Postal Service Facing Its Worst Deficit Ever : But Operating Hours and Delivery Schedules Are Not Expected to Be Cut, Postmaster Says

The U.S. Postal Service will suffer its worst deficit ever next year--more than $1.5 billion--but Postmaster General Anthony M. Frank plans no cutbacks in post office operating hours or delivery schedules.

Frank said he is confident that an ambitious cost-reduction program, heavily dependent on automation, can keep the postal system’s finances under control until the next rate increase, expected in 1991.

Operating hours at local post offices were reduced from March until September, 1988, generating criticism in many communities. But Frank said that he will not approve similar measures this year or next despite the fiscal crunch.

“We’re not going to do that, absolutely not,” Frank said in an interview this week.

Won’t Alter Deliveries

Saturday service also is sacrosanct, according to the postmaster general. Reducing deliveries to five days a week “is not a possibility,” Frank said.

“We handle 530 million pieces of mail a day,” he said. “If we cut out Saturday, we would have to handle a billion on Monday, and we just couldn’t do it. We couldn’t deliver them, handle them and store them.”

The Postal Service is in the final year of its traditional three-year rate cycle. It will apply next year to the independent Postal Rate Commission for an overall increase, probably between 15% and 20%. The commission, after lengthy hearings, will decide on the allocation of higher rates among different types of mail. New rates will take effect in the first quarter of 1991.

The price of a first-class stamp, now 25 cents, would rise to 30 cents if the rate commission decides on a 20% increase.

Losses are mounting as the Postal Service reaches the end of the three-year cycle because labor cost increases and inflation are exceeding the revenue increases produced by the last rate increases.

The system should break even for fiscal 1989, which ends Sept. 30. But fiscal 1990 will produce losses of $1.5 billion to $1.7 billion, the biggest deficit since the Postal Service became an independent agency in 1971. The largest previous loss was $802 million in 1982.

The key to Frank’s plans for controlling Postal Service costs is increased use of automation.

An extensive automation plan “is more crucial to the Postal Service than anything else,” Frank said. “We want to have a program that fully automates the mail stream.”

A vital element is the use of bar codes, the computerized horizontal stripes printed on some envelopes. They help reduce the number of people handling each piece of mail.

Bar code information goes far beyond zip codes. For example, bar codes can direct a letter to a specific floor in a big building or to one side of a block on a residential street. That means fewer hours spent sorting and bundling mail.

About 40% of all letters carry bar codes now, up from 7% at the start of last year. Frank hopes to encourage businesses to increase the figure to 60% by the end of next year, and he will make a pitch for automation in his speech Monday to a conference of major mailers.

The inducement will be financial. He said he hopes to raise the discount given to businesses that use bar codes.

The postal service has just developed a machine able to read bar codes through the clear address windows on business envelopes. When the machines are in common use, businesses will be able to print bar codes on letters instead of placing them on envelopes, which is more expensive.

Increased reliance on automation, combined with a $200-million reduction in spending by headquarters and elimination of 1,000 management jobs through the system by attrition, should enable the Postal Service to handle its budget crunch next year, Frank said.

The deficit for 1990 will be driven by cost-of-living increases and regular wage increases under labor contracts as well as by a surge in workmen’s compensation claims. The cost of benefits for the Postal Service’s 800,000-member work force also is rising rapidly, with health insurance payments increasing at an unsustainable rate of 30% a year, Frank said.

Total hours worked throughout the system will be reduced for 1990, with fewer part-time employees hired and less overtime for regular workers. In addition, some 8,000 jobs won’t be filled as vacancies occur, Frank said. Normal attrition is 60,000 people a year.

‘Difficult Undertaking’

“We will operate in the field with fewer hours next year than we did this year,” Frank said. “That is a very difficult undertaking because our volume is going up.”

Each year, the system must accommodate an additional 1.5 million to 1.8 million addresses of new homes and new businesses.

Various marketing innovations are being implemented, including the sale of stamps on an experimental basis through automated teller machines at banks in Seattle. The experiment will be tested at banks in Santa Ana later this year.