take part in rescue operations. The supplemental funds would also cover repairs to a New York City post office. Additional expenses were incurred as mail moved to ground transportation while airplanes sat idle. Postmaster General John Potter told a Senate committee Thursday that costs associated with the attacks could go well above $50 million. Even before the disaster, the Postal Service was facing a serious financial crunch. Its projected loss in 2002 comes on the heels of $1.65 billion in losses this year. As a result, the board of governors not only approved a rate hike, but also extended a freeze on capital projects for another year. Strasser said the agency has limited flexibility to adjust to the uncertain financial future. The agency is unable to modify the rate case to reflect events of the past week because it takes three to four months to prepare a filing. Additionally, the agency is nearing its $15 billion debt limit. The board earlier this month authorized borrowing an additional $1.6 billion in 2002. That raises the debt level to nearly $13 billion. The situation highlights problems with the current rate-making process, Potter told the Senate committee. From start to finish, a rate case takes nearly 14 months to complete. The agency takes four months preparing its case and the Postal Rate Commission has 10 months to review it and issue a decision. He said the agency needs more flexibility to respond to unforeseen incidents. Nonetheless, Potter said he is looking for ways to cut costs and become more efficient. In 2001, for instance, the agency used 23 million fewer work hours-the equivalent of 11,500 employees. He also announced major cuts in the agency's managerial ranks. "Over the last two years alone, our audits and investigations have identified over $500 million in savings; cost avoidance; and waste, fraud and abuse," Postal Service Inspector General Karla Corcoran said in a written statement. "We continue to identify opportunities for the Postal Service to improve its strategic decision-making, financial management, contracting, labor management, and computer security and privacy."