Association for Postal Commerce
"Representing those who use or support the use of mail for Business Communication and Commerce"
"You will be able to enjoy only those postal rights you believe are worth defending."

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1800 Diagonal Rd., Ste 320 * Alexandria, VA 22314-2862 * Ph.: +1 703 524 0096 * Fax: +1 703 997 2414

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Solutions to the Crisis Facing the U.S. Postal Service
Committee on Homeland Security and Governmental Affairs
February 13, 2013 10:00AM
Location: SD-342, Dirksen Senate Office Building

Member Statements

Chairman Thomas R. Carper D (DE)

• We can complete this reform process.

• We need to resize the Postal Service.

• The Postal Service has done much to encourage retirements with incentives.

• The Postal Service is also looking at how to provide good health care for less money. This should happen in a way that does not disadvantage employees and retirees.

• The Postal Service can just be about cutting. We need to grow revenue.

• This is a problem that can be fixed.

• All of the easy cost cutting has been done, as has just about all of the restructuring permitted under current law. It's long past time for Congress to step up and do its job.

Senator Tom Coburn R (OK)

• I am firmly committed to getting a compromise bill that will pass both chambers.

• I absolutely support your going to five-day. It's essential that it be done at this time.

Witnesses

Panel I

The Honorable  Darrell E. Issa
U.S. House of Representatives

• Mr. Cummings and I came close to a bipartisan bicameral deal. We believe we can get there.
• The subject of five-day delivery is going to be among some of the most important issues. If we are to get comprehensive reform, we must give the Postal Service the flexibility to do things efficiently.
• For a five-cents surcharge, you can get a letter delivered. I believe he has the authority to adjust delivery days. I think that guaranteeing six-day delivery for everyone in America is something the PMG is allowed to do. Both rural and urban countries have gone to five-day delivery. The volume of regular mail has gone down and will continue to go down.
• Had we dealt with this problem a couple of years ago, the benefits to employees via buy-out could have been much more generous. If we can find the efficiencies, we can encourage people to retire.
• With the emphasis on packages, these day, mail delivery needs to be made to a secure, centralized mail system. Providing a secure box in every neighborhood in America should be a goal that Congress promotes.

The Honorable  Elijah E. Cummings Testimony
U.S. House of Representatives

• The Postal Service needs a new formula for success.

• In my opinion, the announcement regarding Saturday delivery was an unfortunate development.

• Congress needs to address the need for comprehensive reform to position the Postal Service for the 21st century.

• Everybody agrees, we have to right-size this workforce.

• We must allow the Postal Service to expand into new business lines.

• The major problem here is Congress' failure to act. We cannot solve this problem if we continue to ignore it.

• The people in this very room can make this happen. I am encouraged by the areas of agreement we have reached. I believe we already are 90% there. We are very close.

• If we relaunch a renewed effort, we can complete this legislation before the end of March. But we need to re-engage right now.

• We have a solemn obligation to do right by the people who have long served in the Postal Service.

• I don't have a problem with a USPS run plan as long as we provide comparable coverage.

• We need to focus on effectiveness and efficiency.

Senator Tester

• I'm one of the guys that say the Postal Service shouldn't cut service, particularly if there are other alternatives.

• The reason I oppose some of what the PMG has recommended, my concern is that the Postal Service will not remain competitive in rural America.

• We're changing mail standards in rural America, and the change is making the time to deliver longer than it used to be.

Senator Enzi

• Rural areas are very dependent on postal services. Some of the consolidations of processing facilities have affected timely delivery.

• Presorted mail is getting more handlings and travel than necessary. It slows delivery service.

Panel II

The Honorable  Patrick R. Donahoe Testimony
Postmaster General and Chief Executive Officer
U.S. Postal Service

• We strenuously urge the 113th Congress to act swiftly, completing the work that was begun in the previous Congress. Time is of the essence, and each day that passes without enacted postal reform further impacts the Postal Service’s already dire financial condition.
• Contrary to some opinions, resolving the RHB prefunding requirement alone will not fully address the problem.
• The Postal Service has exhausted its borrowing authority of $15 billion, and it continues to contend with a serious liquidity crisis.

• It is clear that the Postal Service cannot continue along our current path. Our existing business model is unsustainable, and projections show continued and increased losses into the future – unless a comprehensive set of changes is made. No single solution will solve these financial issues.

