US Postal Service 2014 Annual Report Download - page 36

2014 Report on Form 10-K United States Postal Service 32
approximately 3,000 postmasters who were impacted by reductions in retail hours at certain Postal Service facilities which was
accepted by 1,380 postmasters.
We continue to pursue strategies within our control to increase operational efficiency and to improve liquidity. In April 2014,
we revised certain service standards for Standard Mail as part of an efficiency improvement effort known as “load leveling.”
With this change, delivery volume became more evenly balanced across the delivery days, which improved efficiency and
reduced overtime pay and operating costs.
On January 26, 2014, we implemented price increases on Market-Dominant and Competitive services. The Market-Dominant
increases included a 1.7% price increase based on the CPI-U plus a temporary 4.3% increase approved by the PRC in December
2013 as an exigent rate change. The exigent rate change was approved as a surcharge to be collected only until we recover a
total amount of $3.2 billion of incremental revenue above what would otherwise have been recovered through a CPI-U increase
alone. As of September 30, 2014, the Postal Service has collected $1.4 billion in such incremental revenue. We have filed an
appeal with the United States Court of Appeals for the District of Columbia Circuit arguing that the PRC erred in its decision to
limit the duration of the exigent increase in the manner that it specified. Some mailers have also filed an appeal seeking relief
from the PRC’s decision to allow any exigent rate increase. Additionally, we increased prices an average of 2.4% for
Competitive services.
We have conserved capital by spending only what we believed essential to maintain our existing facilities and service levels.
However, an increase of capital investment is necessary to upgrade our facilities, existing fleet of vehicles and processing
equipment in order to remain operationally competitive.
We continue to pursue legislation to transition to a new delivery schedule that would include package delivery Monday through
Saturday (and on Sundays in some instances) and mail delivery Monday through Friday; however, changing the delivery
schedule to eliminate Saturday delivery of mail is only possible with a change in existing law. We also continue to seek reforms
that would establish a set of health care plans within the FEHBP that would fully integrate with Medicare for current and future
Postal Service retirees, largely eliminating the current unfunded liability and the necessity for the prefunding requirement.
Mitigating Circumstances
Our status as an independent establishment of the executive branch that does not receive tax dollars for its operations presents
unique requirements and restrictions, but also potentially mitigates some of the financial risk that would otherwise be associated
with a cash shortfall. With annual revenue of nearly $68 billion, generated almost entirely through the sale of Postal Service
products and services, a financially sound Postal Service continues to be vital to American commerce. The U.S. economy
benefits greatly from the Postal Service and the many businesses that provide the printing and mailing services that support it.
Disruption of the mail would cause undue hardship to businesses and consumers. Therefore, it is unlikely that in the event of a
cash shortfall, the Federal Government would allow us to significantly curtail or cease operations. We continue to inform the
Administration, Congress, the PRC and other stakeholders of the immediate and long-term financial challenges we face and the
legislative changes that are required to restore financial stability. However, there can be no assurances that the requests to
restructure the pension and benefit payment schedules, or any other legislative changes, will be made in the foreseeable future.