Postal Service's Donahoe Appealing to Congress: Help Save the Agency

U.S. Postmaster General Patrick Donahoe will appeal to Congress Tuesday to help find ways to save the struggling agency, which is nearing default and possibly even facing closure by the end of this year, according to one lawmaker.

Donahue and other leading postal officials have been calling for Congressional assistance, arguing that the post office could be crippled without it. Congress returned from recess Tuesday, and the USPS' struggle is on the agenda.

Already, the post office is expected to miss a $5.5 million payment due to the federal government on Sept. 30 for future employee health care costs -- but that's just one problem among many for the agency. Simply, the post office is in a multiple-pronged bind, wrenched by fast-declining revenue and costs that can't be shed fast enough.

Our situation is extremely serious, Donahoe told The New York Times. If Congress doesn't act, we will default.

The postal service's deficit will likely eclipse $9 billion this year, and the agency is trying to move fast to shore up its money-losing business. Donohoe and the USPS want to eliminate Saturday mail delivery, close as many as 3,700 postal locations, and lay off 120,000 workers -- even though the agency has a no-layoffs clause in union contracts.

Those moves, in addition to dealing with the $5.5 billion due to the federal government, cannot be made without help from Congress.

The postal service receives no taxpayer funds, and expects to lose $8 billion or more this year as its business declines amid more people using online bill pay and e-mail. The postal service needs to cut its payroll to 425,000 jobs -- reducing one-fifth of its workforce -- and take over its retirement and health benefits instead of participating in federal programs, Donahoe told Reuters last month.

The post office hopes to reach a deal with Congress by the end of September to give the agency more control over its finances.

If Congress does address the issue, as the USPS is asking, it is expected to be politically sensitive. Both plans, including the job cuts and benefits change, would face severe opposition from postal worker unions. In the past four years, the post office has cut 110,000 jobs, and it is in the process of eliminating 7,500 administrative jobs.

Last month, the post office's chief financial officer said the agency is cash-starved. He warned of default and publicly asked Congress to help address the dire situation.

The postal service is also facing a $1.3 million payment for worker's compensation that is due in November.

The Senate Homeland Security and Governmental Affairs Committee will hold a hearing on the agency's predicament Tuesday afternoon. Donahue will be one of several witnesses testifying.

We know that the [mail] volume will continue to drop off from a First Class standpoint, Donahoe told Reuters last month. So we've got to do the responsible thing and get ourselves in order.

It's our goal to work with both houses of Congress ... to help craft a bill that would be passable and signed by the president by the end of September, he added.

Joseph Corbett, the postal service's finance chief, also noted the seriousness of the situation in a statement last week. We are experiencing a severe cash crisis, and are unable to continue to maintain the aggressive prepayment schedule, he said.

Nonetheless, Donohue said the mail will still get delivered if something isn't done, until the agency can no longer operate.

We will deliver the mail, he said. The thing we will not do is pay the federal government.

Donohue said the postal service cannot survive as a self-financing entity without changes to the laws requiring it to make such large payments to the government.

Thomas Carper, a Delaware Democrat who is chairman of the Senate subcommittee that oversees the post office, told the New York Times that if we don't react in a smart, appropriate way, the postal service could literally close this year.

If the postal service misses its $5.5 billion payment, the agency will technically be in default -- but officials say it will not cause immediate shutdown. It won't be until early next year that the agency runs out of money to pay employees and operate delivery vehicles.

Still, the USPS has has wanted to get the large annual payment off its books for some time. It argues that the prepayment to the federal government for future retiree benefits isn't an obligation faced by its competitors or any government agency.

Post office officials add that the payment is based upon legislation passed in 2006, when mail volume was at its peak and when it had more workers. Since 2006, it has shed 113,000 employees.

With its business in decline, the post office lost $3.1 billion in the third quarter. Total mail volume for the quarter ended June 30 fell to 39.8 million pieces, a 2.6 percent drop from the same period the previous year. In an attempt to shrink itself, the postal service last month added 3,700 more retail locations throughout the country to a possible closure list.

It now has about 32,000 post offices and branches and 583,908 career employees.

The postal service had a loss of $5.7 billion for the nine-month period ended June 30, compared with a loss of $5.4 million in the same period in 2010, it said.

The recent debt ceiling debate displayed bipartisan bickering and exposed how hard it can be for lawmakers to reach a consensus on cutting costs; hence, adding another $5.5 billion to the deficit and tackling politically sensitive jobs issues with labor unions isn't likely to happen easily.

Some lawmakers are opposed to ending Saturday delivery, while others are far that and other drastic measures.

On the House side, Rep. Darrell Issa, R-Calif., is pushing a bill that would create a commission to recommend office closures, and allow for five-day delivery among other cost-cutting post office moves.