• The future of the Postal Service can be bright, if Congress allows the necessary flexibility and legislative reform. We can return to financial stability and we can do so with no impacts or burdens on American taxpayers. One key to success is gaining enhanced flexibility to adapt to a rapidly changing marketplace.

• The Postal Service continues to aggressively pursue strategies within its control to increase efficiency and to improve its liquidity position.

• Our goal is to reduce our career workforce to 400,000 employees through attrition. Using thoughtful and careful planning, we have consolidated more than 200 mail-processing facilities. Under the Post Office Structure (POSt) Plan, the Postal Service is modifying operating hours at over 13,000 Post Offices, while preserving postal services, especially in small and rural communities. Through careful evaluation, we have reduced some 21,000 delivery routes, resulting in a leaner and more efficient delivery network.

• While we continue to seek out all possible efficiencies and savings, we also put tremendous effort into retaining existing revenue streams and seeking out new sources of revenue.

• Direct Mail continues to be the single best return on investment by offering the highest response rate for advertisers. This has been fueled by effective product innovation and marketing, and the continued rise in e-commerce. We expect this business to continue to grow.

• With the shifts in customer mailing habits, the $10 billion decline, shown above, is driven primarily by precipitous drops in First-Class Mail volume.

• Below are reforms we think are important. They include:
  
  1. Require USPS Health Care Plan (Resolves RHB Prepayment Issue)
  2. Refund FERS Overpayment
  3. Streamline Governance Model
  4. Authority to Expand Products and Services
  5. Require Defined Contribution Retirement System for Future Postal Employees
  6. Instructions to Arbitrator
  7. Reform Workers’ Compensation
  8. Right to Appeal EEOC Class Action Decisions to Federal Court
   

• There is a substantial opportunity for savings – up to $7 billion each year through 2016 – by moving to a more modern, responsive and customer-focused system. This would involve having the Postal Service sponsor its own healthcare plan. By moving away from the federal system, nearly all of our employees and retirees would reap the benefits of getting equivalent or better healthcare coverage and paying less for it.

• The Board of Governors has the responsibility to manage the Postal Service, but does not have adequate authority to do so. In order to meet the challenges it faces both today and in the future, the Postal Service must be given the tools to become a more nimble, streamlined organization, better able to respond quickly to the needs of a dynamic marketplace and to adjust our operations as demand for products and services evolves.

• The Postal Service Board of Governors should have the clear authority to make structural changes that reduce the costs of the retail, processing and delivery networks.

• Another facet of restoring financial sustainability is the growth of revenue through product and pricing innovation, both with respect to existing lines of business and other lines of business. Giving the Board greater authority to exercise business judgment in this area does not mean the end of oversight by an external entity. A more nimble and well-defined regulatory approach is required that minimizes unnecessary bureaucracy, recognizes the Postal Service faces intense competition with respect to all of its products, and allows the Board to respond effectively to changing conditions.

• Giving the Postal Service greater flexibility over pricing and product innovation would further advance the goal of providing universal service in a financially sustainable way. Extensive price and product controls are therefore not necessary. Pairing much greater flexibility over pricing and product innovation with additional flexibility to address network costs would put the Board in a position to create a multi-faceted and balanced approach to restoring financial stability.

• The Postal Service must be allowed authority to establish new revenue sources and respond to a changing marketplace.

• More than 85 percent of the Postal Service’s career employees are covered by collective bargaining agreements. The Postal Service has included in its legislative goals the request that Congress enact provisions that instruct interest arbitration panels to consider the financial condition of the Postal Service in interest arbitration awards.

• S. 1789 contained provisions that would have made reforms to the existing workers’ compensation program, including modifications to current rates of compensation for varying classes of injured employees. It would also have required retirement eligible employees to transition from workers’ compensation rolls and onto the appropriate retirement program, upon reaching retirement age. Any future legislation must contain similar language.

• The Postal Service needs pricing and operational flexibility. The Board should have primary authority over prices and services. The Postal Regulatory Commission should provide only an after effect review.

