With the recent accounting revelations proposed by the Treasury Department and the Office of Management and Budget, $30 billion of U.S. Postal Service retirement debt goes up in smoke. A mere $5 billion debt remains, financed over 40 years. Further, this extraordinary change in the fiscal landscape will bear no cost to USPS nor loss of benefits to retirees: according to the analysts, this debt had already been paid, but for various reasons had not been recognized on the federal retirement system books. This obviously comes as good news to USPS’s financial planners — the annual cost savings will permit a significant reduction in the Service’s outstanding $12 billion operating debt. But it also underscores the need for more complete and forthright financial reporting by the Postal Service.
The biggest winners of this sudden windfall may be postal consumers. If Congress approves the necessary changes to the USPS’s retirement contribution formula, the USPS can skip one rate cycle and would not consider another postage rate increase until 2006. Although, as the Postmaster General recognized in his November 5th remarks, it does not solve all of the Postal Service’s problems. In his view, much work remains to be done, and he reinforces both the need for continued improvements in productivity and the need to streamline the postal system. Consistent with these remarks, the Federal Times reported that the Postal Service will announce in February a sweeping redesign of its operations, which could save $2 to $3 billion.
In a new report released November 13, the General Accounting Office underscores its previous concerns and recommendations regarding “the lack of sufficient and timely periodic information on the Postal Service’s financial condition and outlook.” The report notes USPS’s central role in a $900 billion mailing industry, and cites the need for improved transparency. It observes that USPS financial reports not only lack consistency, making them difficult to analyze, but also that they are not made readily available to the public.
As federal policymakers now consider the required changes to make these proposed retirement cost reductions a reality, consideration should also be given to a requirement for more complete and forthright financial reporting by the Postal Service. Devising the means to restrain the rate of increase in postage rates while increasing USPS’s productivity should remain the central focus of reform efforts. Only when the Postal Service focuses on transmitting its efficiency savings to the bottom line can there be true progress in postal reform.
– Charles Guy, Ph.D., is Adjunct Fellow with the Lexington Institute and former Director, Office of Economics, Strategic Planning, U.S. Postal Service.
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