How to Read
Our Annual Report
2000 Highlights
Letter from
the Postmaster General/CEO
2000 Year
in Review
Delivering
the Future
The Governors
of the Postal Service
Audit Committee
Financial
Section
How to Read
Our Financial Statements
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2000 Annual Report
- page 31 of 70
Rate-Making Process
Until 1971, Congress set postage rates by law. Since revenue was
subsidized by the taxpayers, rates did not cover the actual cost
of operating the postal system. Since 1971, however, the Postal
Reorganization Act has required the Postal Service to establish
postal rates that cover the costs of operating the postal system.
To achieve this alignment of rates with expenses, the Act established
a rate-making process.
The rate-making process begins when management projects that current
rates will not be adequate to meet our mandate of "covering costs"
in the future. The Postal Service, upon concurrence with the Board
of Governors, submits a request for a recommended decision on rate
and fee changes to the Postal Rate Commission. (Like the Postal
Service, the Commission is an independent establishment of the executive
branch of the government.) As required by law, the request is accompanied
by detailed rate proposals supported by extensive testimony and
documentation.
The Commission holds public hearings, during which time such parties
as mailers, competitors and consumer advocate groups are authorized
to question the Postal Service's proposals and submit their own
testimony and proposals. At the conclusion of the hearings, the
Commission sends its recommended decision to the Governors. The
Governors may approve, reject, allow under protest or, under certain
limited circumstances, modify the Commission's recommendations.
Although the Postal Reorganization Act requires the Commission to
issue its recommended decision within 10 months of the filing of
the Postal Service's request, the entire process—starting with preparing
the necessary documentation to support the rate proposals and ending
with implementing the new rates—takes approximately one and a half
years. While this rate-making process has allowed us to bring revenue
more in line with costs (when compared with having the rates set
by Congress), it offers us only limited flexibility in responding
quickly to changes in our costs and in the markets in which we compete.
Contribution
Contribution is the difference between revenue and volume-variable
costs. As the term implies, volume-variable costs are those costs
that vary directly or indirectly with changes in mail volume. For
example, a high percentage of mail processing costs are considered
volume-variable costs since changes in mail volume directly affect
the number of hours clerks and mail handlers have to work. On the
other hand, only a small fraction of postmaster salaries are considered
volume-variable costs since these costs are, for the most part,
unaffected by changes in mail volume. In 1999, the latest year available,
volume-variable costs totaled more than $37 billion, or about 60%
of total costs. The more than $25 billion remaining costs are non-volume-variable
and must be borne, ultimately, by the combined revenue of all classes
of mail.
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FORTUNE MAGAZINE'S
GLOBAL 500 |
| |
Revenue |
Ranking |
|
1999
Revenue *
|
1999
Employees *
|
Employees *
U.S. Rank
|
Diversity
U.S. Rank
|
|
| |
Global |
U.S. |
|
($ in millions)
|
Number
|
In Top 10
|
In Top 50
|
|
| |
1 |
1 |
General
Motors |
$189,058
|
388,000
|
3
|
**
|
|
| |
3 |
2 |
Wal-Mart
Stores |
$166,809
|
1,140,000
|
1
|
**
|
|
| |
4 |
3 |
Exxon |
$163,881
|
106,000
|
10
|
30
|
|
| |
8 |
4 |
Ford
Motor |
$162,558
|
365,550
|
4
|
**
|
|
| |
9 |
5 |
General
Electric |
$111,630
|
340,000
|
5
|
**
|
|
| |
14 |
6 |
IBM |
$ 87,548
|
307,401
|
6
|
**
|
|
| |
16 |
7 |
Citigroup |
$ 82,005
|
176,900
|
7
|
**
|
|
| |
26 |
8 |
United
States Postal Service |
$ 62,726
|
905,766***
|
2
|
9
|
|
| |
27 |
9 |
AT&T |
$ 62,391
|
147,800
|
8
|
**
|
|
| |
29 |
10 |
Philip
Morris |
$ 61,751
|
137,000
|
9
|
**
|
|
| |
* Data used by Fortune was from 1999 Annual
Reports.
** Not available or ranked
*** Career and noncareer employees
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