The Honorable  Eugene L. Dodaro Testimony
Comptroller General of the United States
U.S. Government Accountability Office

• The U.S. Postal Service (USPS) continues to incur unsustainable operating deficits, has not made required payments of $11.1 billion to prefund retiree health benefits, and has reached its $15 billion borrowing limit.
• USPS can no longer borrow to maintain its financial solvency or finance needed capital investment. USPS continues to incur unsustainable operating deficits. In this regard, the USPS Board of Governors recently directed postal management to accelerate restructuring efforts to achieve greater savings.
• USPS’s dire financial condition makes paying for these liabilities highly challenging.
• USPS has reported on several initiatives to reduce costs and increase its revenues to curtail future net losses.
• USPS needs to reduce its expenses to avoid even greater financial losses, repay its outstanding debt, continue funding its retirement obligations, and increase capital for investment, including replacing its aging vehicle fleet.
• Congress needs to act to (1) modify USPS’s retiree health benefit payments in a fiscally responsible manner; (2) facilitate USPS’s ability to align costs with revenues based on changing workload and mail use; and (3) require that any binding arbitration resulting from collective bargaining takes USPS’s financial condition into account.
• If Congress does not act soon, USPS could be forced to take more drastic actions that could have disruptive, negative effects on its employees, customers, and the availability of postal services.
• To increase revenue, USPS is working to increase use of shipping and package services.
• USPS is pursuing 55 initiatives to generate revenue. Forty-eight initiatives are extensions of existing lines of postal products and services. The other seven initiatives included four involving experimental postal products.
• As USPS attempts to reduce costs and increase revenue, its mission to provide universal service continues. USPS’s network serves more than 152 million residential and business delivery points.
• We have issued a number of reports on strategies and options for USPS to improve its financial situation by optimizing its network and restructuring the funding of its pension and retiree health benefit liabilities.
• In summary, to improve its financial situation, USPS needs to reduce its expenses to close the gap between revenue and expenses, repay its outstanding debt, continue funding its retirement obligations, and increase capital for investment, such as replacing its aging vehicle fleet.
• Changes in technology will continue and at a rapid rate. The Postal Service needs flexibility to adjust rapidly to changing challenges and market needs.

Panel III

Cliff Guffey Testimony
President
American Postal Workers Union

Key Points:

• The circumstances confronting the USPS are truly dire, but the demise of the U.S. Postal Service is not inevitable. Congress can cure the illness without killing the patient.
• Congress must end the mandate of the Postal Accountability and Enhancement Act (PAEA) that requires the USPS to pre-fund healthcare benefits for future retirees.
• Congress also must grant the Postal Service flexibility to increase rates...above the rate of inflation. It takes only simple mathematics to know why the 2006 law did not work. Imposing a multi-billion dollar cost on the Postal Service and, at the same time, denying it the power to raise rates to cover its costs was a recipe for financial problems. I urge the Committee to correct the problem caused by the unrealistic CPI cap on postal rates. A substantial part of the financial pressure on the Postal Service has been caused by the rate cap.
• Congress also must strengthen the provisions of the PAEA that were designed to curb the corporate welfare that “worksharing” discounts have become.
• Congress must reject privatization of the Postal Service. Privatization is wrong for the Postal Service and wrong for America.
• Legislators must free the Postal Service to develop new products and new sources of revenue.
• Another major topic that must be addressed before the financial problems of the Postal Service can be examined realistically is the Postal Service’s funding of its retirement annuity funds.

Jeanette P. Dwyer Testimony
President
National Rural Letter Carriers' Association

• The Postal Service’s financial challenges are in large measure a result of billions of dollars in overpayments into the Federal Employees Retirement System (FERS), an overly aggressive prefunding schedule for its retiree health benefits, and declining mail volume. Congress has the power to address and resolve the pension miscalculation and prefunding issues that will help to put the Postal Service back on a firm financial footing.
• We urge Congress to pass legislation to remove the single greatest obstacle to the Postal Service’s financial health and well-being: the onerous pre-funding obligation to the Future Retiree Health Benefits Fund.
• The FERS surplus should be returned to the Postal Service to help alleviate its financial crisis.
• The NRLCA strongly believes the Postmaster General’s plan to eliminate Saturday mail delivery will ruin the Postal Service and abandon those Americans who most rely upon the regular delivery of the mail. The NRLCA does not support this plan. The Postal Service continues to lead Congress to believe that this is what the American public supports.
• And then there are the jobs. At a time when unemployment hovers at 7.8%, this is no time for massive layoffs. In our opinion, the Postmaster General grossly and recklessly underestimated the number of jobs that would be lost when he put the number at 22,500. The NRLCA alone would experience the loss of approximately 20,000 jobs if service were reduced.
• I must also point out the severe hardships that would be visited on rural America if our customers and small businesses lost a day to send and receive mail.
• We desperately want to succeed. And that potential to succeed is there if the Postal Service focuses on growing its business, not shrinking it by reducing delivery frequency.
• The NRLCA will not support any proposal of a Postal-only health plan that leaves FEHB. Leaving FEHB will will undoubtedly mean reduced benefits and increased costs for employees and retirees.
• I am deeply disturbed that the Postal Service continually seeks to have Congress interfere with collective bargaining by stripping away the no-layoff clause protection that the NRLCA secured after hard-bargaining and considerable financial sacrifice.

