Postmaster general says agency’s finances have improved

For the first time in nearly three years, the Postal Service delivered some positive financial news on Friday.

At a Senate hearing, Postmaster General John Potter said the agency's deficit for fiscal 2002, which ends Sept. 30, could be less than $1 billion. That is a vast improvement from the $1.35 billion in losses the agency projected at the beginning of the year. After the anthrax attacks last year, some agency insiders were talking about a $3 billion deficit.

"Looking to fiscal year 2003, our efforts will result in a positive net income," Potter told the Senate Governmental Affairs Subcommittee on International Security, Proliferation and Federal Services. "These projections reinforce a pledge I made six months ago that there will be no general rate increase [for postage stamps] until 2004. This positive net income also means we will be able to reduce our debt by almost $1 billion at the end of fiscal year 2003."

The improved financial situation comes despite a $6 billion decline in mail volume this year. Potter attributed the change to three things: cutting costs, a freeze in capital expenditures and early implementation of a rate hike.

On the cost front, the Postal Service trimmed $2.9 billion from the bottom line by cutting 77 million workhours and reducing the workforce by 23,000 employees. The workforce was reduced through attrition.

The agency was also able to capitalize on an agreement with the mailing industry to implement its most recent rate hike in June, four months earlier than expected. That generated $1 billion.

The freeze on capital expenditures, put in place two years ago, will likely stay in place in fiscal 2003. However, Chief Financial Officer Richard Strasser said there is about $300 million to improve operations in high-growth areas.

To save money in the future, Potter said the agency is considering ways to improve its distribution network, including consolidating some of the agency's 300 mail processing plants in 2003. Potter assured the committee that no decisions on plant closings have yet been made. The agency recently launched a study of its network to determine where it can become more efficient.

Addressing postal reform, Potter said he would welcome a presidential commission to help raise the issue's profile. With the death of postal reform legislation in the House this summer, there is ample discussion about a presidential commission to examine the future of the Postal Service. Potter said such a commission should be independent and made up of people with little direct connection to the Postal Service, its unions and primary customers.