News from the May 29, 2003 Meeting of the
President's Commission on the Postal Service
Summary of Key Points in Testimony and Answers
David Walker, Comptroller of the United States
The USPS lacks the incentive structure needed to encourage efficient and cost-effective operation.
There needs a linkage between management and labor compensation against actual performance regarding performance goals.
The U.S. Postal Service has made progress in addressing the shortcomings identified earlier by the General Accounting Office, but the fundamental flaws underlying its business model still exist.
Fundamental changes are needed to the business model, its regulatory and legislative underpinning, and its governance.
The time has come to take bold and comprehensive action to reform the postal system.
Universal service is NOT defined in law, but has been developed by historical experience and tradition. A proper definition is still needed.
Whether the nation's postal services be provided by government, private entities, or a combination of both needs to be determined.
The USPS is not subject to the kind of financial transparency and accountability that pertains to private sector businesses.
The break-even mandate and cost-based pricing strictures limit the USPS' ability to respond to changing market needs.
The many issues pertaining to labor and compensation very much need to be addressed.
Despite the benefits derived from the recent CSRS reform bill, the measure did require the USPS to pay some $27 billion in retirement costs that are more rightly attributable to the Treasury for an employee's military service.
The Postal Service's retiree health benefit costs are an accrued expense; but the Postal Service continues to treat this expense on a cash accounting basis. This needs to be addressed. The present value cost of the USPS' retiree health costs is $40-50 billion.
Sharp escalations in future postal rates will be needed to fund these costs on a pay-as-you-go basis.
Some of these costs must be built into current rates through an accrual approach.
The Board and management have a responsibility to set this matter straight.
The people who serve on the USPS' governing board need to have experience in managing businesses with comparable issues that is more proactive in addressing the Postal Service's challenges.
There needs to be a determination as to how much infrastructure is needed to provide universal service.
Congressional interference in infrastructural determinations needs to be addressed. A base-closing approach may be needed.
Not enough has been done to determine "compensation comparability."
The ability to retain earnings needs to be considered.
The whole issue of whether the USPS should continue to participate in the federal health program.
The Postal Service needs paradigmatic change, not incremental change. The USPS' Transformation Plan represents a nice beginning, but not change enough.
The Transformation Plan looks the way it does because the Board and management focused only on changes that they believed were in their control.
This Commission needs to go beyond the Transformation Plan.
Government as a whole needs to have more of its compensation subject to individual and institutional performance objectives.
This Commission needs to determine what role is appropriate for the Postal Service as government, and what is more appropriate for the private sector.
Vincent Palladino, President, National Association of Postal Supervisors
Rural letters carriers can provide many of the services that are provided by other postal employees, and more can be expected of the carrier work force in lieu of the retail network.
The USPS needs the ability to consolidate and close postal facilities without congressional interference.
Legal restrictions on the closure of post offices need to be removed.
Outsourcing of upstream mail processing would compromise service and security.
Performance-based compensation should be extended to the entire postal workforce.
Jane Weizman, consultant to the Commission from Watson Wyatt Worldwide -- on compensation
Variable incentive pay is an excellent vehicle for motivating employees and changing behavior.
A postal incentive pay plan should be self-funded from incremental financial results.
Metrics correlated with improved results should be used.
Improved productivity and efficiency should be key to this determination.
Incentive should be linked to customer satisfaction through measurement of attainment of product and service guarantees.
Robert Reisner, Executive Managing Director, Global Insight -- on Price Cap Regulation
Incentive pricing can be made to work for a public enterprise.
This would provide a means by which the USPS would be motivated to "partner" with private sector entities.
A new incentive pricing system will not work without some reference to costs, such as labor costs.
The threat of mail volume declines with rising costs makes an onerous burden and would hamper the acceptance of an incentive pricing scheme.
There is considerable flexibility in the current legislative and regulatory scheme, but there is a management constraint posed by a complex regulatory scheme.
John Potter, Postmaster General of the United States (Potter's presentation has been posted on this site.)
The status quo won't do. The Postal Service must change in accord with a vision with what the nation will need in the years ahead.
The USPS should have the latitude to charge value-based prices instead of cost-based prices only.
The Board of Governors should set prices subject to PRC review.
The break-even mandate should be eliminated, and the USPS should be allowed to retain earnings.
The collective bargaining process can be improved with a negotiating process that puts ALL compensation and benefits on the table.
The collective bargaining process should be streamlined via a mediation arbitration process.
Management needs the ability to compensate new and current employees differently.
The USPS needs the authority to manage its infrastructure without outside interference.
Retail outlets need to be adjusted to meet the changing needs of the nation.
Mail processing facilities should be consolidated as needs change.
Some decision needs to be made as to how universal service should be paid.
Access to the mailbox should not be opened.
The Transformation Plan is very aggressive, and specific targets are being reached.
The Postal Service has responded to the Comptroller General's call for greater financial transparency regarding retiree health benefits costs.
The Postal Service's ability to cost-cut its way to fiscal stability is limited. Declining mail volume would outstrip the ability to trim costs, break even, and meet universal service needs.
The Postal Service will need substantial legislative change to ensure the viability of the nation's postal system in the future. The current Transformation Plan assumes that the current system will remain unchanged, but it points to where significant change is needed.
The Postal Service is accounting for its retiree health obligations satisfactorily.
Universal service is the delivery of merchandise, publications, and messages on a six-day a week basis. Volume changes, however, may modify how this level of service is provided.
International is a small part of our business, but it is not the driving factor of the decisions that are made at the USPS.
The Postal Service should be able to provide some non-core, related services that capitalize on the USPS' infrastructure and that can add revenue to help sustain universal service.
Requiring the USPS to use its CSRS savings to pay on its retiree health obligation would require the Postal Service to raise rates significantly (four percent to cover these costs plus whatever other increase the USPS needs to break-even.)
Caps on rates would need to be accompanied by a safety valve to account for unforeseen circumstances.
The top priority needs to be addressing the rules governing the rates and classification process.
Adjusting the Postal Service down, in the face of falling volume, is not necessarily a bad thing if the USPS is to be retained as an agency of government.