Robert J. Rapoza Testimony
President
National Association of Postmasters of the United States

• The Postal Service has responded to those challenges that are within its control – some of which have caused Postmasters huge anxiety.
• Continuous and debilitating cost-cutting, combined with maintaining unsustainable and unfair financial obligations, is not a formula for the agency’s resurgence or durable sustainability.
• The important question is how do we resolve the fundamental differences among postal policymakers. Tragically, without prompt, responsible, and constructive legislative relief, we may witness the demise of the Postal Service and the essential services it provides to America.
• A much-overlooked fact is that the postal industry does not simply employ Postal Service workers, but provides a work environment for about 8.4 million Americans. Postal Service employees account for only about 8% of the postal industry’s total workforce.
• What differentiates the Postal Service from privatized postal providers is its essential mission to provide a universal and uniform service at an affordable price. Universal access at the entry point to the delivery point, with a trusted government employee, is a hallmark of our postal system.
• One of the most damaging impediments to postal sustainability is the failure to address the unfair statutory requirement that the Postal Service prefund, within a limited 10-year period, 75 years of retiree health benefits.
• The failure to help alleviate the financing crisis confronting the Postal Service has already caused serious damage to the postal infrastructure and impairs the agency’s capability to provide the service that Americans expect and deserve.
• Revenue generation must be a primary focal point of legislative relief. Partnerships should be fostered and the USPS should continue to aggressively focus on revenue growth in all areas to help retain its viability.
• In the not-too-distant future, it is quite likely that parcel volume could surpass letter volume. The explosion of e-commerce fuels this development and the cost of mailing small parcels through the USPS is highly competitive.
• NAPUS believes it is crucial that the Postal Service be able to more effectively partner with other federal agencies and municipal governments in delivering essential governmental services, and it should be the preferred shipper of government publications and products.
• Financial services and partnerships with local or national merchants should also be more aggressively explored.
• Another area that legislation should address is providing the Postal Service more pricing flexibility within its market-dominant classes of mail. Under existing law, the only means of adjusting rates outside the prescribed consumer-price-index rate cap is through the limited criteria of an “exigent rate case.” The Postal Service should be provided with more latitude to rebalance rates based on volume share, and a more postal-specific adjustment index.
• NAPUS understands that the Postal Service continues to push for a health benefits plan, separate and apart from the Federal Employees Health Benefits Program.

Joel Quadracci Testimony
Chairman, President, and Chief Executive Officer
Quad/Graphics, Inc.

• The Postal Service is the backbone of the private sector mailing industry and it plays an integral role in the modern economy ranging across every type of mailer and the printing, paper and technology industries that supply them. These businesses support services in a marketplace that includes cost-effective advertising, magazines, catalogs, e-commerce, prescription drug fulfillment, and what is still a huge amount of statements, bills and greeting cards as well as an expanding package delivery segment. These are products that consumers in all 50 states crave, and in some cases rely on, and they depend on the Postal Service to deliver them right to their door.
• The biggest problem facing the printing industry is the same problem the Postal Service faces: excess capacity.
• Right now, the Postal Service has too much capacity and must be “right-sized.”
• You are not alone on this journey. We are part of the Direct Marketing Association, PostCom, American Catalog Mailers Association, Alliance of Nonprofit Mailers, The Association of Magazine Media, and the Coalition for a 21st Century Postal Service all of which stand beside us, ready to continue their work with you to ensure the future of the Postal Service as well as the 8 million American families that depend on the Postal Service for their livelihood.
• Congress can help by alleviating the unreasonable financial burdens that have been placed on the Postal Service. Without Congressional action, not only will the financial situation of the Postal Service continue to be dire, but the uncertainty for our clients and the entire mailing industry will stifle volume as customers make decisions about how to spend their advertising budgets, among other concerns. Many are referring to this as a “crisis of confidence.”
• Quad/Graphics and other mailers have a critical need for the Postal Service to continue accepting mail drop-offs on Saturday, process that mail on Saturday and move it around the country on Saturday in order for it to be in place for delivery on Monday. The impact on our customers will be felt on an individual customer basis. For some of our clients, the change to 5-day delivery will mean simply adjusting the delivery date expectations. For others, they will need to decide how best to continue Saturday delivery through an alternative carrier if they feel weekend delivery is business critical. Regardless, Quad/Graphics will work with all of our clients to ensure they are receiving the best value for delivery of their printed products.
• While there is some dispute over whether there was an inappropriate overpayment in to the Civil Service Retirement System (CSRS), there is no such dispute over overpayments into the Federal Employees Retirement Systems (FERS). This overpayment has resulted in billions in extra funds pouring into FERS ultimately at the expense of the private mailing industry. Returning the overpayments to the Postal Service is the fair and responsible approach, yet there has been some rhetoric surrounding these proposals as a “bailout.” Nothing could be further from the truth. In this circumstance it is postal ratepayers (the majority of whom are businesses) who have been bailing out the government.
• With the precipitous plunge in mailing volumes, the network of postal facilities has become far too large for the business the system has or is likely to have in the foreseeable future. It, therefore, must downsize.
• In summary, we as an industry, request that Congress, at a minimum, act on the following:
  
