USPS would get $20 billion in cash relief under Obama’s plan

The U.S. Postal Service would see $20 billion in relief under President Obama's deficit reduction plan, in part through changes in employee benefits.

The proposal, introduced Monday, would allow the Postal Service to cut delivery days from six to five, provide two years of relief from employer contributions to the agency's Federal Employees Retirement System account and restructure obligations to prefund retiree health benefits. USPS also would have the flexibility to alter its retail network and adjust postage costs.

"We're cleaning up a significant liability and putting the Postal Service on a sustainable course," a senior Obama administration official told reporters Monday. "All of those things are responsible things to do." He added that the plan would offer "short-term relief to the Postal Service as well as take off the handcuffs in order to allow it to do some of the structural reforms it has said are needed."

Postal officials have said that without help, the agency will default on several payments to the federal government and will be $10 billion in the red by the end of September. The agency in June halted contributions to its FERS account and is targeting 120,000 jobs for layoffs by 2015. USPS also is seeking permission to create its own health and retirement benefit plans, reduce delivery days, and adjust staffing levels to meet changing mail volume.

Under the president's proposal, the Postal Service would receive $20 billion in short-term relief, including $6.9 billion over two years as payback for surplus contributions to its FERS account. The plan would forgive the $5.5 billion retiree health payment due on Sept. 30 and spread out the agency's obligation to the fund over several years on an accrual basis, providing $10 billion in relief. USPS could phase in five-day delivery beginning in 2013, officials said.

The administration will not back USPS' proposal to alter labor contract provisions that prohibit layoffs, however. Officials on Monday expressed support for continued use of buyouts and early retirement offers, which they said could be funded in part with the FERS refund. The administration also is taking a closer look at the agency's request to withdraw from federal benefit programs, they said.

The measures already are drawing mixed reactions from Congress, which has several bills in play to bring the Postal Service back to fiscal health. House lawmakers earlier this month introduced legislation that would extend by 90 days the Postal Service's deadline to make its retiree health fund contribution and are working on proposals that would allow USPS to offer retirement incentives and adjust its retiree benefits payment schedule, for example.

"What the president has put forward today appears to be a meaningful response to a very real and dire crisis that has the potential, perhaps in combination with other proposals that have been made in recent months, to address the challenges facing the Postal Service in the near term and in the years to come," said Sen. Tom Carper, D-Del.

Rep. Darrell Issa, R-Calif., who in May sponsored postal reform legislation, criticized Obama's proposal for offering "fake" savings.

"The president's plan to achieve savings for the Postal Service does so by sticking taxpayers with the tab," Issa said. "Rather than backing an effort to seek fundamental reform, the accounting gimmicks used in the plan are a thinly veiled attempt to offset continued operating losses with a taxpayer-funded bailout."

The House subcommittee responsible for postal issues on Wednesday will take up Issa's bill, which he says will save the agency at least $10.7 billion annually. Issa plans to introduce an amendment to the legislation that would cut back door-to-door delivery and reduce the postal workforce starting with retirement-eligible employees before laying off other staff.