Postal Service needs overhaul to avoid cutbacks, postmaster says

Wednesday, April 4th 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ The Postal Service needs a major overhaul to avoid threats to the universal mail service Americans expect, Postmaster General William Henderson said Wednesday.

The Postal Service, battered by slowing business and billions in projected losses, recently announced an array of cutbacks and is exploring the possibility of ending some Saturday mail delivery and closing some post offices and facilities.

Henderson, called to testify before the House Government Reform Committee, said in prepared remarks that during the holiday season first-class mail volume dropped for the first time in years and Priority Mail is also in decline.

``A seriously weakening postal system would find it more and more difficult to carry the full load of universal service,'' Henderson said. ``Can we reasonably expect at this point that the Postal Service will regain the steady progress it made in the 1990s without a major modernizing reform? I doubt it.''

Henderson said laws regulating post office operations must be changed to provide more flexibility in setting rates and services to contend with rising costs. Currently, it takes almost a year to change rates.

``Without an ability to probe for new ways of doing business and to rapidly adjust to forces of demand and competition, the postal system will become increasingly outmoded,'' said Henderson, who will be leaving the agency next month.

Henderson submitted his remarks to the committee, but did not read from them at the hearing. He told the committee, ``The problem with declining revenues is a fact in today's economy.''

While the Postal Service receives no taxpayer money for its operations, it remains a government agency and operates under laws set by Congress.

Rep. Dan Burton, R-Ind., the committee chairman, said he agreed with the need for an overhaul.

``If we take the necessary steps now to fix the problems, maybe we can avoid a full-blown crisis in the next few years,'' he said Wednesday. ``More cost containment options must be examined. Nothing should be off the table. Another rate increase should be the last option, not the first.''

With rising costs, postal officials say they face a loss of $2 billion to $3 billion this fiscal year despite a postage rate increase three months ago. After five years in the black, the post office had a $199 million loss last fiscal year.

Among the problems cited by the Postal Service are wage rate increases larger than the rate of inflation, rising fuel costs, greater competition and increasing use of electronic alternatives like the Internet. There also has been a drop in mail volume because of the poor economy, further reducing anticipated income.

Tuesday, the Postal Service announced a study of options to dig out of its hole, such as eliminating Saturday mail delivery, except for overnight mail, and consolidating some operations.

The American Postal Workers Union, which has 366,000 members nationwide, said it would vigorously oppose such changes, which would require congressional approval.

``The effect of such activity on the APWU membership would be dramatic as the number of duty assignments would be reduced and employees would be required to relocate to more distant locations,'' William Burrus, the union's executive vice president, said in a statement.

The financial savings of going to five-day service could be substantial, said S. David Fineman, vice chairman of the post office's governing board and one of those scheduled to testify.

``It could offset the amount of the loss that we have, and we would hope that whatever actions we take will be able to cause us to ask for less of a rate increase,'' he said.

The price of first-class mail went up a penny to 34 cents in January. Postal managers plan to apply this summer for another rate increase, to take effect next year.

Agency critics questioned the purpose of the new study.

``The Postal Service should be focusing on issues they can implement now and management decisions they can implement without congressional approval,'' said Robert McLean, director of the Virginia-based Mailers Council, a coalition of businesses and mailing groups.

He said the agency should focus on cutting its work force of about 798,000 people.