Here's some info I just received from a Direct Mailing company that went to a USPS briefing.......
"CSPI
07/23/2009 12:09 PM
Subject US Postal Service financial crisis
I went to a briefing at AARP conducted by the Alliance of Nonprofit Mailers and
Magazine Publishers of America on the looming financial crisis at the Post
Office:
deficit in 2008: $3B
deficit in 2009: $6B
deficit in 2010: $10B
These losses are due to plummeting mail volumes (down 5% in 2008, 13% in 2009)
and inflexible personnel costs (80% of USPS costs).
USPS has reached the statutory maximum they can borrow, they have announced
they will default on $5.4B owed to the U.S. Treasury in September, and they
will run out of cash to meet payroll in November or December.
The postal service is on the verge of insolvency but since they're a government
agency, the pressures on them to reorganize, save money, and change their
business model are much less than the pressures of bankruptcy on a private
company like, say, GM.
All the experts at the seminar said the Postal Service would not ultimately be
allowed to fail by Congress and the Administration. The question is whether
this crisis will provoke meaningful change and reform, or just result in
stopgap measures, which just "kick the can down the road" a year or two.
There was some hope the Obama Administration would go for full reform; but last
week they decided to kick the can -- and simply support raising the statutory
maximum USPS can borrow from Treasury, plus some other short-term things, none
of which solve the problem, but just put some cash into the USPS so they can
pay their bills for a while.
To make things worse for USPS, because inflation is negative, the COLA rate
increases it is entitled to for next year will probably be close to zero.
The USPS management is clear (and right) about what they have to do -- and what
they shouldn't do. They need to cut their workforce in half, reduce delivery
to 5 days, and close hundreds of post offices, in order to align costs with the
realities of their shrunken mail volumes and revenues. They know they should
not raise postal rates, because it is clear now that this will only further
decrease volumes and revenue.
But what they need to do may not be politically possible because the postal
unions are so strong in Congress and so intransigent -- and they are adamantly
opposed to all the things that need to be done. So USPS management may be
forced to do what they know they shouldn't do: try to raise rates.
The only way to raise rates under the 2006 reform law is to file an emergency
rate case -- but "emergency" is defined in the law so narrowly that there is
doubt whether even today's crisis qualifies -- and it would be litigated long
and hard in any case.
Management's other option is simply to let things proceed along the current
course to the point, sometime in 2010, when postal workers are not paid and
mail delivery falters or stops -- this would force the USPS crisis to the top
of the national agenda and Congress & Administration would be forced to deal
with it.
Bottom line: 2010 is going to be a wild ride with USPS.
When asked what nonprofits should do at this point to plan their budgets for
2010, the presenters generally agreed that it would be prudent to plan for 8-
10% postal increases -- even though nobody really knows what's going to happen.
P.S. All the experts were agreed that within 10 years there will only be 3-day-
a-week postal delivery.
Center for Science in the Public Interest"
