USPS reform may be on the way, but is it too late?

With each passing day, it is more obvious that the U.S. Postal Service’s business model is “not viable,” as a Government Accountability Office report put it last year. Having lost $8.5 billion in fiscal 2010, USPS expects to lose another $8.3 billion in fiscal 2011. Personnel accounts for 80 percent of the Postal Service’scosts, but its new 4¹ / _2-year agreement with a 205,000-member union cuts costs only $844 million a year. And USPS has to pay $6.7 billion to retiree health and worker compensation funds by Sept. 30.

USPS, in short, could be unable to make payroll in the near term unless Congress acts. Yet the likeliest answer from Capitol Hill is to extend more aid, enabling USPS to limp along for a few more years, without attacking the Postal Service’s dysfunction at the roots.

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The Senate’s leaders on postal issues, Sens. Susan Collins (R-Maine) and Thomas R. Carper (D-Del.), propose to let the Postal Service dip into the federal civil service retiree fund for the next several years so it can make otherwise unaffordable annual payments for retiree health and worker compensation. Ms. Collins and Mr.Carper say that this is justifiable because the Postal Service had overpaid the federal civil-service pension fund by some $50 billion in recent years, according to the USPS inspector general and the Postal Regulatory Commission.

Still, it’s a big concession that basically suspends the requirement, enacted just five years ago, that the Postal Service pre-fund these liabilities out of current revenue. USPS and its unions habitually blame this law for all of their woes. Actually, given USPS’s bleak financial future, the law was a wise precaution that also gave Congress leverage to demand reform.

And what would the proposed legislation exact in return for this concession? The strongest provision of Ms. Collins’s bill would fix the pro-labor tilt in existing law by requiring arbitrators to take USPS’s financial condition into account before settling contract disputes. The lack of such a provision is one reason USPS was unable to negotiate a tougher contract this year. Necessary as it is, however, Ms. Collins’s reform can’t make much impact until the next labor negotiations, which, for most postal workers, don’t come until 2015.

Mr. Carper’s bill would allow the Postal Service to trim its thousands of excess post offices more rapidly than Ms. Collins’s proposal would, and allow the Postal Service to suspend Saturday delivery, saving $3 billion per year, according to USPS. Well and good: The post office network is long overdue for consolidation, and Americans will survive if the mail comes Monday through Friday.

Yet we can’t help noting that these service cuts are necessary, in part, because the Postal Service has not done more to cut other still-unreasonable costs: Postal employees still enjoy a no-layoff clause and still pay a smaller share of their salary for health care than federal workers. More than 850 senior postal service managers get their health care absolutely free.

The USPS was created by the Postal Reorganization Act of 1970, when the iPad was still science fiction. The current proposals represent potential progress, not fundamental change. Once Congress puts out USPS’s latest financial fire, it must draft legislation that transforms today’s technological dinosaur to a more efficient, nimbler and, inevitably, much smaller business — one that could eventually attract private capital as European postal agencies have done.