Postal reform panel takes on daunting task in short time frame

Charged with creating a fresh business model for the Postal Service, a newly created presidential commission got an eye-opening presentation Wednesday on the daunting challenges that lie ahead.

Speaking before the nine-member panel, Postmaster General John Potter best summed up the task at hand: "The key question is how can we provide universal service to all Americans and still make it affordable in the face of potentially declining mail volume. That is the central public policy issue facing this commission."

Created on Dec. 11 by executive order, the panel has until July 31 to study the entire postal system and come up with a set of recommendations to reform the agency and ensure that it is on sound financial footing for decades to come. By comparison, the Kappel Commission, which made a series of recommendations in 1968 that laid the groundwork for the modern-day Postal Service, had a year in which to complete its work.

As Potter suggested, the biggest challenge facing the panel is addressing the agency's mandate to deliver mail to every household in the country at a uniform rate-and to break even while doing so. That model is proving increasingly difficult to sustain. In a given year, 1.7 million new addresses are added to the Postal Service's delivery system. That equates to 3,400 new routes, which creates the need to hire 4,800 new carriers and build 80 new delivery facilities to the tune of $50 million each, according to Richard Strasser, the agency's chief financial officer.

At the same time, mail volume is in decline. Between 2000 and 2002, volume dropped by 5 billion pieces. The biggest concern, Strasser said, is that single-letter First Class mail, has dropped from 54.3 billion pieces in 1998 to 49.3 billion in 2002. First Class mail covers 66 percent of the agency's fixed costs.

But declining mail volume isn't the only issue the commission must tackle. The panel also needs to look at the agency's labor situation, which accounts for roughly 80 percent of expenses; its hefty retirement and health care obligations; overall efficiency; and the rate-setting process, which generally takes up to 18 months.

Treasury Undersecretary for Domestic Finance Peter Fisher told the panel that "everything is on the table," including privatization. But he was quick to add that the panel must consider the agency's public service role. He suggested that the panel first develop a new business model for the agency, then consider its relationship to the government.

During the three-hour hearing, most of the commissioners, none of whom have any ties to the mailing industry or the Postal Service, displayed a solid understanding of the problems facing the agency. They toured a processing facility Tuesday and it appeared that many had studied the agency's 400-page transformation plan, which calls for several operational changes.

The next public hearing is scheduled for Feb. 20 in Washington. The panel will also hold hearings in California, Illinois and Texas.