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U.S. Postal Service plans $1 billion in cost cutting

Published: Monday, March 3 2008 12:00 a.m. MST

The U.S. Postal Service plans $1 billion in cost reductions this year to reduce a projected $2 billion loss caused in part by a slowing economy, Postmaster General John Potter said.

"We cannot simply wait for a recovery," Potter said in prepared testimony for the U.S. House subcommittee on federal workforce, Postal Service and the District of Columbia. "We are clear in our resolve that it will not come at the expense of service."

Potter said the cost reductions, combined with $735 million in additional revenue to come from postal-rate increases scheduled to take effect May 12, may reduce the anticipated loss to $265 million.

The agency cut costs by more than $300 million in the first quarter, in part by reducing more than 10.5 million work hours, Katherine Siggerud, a director of the Government Accountability Office, Congress's independent watchdog, said in prepared testimony.

The Postal Service is a government agency required by law to set its rates to cover costs. It incurred a $5.1 billion deficit last year while trying to implement the Postal Accountability Enhancement Act of 2006, which required establishment of a retiree health benefits fund.

At the same time, the law gave the agency more flexibility to set prices and introduce new products.

"It will be crucial for the Service to take advantage of this opportunity and achieve sustainable, realizable cost reductions," Siggerud said.

The Postal Service reduced its career workforce by more than 11,000 employees last year, contributing to a reduction of 36 million work hours, she said.

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