represents a reduction of approximately 24,000 positions since 2002, and almost 70,000 since 1999, when career employment reached a peak of 798,000. Reconfiguration of the postal air transportation system resulted in savings of $200 million while supporting record service performance. A shift from traditional purchasing activities to supply chain management, which includes central purchasing for many key products and services, resulted in an additional $461 million in cost reductions, cost avoidance, and revenue generation, including $76 million of capital. The Postal Service reduced planned costs by a total of $2 billion in 2003, which included the workload savings associated with reduced volume.

     The Postal Service Civil Service Retirement System Funding Reform Act of 2003 (Act), signed by the President on April 23, 2003, significantly affects Postal Service finances. The Act changes the way the Postal Service funds its Civil Service Retirement System (CSRS) obligation. According to a 2003 GAO report, the Postal Service had overfunded its pension obligation and, without this legislation, was on course to overfund by approximately $103 billion.

     The Act also transfers to the Postal Service from the U. S. Treasury the responsibility for funding the costs of CSRS benefits that current and former Postal Service employees have earned through military service. Thus, the Act transfers $27 billion in cost from U. S. taxpayers to Postal Service ratepayers. Before this transfer was enacted, the Postal Service had overfunded its obligations to the Civil Service Retirement and Disability Fund by $10 billion.

     Legislation has also enabled the Postal Service to pay down its debt by more than one third, from $11.1 billion at the close of the last fiscal year, to $7.3 billion this year. At the same time, refinancing of certain long-term obligations resulted in a $35 million reduction in interest expenses.

     The Postal Service closed the year with a net income of $3.9 billion, reflecting the positive effect of the CSRS funding reform legislation referenced above. Even without

this legislation, actions taken by the Postal Service to manage its finances would have resulted in a positive net income of $900 million, which is $300 million greater than the $600 million plan.

     In December 2002, the administration announced the creation of the President's Commission on the United States Postal Service. The President's Commission's objective was to advise the President on the state of the Postal Service, prepare a report articulating a vision for the future of the Postal Service, and recommend the legislative and administrative steps necessary to enact reform needed to ensure the viability of postal services.

     The President's Commission held a series of nine public meetings throughout the nation over a period of eight months and heard from a wide range of postal stakeholders, as it examined every aspect of the Postal Service's operations. Witnesses included the postmaster general, Postal Service governors, other senior officers of the organization, leaders of postal unions and management associations, representatives of the mailing industry, competitors, academics, and economists.

     In July, the President's Commission issued its final report to the President containing its recommendations for the changes its members deem necessary to protect the nation's access to affordable, universal mail service long into the future. By September, Congress began a series of hearings to explore the President's Commission's recommendations, many of which would require legislative action for implementation.

     The President's Commission concluded that the Postal Service business model, created by the 1970 Postal Reorganization Act, is in need of change. The Postal Service agrees that the Act's basic assumption, that the costs of a continually expanding delivery base will be offset by the increasing revenue from continued mail volume growth, is no longer valid. Instead, the Postal Service is delivering fewer pieces of mail to more delivery points.