FOR IMMEDIATE RELEASE
April 3, 2001
Release No. 01-036

WASHINGTON — Faced with a softening demand for postal products and services, coupled with rapidly rising costs, the Postal Service Board of Governors directed management today to study cost-savings associated with reducing delivery service to five days and consolidating postal facilities.

The Board reaffirmed its commitment to universal service with its directive today and reinforced its call for the need for statutory reform of the laws governing the Postal Service. Without the needed flexibility of a new regulatory model, the Postal Service must consider steps such as those requested by the Board in order to pay the costs of maintaining universal service.

The call to study how the Postal Service can continue to cut costs comes after last week's announcement that the Postal Service has committed to reduce spending by $2.5 billion by 2003 and – over the next five years – plans to cut 75,000 work years, squeeze administrative costs by 25 percent, and reduce transportation costs by 10 percent. And earlier this month, the Postal Service Board of Governors asked postal management to immediately freeze capital construction commitments that affected more than 800 facility projects.

"The Postal Service's ability to meet its statutory mandate to bind the nation together needs to be protected," said S. David Fineman, Board Vice Chairman. "However, the reality of the marketplace is that the 30-year-old statutory model that governs the Postal Service is in need of change to protect universal service at affordable rates."

Among the fiscal challenges faced by the Postal Service is a potential loss of $2 billion to $3 billion this fiscal year. Contributing factors include very little control over some labor costs, with arbitrated wage rate increases that can exceed the rate of inflation, escalating fuel costs, changes in the type of mail being processed, an increasingly competitive communications marketplace, and forecasts calling for the diversion of some First-Class Mail to electronic alternatives. Employee compensation accounts for 76 percent of Postal Service costs. The law governing postal operations provides neither a mechanism to control wage rates nor to adjust postage rates quickly in response to market changes.

The Governors of the Postal Service recently wrote to the President and congressional leaders, explaining that, "We are taking the steps within our power to sustain the institution. Long-term solutions, however, require substantial changes to our regulatory framework."