Postal Service needs immediate financial relief, lawmakers say

To stay afloat, the U.S. Postal Service needs immediate relief from a congressional mandate that requires the agency to make advance payments to its retiree health fund, witnesses and lawmakers said during a hearing on Thursday. But union leaders and senators clashed over amendments to a relief bill that would affect contract negotiations set to take place in 2010 and 2011.

"I think it's critical to do this rescheduling of the payments into the retiree health fund, payments that are way above any other governmental program of its kind," said Sen. Joseph Lieberman, I-Conn. "The reality though is that's not going to be enough. That's a short-term step to allow the Postal Service to essentially keep going. We've got to agree on a broader strategy that will save the Postal Service."

Postmaster General John Potter said he had notified Congress and the Obama administration that the agency would not be able to pay all of the $5.4 billion it is required to contribute to the Postal Service Retiree Health Benefit Fund on Sept. 30 to compensate current employees.

That $5.4 billion figure is set by a 2006 law that requires the Postal Service to make substantial advance payments to ensure that it has funding to cover the future costs of retiree health care until 2017, when it will begin making payments based on actual coverage needs as calculated by the Office of Personnel Management. On July 30, the Homeland Security and Governmental Affairs Committee passed S. 1507, which would allow the Postal Service to begin making those more tailored payments immediately.

While senators indicated that it was likely they would approve S. 1507 or a similar bill, they agreed that the financial problems USPS faces are long-term issues driven more by declining use of regular mail services that will require major restructuring, either in terms of remapped routes, post office closures, a smaller workforce or a reduced delivery schedule.

Postal Service management and an agency oversight group described a positive relationship between labor and management in addressing several issues confronting USPS. Potter praised the National Association of Letter Carriers for working with the agency to conduct a review of 158,000 mail delivery routes. And Postal Regulatory Service Commissioner Ruth Goldway said, "Management and labor have worked remarkably cooperatively and effectively to streamline the system. I think we can be confident that they are going to be responsible in the future."

But compensation and benefits account for 80 percent of the Postal Service's costs. And the four collective bargaining agreements that cover 85 percent of postal employees expire are set to expire in 2010 and 2011.

Some senators view those negotiations as an opportunity to shrink those costs.

"It is my hope that the unions continue to work constructively with the Postal Service through those negotiations to adjust pay, benefits and work rules to reflect the reality that the Postal Service faces in the mailing and communications market today," said Sen. Thomas Carper, D-Del., chairman of the Senate Homeland Security and Governmental Affairs Federal Financial Management Subcommittee, which conducted the hearing. "These will not be easy negotiations."

But they are not merely hoping. The Homeland Security and Governmental Affairs Committee added an amendment, authored by Sen. Tom Coburn, R-Okla., that would require the arbitrators who handle USPS contract negotiations to "take the financial health of the Postal Service into account." Lieberman, who voted for the amendment, called it "a statement of reality."

Potter said he supported the amendment because the existing instructions to arbitrators to consider prevailing private sector wages when negotiating agreements were overly broad, sometimes leading arbitrators to compare postal workers' wages to those paid to police officers, and they bore no reflection on the specific financial conditions the agency faces.

But postal unions blasted the amendment, saying arbitrators and negotiators already considered the economy and the financial straits of the Postal Service.

"This is a mean-spirited amendment that is intended to shift the payment of the employer's share of retiree health care liabilities to employees," said William Burrus, president of the American Postal Workers Union. "The committee did not consider imposing "This is a mean-spirited amendment that is intended to shift the payment of the employer's share of retiree health care liabilities to employees," said William Burrus, president of the American Postal Workers Union. "The committee did not consider imposing a surtax on postage rates to pay the unfunded liability, but adopted an amendment that would, in effect, assess a tax on postal workers."

Sen. Daniel Akaka, D-Hawaii, said he thought the amendment was unnecessary and served no practical function other than to "insult" postal workers by suggesting they were inattentive to the overall financial health of the organization.

Pay and benefits are not the only issues the Postal Service must confront as it seeks to work around existing contracts to cut costs. Potter said the agency had offered early retirement opportunities to 150,000 employees, but the Government Accountability Office reported that less than 3 percent of those employees took buyouts. Potter told Sen. John McCain, R-Ariz., that it would be difficult to reduce the workforce through layoffs, because existing union contracts include clauses prohibiting layoffs. The clauses vary, but generally, before the Postal Service can move to lay off career employees, it first must stop using noncareer and contract employees.

Sen. Susan Collins, R-Maine, said she hoped the Postal Service would explore opportunities to cross-train its employees so they could work more efficiently and perform more tasks.

"I wish I could be optimistic" that negotiations with the postal unions would allow such training, Potter said. "But having discussed these issues in the past, we were not successful. Hopefully, the conditions we're in today would make people more open."