From the U.S. Government Accountability Office, www.gao.gov

Transcript for: USPS Sustainability

Description: Lori Rectanus is with the Watchdog Report to talk about the
issues affecting the Postal Service’s business model. 

Related GAO Work: GAO-20-385, U.S. Postal Service: Congressional Action
is Essential to Enable a Sustainable Business Model 
Released: April 2020

[ Intro Music ]

[Lori Rectanus:] The Postal Services' financial situation will continue
to deteriorate, and will put its ability to carry out its role in
jeopardy.

[Matt Oldham:] Welcome to GAO's Watchdog Report, your source for news
and information from the U.S. Government Accountability Office. I'm Matt
Oldham. GAO placed the U.S. Postal Service on its High Risk list in
2009, and since then, USPS's financial viability has only worsened. With
me to talk about a GAO report on the challenges facing the mail service
and how they could get to a more sustainable business model is Lori
Rectanus, a Physical Infrastructure Director. Thank you for joining me,
Lori.

[Lori Rectanus:] Thank you, Matt.

[Matt Oldham:] So, what are some of the factors that are causing USPS to
lose money?

[Lori Rectanus:] You know, Matt, everybody knows the Postal Service. You
know, it's been around for 200 years, and it's part of the fabric of our
society. But what many people don't know is that the Postal Service is
really a unique organization. Although it's technically a part of the
federal government, it has many requirements that you would associate
with a private business. And one of those is it has to be what we call
self-financing. So, what that means is the Postal Service doesn't
formally get any tax dollars, and it must pay for its operations with
the revenue it gets to deliver mail and packages. But here's the rub:
you know, last year it cost the Postal Service almost $80 billion to
deliver the mail six days a week to over 150 million addresses, but it
only received $71 billion to do that. So, this deficit sort of situation
is not new. It's been happening for a decade. And this is largely
because the Postal Service, it can't really change delivery requirements
or labor conditions very much, so its costs are growing. At the same
time, it's primary money makers, like letters and bills, have been
steadily declining, as people have transitioned to electronic
correspondence. I mean, think about it. How many cards and letters do
you have in your mailbox today versus say, five or 10 years ago?

[Matt Oldham]: Right.

[Lori Rectanus:] So, it's a simple math problem. You know, your revenue
is not growing as fast as cost. You know, that's what they're looking
at, in terms of continualy losing money.

[Matt Oldham:] So, it sounds like they're dealing with some issues on
multiple fronts. What have they been doing about them?

[Lori Rectanus:] Well, in absence of fundamental action to address this
problem at a global level, the Postal Service has been trying to do a
lot of things to either curb cost growth or raise revenue, where they
can. So, the big area for them is costs. You know, employee costs and
compensation are about 80 percent of their costs. And so one of the
major things that they've done over the past several years, is they've
started to use this new type of worker. They call it a non-career
worker. It gives them a lot of hiring and firing flexibility. They can
bring people on when they need them for volume increases, but then get
rid of them easier when the volume goes down. They're also paying new
people less than what they've paid people in the past. So, these two
options have, in fact, helped them avoid billions of dollars in costs
over the last decade. In terms of revenue, which is the other piece of
that puzzle, a lot of what they're trying to do is literally keep mail
in the mail stream. You may have seen in your mailbox, in the last
couple years, flashy advertisements, or color, or different and new
types of advertising. The Postal Service has been working with these
advertisers on these sorts of things, and the hope is that, if
advertisers see that you're paying attention to those things in your
mailbox, and you use those to buy their services, then they'll keep
sending mail in your mailbox, as opposed to reverting to email and
Facebook and other ways that advertisers use to get your attention. But,
you know, these things are just not enough to compensate for the many
legal and political issues that stop the Postal Service from addressing
its financial problems.

[ Music ]

[Matt Oldham:] So, the Postal Service has been running with a budget
deficit for a while now, and the numbers of people using mail have been
dropping. To address those issues, USPS has been making some workforce
changes or looking at new areas to focus for revenue. Lori, what else
could they do to get to a more sustainable path?

[Lori Rectanus:] This is a case where the fundamental answer really lies
outside of the Postal Service itself. As, again, I started like, you
know, they are a part of our fabric. They're sort of this intrinsic part
of our country. So, it's really up to us, as a country, we have to
decide what we want from the Postal Service, and how we want to pay for
it. I think what's ironic is that, even though things are bad now, many
stakeholders in this environment are concerned about whether changing
things will be better or worse. You know, some of the questions that
they ask are like, well how would any changes affect what I pay for
mail? Would we be okay if we only got mail four days a week or five days
a week? If, in fact, we wanted to make up this financial shortfall, who
would do that? Would that be taxes? How would we do that? And then the
other question is, the Postal Service is really a critical part of the
delivery and logistics industry, not just domestically, but
internationally. And so some people are concerned with, if you start
changing how the Postal Service operates, what does that do to that
larger industry? And so because we can't agree on the answers, or we
don't know the answers to these questions, we haven't been able to come
up with a solution to actually get the Postal Service on a more
sustainable path.

[Matt Oldham:] I've got one more question for you, and that's, what's
the bottom line here?

[Lori Rectanus:] This is a case of where Congress has to use its
leadership authority to make some really tough decisions. We are never
going to get all the stakeholders who have some relationship to the mail
and to the Postal Service to agree, and it's really up to Congress to
decide, you know, what is the best for the country? And as we identified
in our report, there's only three key decision they need to make, to
start this process. The first one has to be, what is the needed level of
services we want in the postal area, given what we know about how we
communicate and do business, and how that's going to change in the
future. The second decision is to really identify whether, given this
level of services that we need, is it still important for this
organization called the Postal Service to be self-financing? And here's
the hard part: if it is, then the Postal Service must have the
flexibility and accountability to make the changes for that to happen.
But if we're not open to that, then we have to make the decision to
support them in some other way, and that's when you hear people talking
about giving them taxpayer support or relieving them of some of their
debt. And as you recall, the other thing I talked about is, they have a
very unique structure. The ideal is if you made them part government,
part business. Maybe we'd get the best of both worlds. I think,
unfortunately, what we're looking at now is almost the worst of both
worlds. And so the third decision really has to do with the structure.
Because structure is so critical to an organization's success, after we
figure out the services and how we want to pay for them, Congress needs
to identify what's the best structure to carry out these new
requirements. You know, these are really tough decisions, and there's a
reason that we haven't been able to figure this out. A lot of people are
involved here, a lot of jobs, a lot of money. Like I said, a huge
delivery and logistics industry, and success means a continued long-term
sustained focus. But in the absence of that, the Postal Service's
financial situation will continue to deteriorate, and will put its
ability to carry out its role in jeopardy, and that's not good for the
Postal Service, those who use the Postal Service, or the country. So,
something really needs to be done.

[Matt Oldham:] Lori Rectanus was talking about a GAO report on how to
get USPS to a more sustainable business model. Thank you for your time,
Lori.

[Lori Rectanus:] Thank you so much, Matt.

[Matt Oldham:] And thank you for listening to the Watchdog Report. To
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