Postal Service to pay millions in performance bonuses

The Postal Service will pay out $124.5 million to executives, managers, supervisors and postmasters for meeting performance goals in fiscal 2001, postal officials announced Tuesday. Roughly 61 percent of the 85,000 Postal Career Executive Schedule managers--the equivalent of Senior Executive Service members--have met their goals for the year.

The Postal Service has been required to pay for performance bonuses since 1996, when senior managers negotiated a pay-for-performance package in lieu of annual cost-of-living increases and overtime pay. Postal union leaders have long criticized the program, claiming line employees, not managers, are responsible for gains in productivity. Postal Service officials point out that unions were offered a pay-for-performance package but chose not to participate.

"Without that agreement, we would have paid out $500 million more," Deputy Postmaster General John Nolan said, referring to the deal with senior managers.

Postal Service Chief Financial Officer Richard Strasser, appearing with other agency executives at a news briefing Tuesday, noted that productivity is at an all-time high. The agency saved $900 million from productivity gains in 2001. It added 1.6 million new delivery points and cut 23 million workhours, the equivalent of 11,500 employees.

But Strasser also delivered some bad news--the agency lost $1.68 billion in fiscal 2001, $1.2 billion more than anticipated.

Strasser blamed the additional losses on three overriding factors: the delay in implementing the most recent rate hike, the recession and the Sept. 11 attacks. Between Sept. 11 and the end of the fiscal year on Sept. 30, mail volume dropped by 800 million pieces, costing the agency between $250 million and $300 million in revenue. For the year, mail volume declined 0.2 percent, the first drop in more than a decade.

The trend line has continued into fiscal 2002. Thus far, mail volume is down 6.8 percent. Losses are already $400 million beyond estimates.

Union negotiations could also have a dramatic impact on the bottom line. The agency is in arbitration with three unions and in collective bargaining with a fourth. Most agency watchers expect benefits for all the unions to increase. At the same time, the agency is in negotiations with mailers to settle a rate case filed this fall. The board of governors gave management until Dec. 28 to reach a settlement or proceed with the normal rate making process.

Also on Tuesday, Postal Service Chief Executive Officer Pat Donahoe denied press accounts that the agency is going to stop irradiating mail. The Postal Service has committed to purchase at least eight machines to irradiate mail. Officials are currently assessing where and how to deploy the technology. Meanwhile, the $1.1 billion the Postal Service asked Congress to pay for the machines is tied up in political negotiations. Postal Service officials maintain that the government, not ratepayers, should bear the cost of those machines.