  Assuring USPS the Authority to Streamline its Service
  
  • Mail volume has declined 25% since its peak year in 2006. The associated revenue drop has vastly outpaced the Postal Service’s actions to cut costs.
  • The USPS has the infrastructure and capacity to handle and process more than 300 billion pieces of mail. Unfortunately mail volume continues to decline and is expected to be only 153 billion pieces of mail in 2013 (of which Quad/Graphics accounts for approximately 12 billion pieces of mail).
  • The USPS must reconfigure its system (facilities and workforce) to the business it has and projects over the coming years.
  • The decline is unlikely to be substantially reversed, but further losses may be slowed.
  • The USPS has a plan in place to consolidate and close processing facilities and reduce post office costs without widespread closings. These plans ought to be allowed to proceed without Congressional interference.
  • The USPS must be provided with and use its authority to continue the effort to “right-size” its system to current and anticipated future mail volumes.
  
  Reamortization of Payments for Prefunding Retiree Health Benefits
  
  • Ensuring retiree health is not an unfunded liability is financially sound.
  • The current 10-year amortization results in unaffordable payments $5.5 billion annually, which the Postal Service has defaulted on twice.
  • Extended amortization guarantees full pre-funding at much lower annual payments.
  • The 40-year amortization schedule, as proposed in the Senate bill last year, would accomplish all of the foregoing goals.
  
  Return to USPS of its Overpayments to the Federal Employees Retirement System (FERS)
  
  • Depending upon the calculation, the USPS has overpaid into FERS by $3.0 billion-$12.5 billion.
  • Since the USPS operations are funded by postage, not taxes, mail users and especially the business community (which is responsible for about 90% of postal volume) have been overcharged.
  • Returned funds can be used as incentives for early retirement, debt reduction and more.
  
  Provide USPS with needed flexibility to manage health care costs
  
  • Health care costs are a significant issue for every business and making sure their employees get the necessary services at an affordable price is paramount to business success.
  • Quad/Graphics has a unique, in-house, health care model, called QuadMed, which focuses on preventive primary care, based on a wellness model that rewards employees for choosing a healthy lifestyle. It generates a significant amount of savings for the company and the employee while improving the quality of care.
  • Due to this unique model, Quad/Graphics has seen a significant reduction in health care costs.
  • The USPS should be allowed to go out in the marketplace and negotiate for better service at a lower cost, which is something it has explored and recommends to Congress. Those beneficial options do exist and can save the Postal Service money.

