Postal commission considers new pay system

Pay-for-performance could be included in a forthcoming plan to reform the U.S. Postal Service, most likely encompassing both employees and managers.

Members of the Presidential Commission on the U.S. Postal Service are debating the concept, though details have not been ironed out. Appointed in December to develop a blueprint for reforming the agency, the commission held the last of seven hearings Thursday in Washington. Very early in the proceeding, commission co-chairman Harry Pearce said several of the nine panel members were focused on building an incentive package into their recommendation to President Bush.

But implementing a pay-for-performance program would be extremely difficult. The agency's employee unions are vehemently opposed to the idea. William Burrus, president of the American Postal Workers Union, called the last incentive program, negotiated by the union and USPS in the mid-1980s, a failure. Postmaster General John Potter said he would not endorse widespread pay-for-performance without support from the unions.

"The worst thing we could do is to try and force it on the craft employees," he told Government Executive. "We would need some sort of cooperative agreement before moving forward."

Currently, the agency has an incentive plan for supervisors. But even that program has come under fire in recent years from congressional overseers and managers. The Postal Service and its supervisors' association are in the process of developing a new pay-for-performance formula.

As it moves forward, the commission should get a better understanding of the agency's overall compensation package and see how it compares with the private sector, said David Walker, head of the General Accounting Office.

Walker also told the commission to address how the Postal Service accounts for retiree health care costs, which he estimated at between $40 billion and $50 billion. Currently, the Postal Service views the costs on a cash accounting, or pay-as-you-go, basis. It is an accepted accounting principle used by many companies. But Walker and GAO have for the past several years argued that the Postal Service should track the costs as an accrued expense. This would give the agency a more realistic picture of future health care outlays and allow them to built into rate changes, he said.

Several members of the commission seemed to agree with Walker, but were unsure how the agency could phase in the change.

On a broader level, commissioners did not tip their hands on how far-reaching their recommendations will be. There seems to be a consensus that the agency needs some flexibility in the rate-setting process. Additionally, the Postal Service's mandate to break even financially each year is likely to be addressed in some fashion. That may include allowing the agency to retain its earnings and reinvest them in operations.

But few postal observers expect a groundbreaking proposal. In fact, many predicted that the commission will retain the current business model, with slight modifications.

That would not be to Walker's liking. "They need to be bold," he said. "That's why you create a commission."

A final report is due to the president by July 31.