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

Transcript for: Watchdog Report: The Potential Effects of Ending Mail
Delivery on Saturdays

Audio interview by GAO staff with Phil Herr, Director, Physical
Infrastructure

Related GAO Work: GAO-11-270: US Postal Service: Ending Saturday
Delivery Would Reduce Costs, but Comprehensive Restructuring Is Also
Needed

Released on: March 29, 2011

[ Background Music ]

[ Narrator: [ Narrator: ] Welcome to GAO's Watchdog Report, your source
for news and information from the Government Accountability Office. It's
March 29, 2011. The U.S. Postal Service has proposed ending mail
delivery on Saturdays. Faced with steadily declining mail volumes and a
steadily increasing number of delivery addresses, the Postal Service
estimates this change could result in $3.1 billion in cost savings. A
group led by Phil Herr, a director in GAO's Physical Infrastructure
team, recently reviewed the Postal Service's proposal and its potential
effects. GAO's Jeremy Cluchey sat down with Phil to learn more.

[ Jeremy Cluchey: ] The Postal Service proposed last year to eliminate
Saturday mail delivery. Can you provide some background on the financial
outlook of the Postal Service that prompted them to propose this plan?

[ Phil Herr: ] We have a number of concerns about the Postal Service's
financial condition. For that reason, they are on our high-risk list.
They're 1 of the about 30 organizations that are on that list that was
just reissued in February of this year. Broad brush, the Postal
Service's key operations in terms of, you know, the mail and mail volume
has declined about 20 percent. That's over the last four fiscal years.
So mail peaked at about 213 billion pieces per year in fiscal year 2006,
and last fiscal year that was down to 171 billion pieces—still a lot of
mail, but when you look at broad brush in terms of the organization and
what it's doing and the delivery to 151 million different points on a
day, this is one way they see as reducing their operating costs.

[ Jeremy Cluchey: ] Your team reviewed the five-day delivery proposal
and the estimated cost savings that could result from it. What did you
find?

[ Phil Herr: ] The Postal Service is projecting $3.1 billion in net cost
savings from this. And, as we did analysis of looking at some of the
things that would affect whether they'd achieve those—that level of
savings—one of the biggest questions, I think, out there is whether and
how the workload would be dispersed across the week. The assumption
would be that by dropping Saturday delivery, the mail that's in the
system would be moving through on Mondays, perhaps on Fridays, but also
would likely be spread more across the week—that is, as mailers change
their behavior, as well. And that difference there could be in the range
of $500 million, depending on how that workload is absorbed. Still, with
it all, for an organization with a large amount of fixed costs, this is
one fairly large way to impact their bottom line.

[ Jeremy Cluchey: ] What are some of the possible next steps for this
proposal?

[ Phil Herr: ] The mandate—or really it's more of a requirement—is that
the appropriations bills have had a rider in there that says that the
Postal Service should do mail delivery on a six—six days a week. We
think that this is an issue that ultimately will be one Congress will
want to look at, because it affects virtually every American household
and businesses. So it rises to the level of a broad policy question that
really appropriately would end up in a congressional decision-making
process.

[ Jeremy Cluchey: ] What are some of the potential implications of this
change if it is made, particularly from the perspective of taxpayers?
Does the impact extend beyond not getting mail on Saturdays, for
example?

[ Phil Herr: ] That's an interesting question. Right now, the Postal
Service is having a rough time financially, and this year it expects to
reach its $15 billion statutory debt limit. So that's billion with a B.
One of the key principles behind the Postal Service is the revenues that
it brings in are supposed to cover its costs. To the extent that it's
not able to cover those costs, it raises the question, ultimately, of
how the services—the cost of those services—would be covered. It's a
large network: 32,000 post offices, 500-plus processing plants, delivery
to, you know, people six days a week. So there's a lot of costs
associated with this operation. When I think about the Postal Service, I
always mention to folks is there's no other organization comes to your
home six days a week—whether you have something for them to pick up or
not, whether, you know, they do their—they do those rounds. So—but
there's a cost in having that service, as well. So I think it does have
an effect on taxpayers, one way or the other, in the sense that we all
are customers. And it would affect how we live, how we, you know, what
we expect. But ultimately, it's a broader question of bringing those—the
revenues and the expenses into balance, as well.

[ Background Msic ]

[ Narrator: ] To learn more, visit GAO's Web site at GAO.gov and be sure
to tune in to the next edition of GAO's Watchdog Report for more from
the congressional watchdog, the Government Accountability Office.