GAO weighs in on Postal Service’s financial health

The U.S. Postal Service's prefunding for retiree health benefits should either be eliminated or restructured, and compensation and benefits for employees should either follow private or public sector standards, but not a hybrid of both, the Government Accountability Office said in a report released Thursday.

The report detailed recommendations for fixing USPS' financial woes, for three different business models -- a fully subsidized government agency; the current structure, but with increased flexibility; or an entirely private sector entity. While GAO provided recommendations for each scenario, it did not endorse one specific model.

Sens. Joe Lieberman, I-Conn., and Susan Collins, R-Maine, chairman and ranking member of the Senate Homeland Security and Governmental Affairs Committee, requested the report. After GAO briefed Lieberman and Collins on its findings Oct. 7, the lawmakers announced that they will use the recommendations to develop legislation aimed at better aligning USPS' costs and revenues.

USPS projects that overall mail volume will decrease by 25 percent by 2020. Almost 60 percent of mail in 2010 was advertising, while bills and financial statements made up only 22 percent.

"These trends underscore the need for USPS' business model to undergo fundamental changes to reduce personnel and network-related costs," the report said.

Reports in April 2010 and February 2011 found similar results, and recommended USPS restructure its networks and workforce in order to continue operations.

All three scenarios that GAO considered would require USPS to adapt to lower mail volume and the watchdog recommended revising the policy of universal service.

GAO also recommended reforming the Postal Service's borrowing authority, emphasizing USPS must find a way to pay off its debt to the Treasury or the $15 billion debt limit must be raised. The agency also should decide whether to retain price caps and subsidies for certain mail classes, and, no matter which business model it adopts, should ensure products cover their costs, GAO said.

While a continuing resolution will keep USPS running until Nov. 18, lawmakers have introduced several bills to get the agency back on sounder financial footing, with solutions ranging from forgoing Saturday mail delivery to eliminating the practice of prefunding retiree health benefits.

Collins proposed her own bill in February, suggesting changes to the workers' compensation program. The measure would require postal employees who are receiving disability benefits under the Federal Employees Compensation Act to convert to the federal retirement system when they reach retirement age.