R. Richard Geddes, Ph.D. Testimony
Associate Professor, Department of Policy Analysis and Management
Cornell University

• The U. S. Postal Service is facing a major financial crisis. That crisis is driven by declining demand for the Postal Service’s core activity – the delivery of first-class mail – combined with the cost of maintaining the extensive delivery network required to provide universal delivery service. First-class mail is important because it is the Postal Service’s most profitable activity, and because ensuring the delivery of letters is the justification for the Postal Service’s current organizational structure as a state-owned enterprise with a legally enforced monopoly over its core service.
• Alternative methods of communicating messages include telephone calls, electronic mail messages, text messages, and facsimiles, among others. Such methods have an advantage over physical mail delivery because they are both inexpensive and instantaneous. Increased use of electronic banking and electronic payment of bills, such as utility bills, have had a particularly large impact on mail volumes.
• Postal liberalization in other countries demonstrates clearly that, with proper policy reform, the postal and delivery sector can emerge from this technological challenge as a sustainable, vigorous, and profitable component of a developed economy. For that desirable outcome to be realized in the United States, however, we must remove existing legal impediments to the Postal Service evolving into a more innovative and entrepreneurial company.
• Barring a return to the massive – and likely increasing – pre-1970 direct annual subsidies from taxpayers to the Postal Service, there are two broad approaches to addressing its mounting fiscal crisis. The first is to rely mainly on a “shrink to survive” strategy to assist the Postal Service in reducing its costs as the demand for its core service falls. This involves reducing the number of post offices, downsizing the postal workforce, closing large sorting centers, and reducing the level of service (such as delivery days per week and post office hours), among other reductions.
• There are several reasons why an overall “shrink to survive” strategy is unlikely to result in a sustainable Postal Service. Without major changes in the Postal Service’s business model, further declines in mail demand and in revenues are likely.
• The Postal Service’s fundamental business model must be modernized to allow it to use its existing assets to discover new ways to better meet demand and to create new demand for physical document delivery.
• There are two key reforms that will allow the USPS to be sustainable in the new communications marketplace. The first is de-monopolization and commercialization, and the second is corporatization. The concepts of de-monopolization and commercialization are critical for postal reform, and are inextricably linked. De-monopolization refers to repeal of the Postal Service dual monopolies. These concepts are sometimes referred to collectively as postal “liberalization.” It currently receives a legally enforced monopoly over the delivery of any item defined as a letter, and another over the use of a household’s mailbox. Commercialization refers to the process of allowing the Postal Service to become entrepreneurial and innovative in entering new markets and in creating new product offerings. This means using its existing delivery network to generate more economic value.
• These two reforms are inextricably linked because the Postal Service will never receive commercial freedom without de-monopolization, nor should it. Legal enforcement of monopoly power is always accompanied by regulatory oversight of the monopoly, which is appropriate.
• Another by-product of legally enforced monopoly is regulation of rates. This stems from a concern that a firm receiving a monopoly may charge excessively high rates. Rates charged by the Postal Service are currently overseen by the Postal Regulatory Commission. The Postal Service also receives pricing flexibility through de-monopolization and commercialization.
• Postal laws should be reformed to allow the Postal Service to use its most valuable asset – the network that gives it the ability to deliver mail to every address on a regular basis – in new and innovative ways to meet existing demand and to offer new delivery products. Many stakeholders would share in the benefits from the creation of such added economic value, including customers, employees, and of course mailers.
• To facilitate revenue growth, any sustainable reform must contain de-monopolization and its complement, commercialization.
• Package and shipping is however one of the Postal Service’s most competitive markets. The ability of the Postal Service to innovate and succeed in those markets is becoming more important with such market changes.
• In addition to revenue-side liberalization, changes in the Postal Service’s organizational structure are necessary to improve governance, to attract the managerial talent, experience, and the focused incentives that are critical for its fiscal sustainability.
• The first step is corporatization, which is distinct from privatization. Corporatization refers to subjecting the Postal Service to the usual set of corporate laws and norms associated with a modern, large, commercial entity. It includes the establishment of a professional, experienced board of directors with explicit fiduciary duties to the government shareholder, as well as executive compensation linked to clear performance standards, among other standard business structures. Importantly, it also includes the legal creation (but not the sale) of ownership shares in the firm. All shares are initially held by a single government shareholder, such as the U.S. Treasury.
• Although they are distinct, corporatization and privatization are related. Privatization refers to the actual offering of ownership shares to the public once they are legally created. That is, the Treasury would divest itself of its ownership shares, typically over time in tranches. The first sale of shares would constitute an “initial public offering” of Postal Service ownership shares.
• There are large, often underappreciated, social benefits associated with such a step. First, the Postal Service would receive an influx of much-needed capital that would allow it to undertake innovative, but inherently risky, new approaches in the postal and delivery sector. The burden of providing the capital necessary for such innovation thus would not come from taxpayers, but instead from private investors.
• Second, the risks inherent in moving from the current fiscal crisis to creating a vibrant, profitable, sustainable postal sector would be borne by investors rather than by taxpayers.
• Third, allowing ownership shares to trade further improves firm governance.
• Because of these and a range of other social benefits associated with tradable ownership shares, the most appropriate organizational structure for a large commercial entity such as the Postal Service is likely to be a publicly traded company. This stems from the large capital needs and inherent risks associated with operating an innovative delivery business.