The U.S. Postal Service recently delivered a Transformation Plan to Congress. The plan offers solutions to the current financial situation the Postal Service now faces and, in the long term, calls for a new business model to replace our 30-year-old operating structure. Changing to a new business model will require legislative changes, essentially rewriting the 1970 Postal Reorganization Act that formed the U.S. Postal Service.
First-Class revenue The Postal Service gets most of its revenue from First-Class Mail - the kind of mail used to pay bills and write letters. Any decline in this type of mail has huge consequences since two-thirds of our costs are covered by the revenue it brings in. Add to that equation the 3,278 new addresses created last year in the Big Sky U.S. Postal Service District and you can see the crisis we face. Trends like that threaten our ability to deliver the mail.
But we have solutions. In the long term, the Postal Service will ask Congress to adopt a new business model, called a Commercial Government Enterprise (CGE). Changing to a CGE would be a large step toward placing the U.S. Postal Service on a more business-like footing. We would be expected to provide traditional and nontraditional products and services and implement market-based pricing. Universal mail delivery would be maintained by giving the Postal Service the flexibility to survive in a new economy.Cutting operating costs We will also cut costs. The U.S. Postal Service nationwide has cut $2.5 billion dollars in operating expenses since the end of 1999. The Postmaster General has asked us to cut $5 billion more nationally (on an annualized basis) over the next five years. The Big Sky U.S. Postal Service District will do its part to meet that goal.
The survival and success of the U.S. mail system is vitally important to all Americans. It is extremely important to the nation's economy, commerce and communications - nationally, regionally and locally.
In our postal district alone, which encompasses all of the mail delivery area for the state of Montana, we deliver 2.3 million pieces of mail per day. That equals 722 million pieces of mail delivered this past year to nearly 600,000 Montana residents and business addresses.
The Postal Service delivers in one week as much as UPS delivers in a year; we deliver in two days what FedEx delivers in their typical year. No postal system or delivery network does what the U.S. Postal Service does today. But what organization can keep the same business model for 30 years and hope to survive?
No organization could. Organizations must be able to change in order to survive. Thirty years ago, no one could have predicted the rapid rise of the Internet, electronic bill payment and competition from global mail providers. Mail volume nationally and in the Big Sky Postal District has always had steady increases and our old business model counted on volume always going up. But that has changed, too. Nationwide, the Postal Service lost $1.68 billion in fiscal year 2001 and could lose close to $2 billion this fiscal year.New delivery ideas Our proposed U.S. Postal Service Transformation Plan allows us to better meet changing customer needs, such as increasing access for consumers. The Big Sky Postal District has 320 post offices and 62 contract postal retail outlets.
But there are quicker, more cost-effective ways to get basic services like stamps. People already purchase stamps by phone and over the Internet. We will also explore other nontraditional outlets. We plan to offer simplified, prepaid package shipping so customers can pay by the size of the box, not the weight. And we recently introduced a product called Confirm, part of the new generation of "intelligent" mail services that allows large businesses to track their mail in near real-time throughout the postal system.
As the U.S. Postal Service district manager for Montana, I'm excited to be a part of this transformation plan. Delivering the mail is a public trust. The U.S. Postal Service is committed to guaranteeing mail delivery well into the future.