Postal Service does not foresee layoffs despite pressures

The head of the U.S. Postal Service said Tuesday high labor expenses and a decline in the circulation of more profitable classes of mail pose new challenges for the organization, which is undergoing a major overhaul of business operations.

Still, Postmaster General John Potter assured the House Oversight and Government Reform Federal Workforce Subcommittee, "I do not foresee laying off workers" to cut labor costs, which amount to 80 percent of its budget.

Speaking at what lawmakers called the first congressional oversight hearing for the Postal Service in nearly a decade, Potter said that changes in the Postal Service's business model -- dictated by new rules set under legislation enacted in December 2006 -- could lead to dramatic changes to its workforce.

"I do not believe any law, however well intended, can repair [our] broken model, because mail volume is no longer growing at a rate sufficient to sustain the ever-expanding delivery network," the one-time mail clerk said.

Despite his assurances about the existing workforce, lawmakers expressed concerns about potential layoffs of letter carriers and the hiring of more private contractors as cost-cutting options for the Postal Service, which delivered 213 billion pieces of mail last year. Currently, 94 percent of all letter carriers are career employees.

Postal Service representatives told the subcommittee it will have to come up with creative ways to drive business and keep prices low.

"In a competitive market, raising the price of mail no longer solves the problem," said James Miller, chairman of the Postal Service Board of Governors. The expansive legislation enacted late last year imposes a rate cap on the Postal Service for the first time, requiring that it tie pricing of stamps and first-class mail to the inflation rate.

The law requires the price of express and priority mail be aligned with the market, taking into consideration what competitors like FedEx and UPS charge for deliveries. The newly created Postal Regulatory Commission is to draw up a pricing plan for those products, which is not expected to be released for another year.

House Oversight and Government Reform Federal Workforce Subcommittee Chairman Danny Davis, D-Ill., announced a field hearing in his Chicago congressional district next month, responding to Potter's comments that the city's delivery standards were among the worst nationwide.

Davis said he planned to schedule a series of oversight hearings "to ensure the Postal Service can compete in today's market."

In the Senate, meanwhile, Homeland Security and Governmental Affairs Federal Financial Management Subcommittee Chairman Thomas Carper, D-Del., announced Tuesday that his panel would hear from Potter Thursday in its first review of progress made under the recently enacted postal service overhaul legislation.