July 28, 2011

THE BIGGEST CRISIS surrounding the U.S. Postal Service is the fact that no one seems to notice how bad the crisis is.

Further delay in addressing the system’s troubles is literally unaffordable. Facing a deficit of $8 billion this year, the Postal Service will default on its obligations by October and leave taxpayers footing the bill unless serious changes are made.

The only bill before Congress that offers any opportunity to fix this is the Ross-Issa Postal Reform Act of 2011. Is the act perfect? By no means. But the bill includes a mechanism for fundamental change, as well as several reforms that the Postal Service sorely needs: a shift to five-day delivery, which would save an estimated $3 billion over the first four years; a requirement that the financial predicament of the Postal Service be taken into consideration in any arbitration; and the ability to renegotiate existing contracts if the Postal Service’s finances require it.

Unlike at least one other bill aimed at the Postal Service, the Ross-Issa bill does not depend on a recently discovered windfall of up to $50 billion that some actuaries claim was overpaid by the Postal Service some years ago — a cache that has given those unwilling to change the status quo an argument for postponing critical structural reforms.

The Ross-Issa bill creates two commissions — one to focus on post office closures, excess processing capacity and unnecessary administrative offices, and the other to take charge of the USPS’s finances if it goes into default and take whatever measures are necessary to bring it back into the black, including renegotiating collective bargaining agreements.

On Tuesday, Postmaster General Patrick Donahoe announced that 3,653 local post offices are being studied for closure. But closing post offices will not resolve the USPS’s problems. Eighty percent of the Postal Service’s current costs stem from labor — a higher percentage than more than 30 years ago, when the USPS lacked automation. Some employees still enjoy a no-layoffs clause. Even after recent concessions, they contribute a smaller share of their salary to health-care plans than do most federal workers — a gap the Postal Reform Act would close. And rules preventing arbitrators from taking the financial crisis of the USPS into consideration have resulted in new contracts that give employees raises even in the face of ever-mounting deficits.

The USPS blames its woes on the requirement that it pre-fund employees’ retirement benefits. We have repeatedly supported the prepayment, based on the simple logic that the USPS, at its present rate of decline, will not have enough money to fund the plans when employees retire. This remains the case.

In the long run, the best solution for the Postal Service would be one that cuts it loose of the cumbersome oversight structure that prevents it from efficiently downsizing or competing, allows it to negotiate more sensible contracts and behave more like a private-sector business, and rethinks its universal service obligation for a century where people no longer rely on the mail to pay bills or send messages.

Currently, taxpayers do not fund the Postal Service. But if present trends continue, they may have to. The Issa bill, while not perfect, supplies several necessary reforms and offers a path to pull the USPS out of the red.