Summary: GAO testified on the events and issues that currently affect the operation and management of the Postal Service (USPS). Until January 1985, USPS had 3 years of relatively stable and profitable operations. However, in 1985, it: (1) underwent major changes in at least 16 executive positions; (2) entered into new labor contracts which increased wages; and (3) had three cost increasing events to improve mail transportation operations. Although new postage rates went into effect in February, the increases were less than requested. In July, USPS announced a major change in the ZIP-Plus-4 automated mail processing operations and plans to increase the postage discount large-volume mailers receive for using ZIP-Plus-4 codes. During the past few months, the Postmaster General has been confronted with the problem of avoiding a potential $500 million deficit for fiscal year 1985 when the budget for 1985 had anticipated a net income of $56 million. Although the new postage rates took effect 1 month earlier than planned, they were not in effect during the Christmas season, which is the most profitable for USPS, and would have produced about $900 million if they had taken effect at the start of the fiscal year. About 83 percent of the 1985 deficit was for salaries, benefits, and domestic transportation. Salaries were $441 million over budget because: (1) the arbitrated labor settlement of $170 million was not budgeted; and (2) nearly 22 million more workhours were used to operate a higher processing priority for second-class mail. Domestic transportation was over budget by about $109 million due to air transportation costs. The revenue foregone appropriation, which reimburses USPS for overhead costs assigned to third-class mail sent by nonprofit organizations and schools, remains unauthorized. GAO believes that USPS must continue to seek ways to contain its operating costs and, although 1986 will probably be a deficit year, the amount could be less than in 1985.
