E-mail, Retirement, Health Benefits Hurt USPS Bottom Line

In a speech today, Postmaster General Donahoe called for greater postal service flexibility.


The Postal Service ended fiscal year 2011 with a $5.1 billion loss. During that period, mail volume fell by 3.1 billion pieces, or 1.7 percent from fiscal year 2010, and the value of first-class mail fell by 5.8 percent. After years of E-mail and electronic bill payment hurting the post office's bottom line, the Postal Service still says that the agency can fix its massive fiscal problems, if only Congress lets it.

According to Postmaster General Patrick Donahoe, lawmakers on Capitol Hill hold the key to allowing the USPS to fix itself. The rules currently in place, such as mandatory six-day delivery, give the postal service "no flexibility to function like a business," said Donahoe, speaking at a National Press Club luncheon. And though members of both the House and the Senate have floated bills to help the USPS cut costs and raise revenues, neither house of Congress has done so satisfactorily yet, said Donahoe.

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"If passed today, either bill would provide at best one year of profitability, and at least a decade of steep losses," said Donahoe. He advises "taking the best of both the House and Senate approaches" to fix the problems.

Aside from declining mail volumes and income, the postal service says its fiscal problems also stem from having overpaid billions of dollars to the Federal Employee Retirement System, as well as health and retirement benefits for its employees. Donahoe said today that the requirement to prepay employee retirement health benefits has left the agency "effectively bankrupt."

On the House side, Republican Reps. Darrell Issa and Dennis Ross have introduced a bill that would create a supervisory committee to oversee USPS finances, including the closure or consolidation of offices. It would also give the postal service the option of going to five-day delivery. This bill passed the House Oversight and Government Reform Committee.

The Senate bill is sponsored by a bipartisan group of four senators. Key components of that bill include reforming workers' compensation; include returning approximately $7 billion in FERS overpayments to the postal service, to be used for employee buyouts, toward reducing the workforce by 100,000 workers. The Senate bill would also prohibit the postal service from moving to five-day service for two years, during which the postal service would cut costs elsewhere and the government could study the potential effects of such a change.

According to a statement today from the U.S. Postal Service, "Taken as they are, [these two bills] do not come close to enabling cost reductions of $20 billion by 2015 which they must do for the Postal Service to return to profitability."

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Donahoe told reporters that he is in favor of the Senate bill's provisions to refund the FERS overpayment, as well as reform workers' compensation. He also vehemently disagreed with the House bill's proposed supervisory committee: "If we have to go to a control board, we've failed," he said.

Above all, he today repeatedly stressed the need for the post office to operate like a private business, with fewer strictures. This would allow it to better innovate its products and modernize its business model, he said.

The post office has already taken bold cost-cutting steps, reducing its workforce by 128,000 career employees over the last four years. Over the last decade, the USPS has also reduced work hours by 28 percent while delivering to 14 million additional addresses. Currently, the postal service is in the process of evaluating 3,700 offices for closure.

Aside from navigating the difficult waters of creating congresisonal consensus, Donohoe has other, larger constituencies to worry about. Dozens of protesters picketed outside of the National Press Club before Donohoe's speech, opposed to the postal service's proposed cutbacks and accusing Donohoe of "union-busting."

One of those protesters, Beverly Collins, is a 24-year veteran of the post office, currently working in a plant on Maryland's Eastern Shore that is in danger of closing. She believes that postal service leadership, including Donahoe, is asking too much sacrifice of employees. "[They're] trying to save themselves by cutting us off at the bottom," she said.