Postal Service: Legislation Needed to Change Fed Burden For Profit Sake
September 8, 2011 by Sam Rolley
Without legislative action, the U.S. Postal Service will most likely default by the end of September, according to a press release issued Tuesday. The agency lacks the funding to meet a Congressionally mandated $5.5 billion payment to pre-fund Postal Service retiree health benefits.
“The Postal Service is in a crisis today because it operates within a restrictive business model and has limited flexibility to respond to a changing marketplace,” Postmaster General Patrick Donahoe told the Committee on Homeland Security and Governmental Affairs on Tuesday. “We need the ability to operate more as a business does. This applies to the way we provide products and services, allocate resources, configure our retail, delivery and mail processing networks and manage our workforce.”
The Postal Service has blamed the current economic climate and the increased use of electronic communication for a significant drop in the amount of First Class and Standard mail that the agency handles, a trend that is predicted to continue indefinitely. Over the past four years, the agency has cut costs by about $12 billion and let go about 110,000 employees. In order to meet profitability in its current state, the Postal Service must make an additional $20 billion in cuts by 2015: This means large-scale lay-offs, post office closings and a major reduction in services.
“Without legislative change this year, the Postal Service faces default, as available liquidity at the end of this month will be insufficient to meet our financial obligations. Even our unavoidable default on the required $5.5 billion RHB pre-payment and the suspension of our employer contribution to the defined benefit portion of the Federal Employees’ Retirement System (FERS) will not stave off financial disaster,” Donahoe said. “After reimbursing the Department of Labor (DOL) $1.3 billion for workers’ compensation payments in October 2011, we will have liquidity equal to approximately one week’s operating expenses. Foregoing the RHB pre-payment this year, without fundamental changes in the funding schedule, will likely only forestall insolvency until this time next year.”
The Postal Service says it is not looking for a bailout, but legislation that will ease its operational burdens. Among the legislative action on the failing agency’s wish list: an amendment that would change the way its $5.5 billion in annual retirement health benefits is handled; a return of $6.9 billion in Federal Employees Retirement System overpayments; the authority to change the agency’s healthcare system to make it independent of the Federal system; and the authority to set its own delivery schedule, product policy and new-hire practices.
The size of the Postal Service workforce must also be addressed to meet the 2015 goal. In order to return to profitability, the Postal Service will have to to reduce its career workforce by about another 220,000, but it is unable to do so under the terms of existing collective bargain agreements. To ease workforce reductions, the Postal Service is asking Congress to allow it to use Reduction-in-Force (RIF) provisions currently applicable to Federal competitive service employees for positions held by bargaining unit employees.