USPS move to five-day delivery isn’t a done deal

While labor costs are a major cause of financial woes at the Postal Service, five-day mail delivery and further workforce reductions are not certainties, officials told lawmakers on Thursday.

In a hearing before a Senate Homeland Security and Governmental Affairs subcommittee, Postmaster General John Potter warned the agency could run out of cash in fiscal 2011 unless Congress takes immediate action. The Postal Service is projecting a 10-year, $238 billion budget deficit unless drastic changes are made to its operation. Employee compensation and benefits account for 80 percent of Postal Service expenses -- a major cause for concern, witnesses said.

"We can't fix this problem without looking at all costs. To say we shouldn't consider labor costs, we won't solve the problem without considering [them]," said Sen. Tom Coburn, R-Okla.

Panelists agreed that one change alone won't solve the Postal Service's fiscal problems. The agency is looking for relief from its $5.6 billion annual retiree health benefits prefunding requirement, as well as elimination of Saturday delivery and an arbiter to consider financial concerns in the collective bargaining process. A Postal Service inspector general audit found that the agency is overfunding its Civil Service Retirement System pension fund by $75 billion, which, if refunded, would mitigate the budget crisis, according to Potter.

The Postal Service in March filed its five-day delivery plan with the Postal Regulatory Commission and is waiting for an advisory opinion. The plan also included provisions to eliminate the equivalent of 40,000 full-time positions at a savings of $2.7 billion.

The PRC already has received 2,000 public comments on the plan and has seven hearings planned to solicit feedback, according to PRC Chairman Ruth Goldway. The commission will keep an open mind and ensure the process is as "speedy and efficient as possible given the restraints we have," she said.

The PRC will examine whether the Postal Service has overfunded its pension fund by $75 billion, releasing those findings in early July. In addition, the commission will consider the calculation and financing of the agency's retiree health benefits and weigh whether to adjust contributions to a more affordable level over time, Goldway said.

Lawmakers disagreed over whether eliminating Saturday delivery would be the best move for the Postal Service. Sen. Daniel Akaka, D-Hawaii, said the projected $3 billion in annual savings might not be accurate, and others expressed concerned that the 17 percent delivery reduction is estimated to bring only 5 percent in savings to the agency. Potter explained that currently a combination of factors already in place, such as five-day delivery to certain addresses and the use of noncareer employees on rural routes, lower that savings estimate. The agency also has offset the savings projection with an estimated drop in revenue, he added.

According to Federal Financial Management, Government Information, Federal Services, and International Security Subcommittee Chairman Tom Carper, D-Del., the Postal Service's five-day delivery proposal should receive serious consideration, but Congress' opposition to the idea has hampered the agency's ability to turn itself around.

"It is long past time for us to get out of the way and allow postal management to take steps that need to be taken to adjust to the new reality the Postal Service faces," he said.