USPS expects $1B operating deficit

USPS expects $1B operating deficit

Washington Post

WASHINGTON — The souring economy and changing lifestyles are dramatically affecting one of the most dependable institutions in American life: the U.S. Postal Service. Troubled banks are mailing fewer credit card offers. Declining home sales mean vacant houses sitting with empty mailboxes. And as consumers switch to paying bills online, first-class mailings are drying up.

Now, a new trend in consumer activism — do-not-mail lists pending in 18 states — threatens to reduce deliveries of catalogs and other “junk mail” that make up the largest volume of postal deliveries.

Because of these factors, postal officials are expecting an operating deficit of $1 billion this year, the largest since 1995, and are looking for creative solutions.

“We cannot afford, literally or figuratively, to begin [the year] ... more than $1 billion in the red,” Postmaster General John Potter testified before a Senate subcommittee Wednesday. Potter said he wants to explore the possibility of renting space in the 37,000 post offices across the country to banks and other commercial interests. He said, however, that legal restrictions governing federal property could get in the way of, say, installing a Starbucks in the local post office.

“Other countries have the same challenges, but they look at their assets and use those assets to generate revenue. They use their retail outlets as banks,” Potter said. “That type of flexibility is something I think we need to explore.”

The looming deficit is a sharp reversal from the past several years. As recently as 2004, the Postal Service had a $3.1 billion surplus, but has since been struggling against growing competition from FedEx, DHL, UPS and other delivery services. The Internet also has posed a threat, with the explosion of e-mail and an increase in the number of consumers who pay bills online rather than through the mail.

First-class mail, the Postal Service’s most profitable type, has been dropping steadily. The amount of first-class mail, which includes letters and bill payments, fell to 96 billion pieces in 2007 from 98 billion in 2004.

At the same time, standard mail — advertising circulars, catalogs, fund-raising appeals — has grown to 104 billion pieces in 2007 from 101 billion in 2005

The explosion in standard mail has not gone unnoticed by consumers, many of whom have begun asking lawmakers for a national “do not mail” registry similar to the telemarketing Do Not Call phone registry, where advertisers would have to stop mailing catalogs and other unwanted mail to anyone on the list.

At Wednesday’s hearing before the Senate subcommittee, Potter talked about the Postal Service’s lobbying efforts against “do not mail.”

“We’re working very hard to inform people about the role that mail plays in the economy, as an employer of millions of Americans,” said Potter, adding that it is unclear whether states have the authority to create laws that affect the Postal Service.