Everyone agrees with that, but are Donahoe’s proposals the answer?
The Postal Service, whose operating expenses are funded by the sale of its goods and services and not by tax dollars, has long warned that its financial doomsday was quickly approaching. But only last month did it issue white papers proposing to totally restructure benefit programs and dismantle contracts.
Joe Davidson
Joe Davidson writes the Federal Diary, a column about the federal workplace that celebrated its 80th birthday in November 2012. Davidson previously was an assistant city editor at The Washington Post and a Washington and foreign correspondent with The Wall Street Journal, where he covered federal agencies and political campaigns.
Interactive: Post office closures
The USPS has taken a number of measures to reduce costs, including cutting payroll and facilities. It has pushed Congress to allow five-day delivery, asked for a refund of pension contribution overpayments and pleaded for a restructuring of a particularly devastating prefunding of retiree health benefits requirement Congress had imposed on the agency.
“The last four years’ reported losses can all be attributed to this prefunding and then some,” Fredric V. Rolando, president of the National Association of Letter Carriers, said in an interview.
He is correct.
According to the USPS white papers, from 2007 to 2010, mail volume declined 20 percent while postage remained capped at the rate of inflation, “resulting in net losses over the period of just over $20 billion, including a loss in FY2010 of $8.5 billion.”
During that period, the prefunding of retiree health benefits cost $21 billion. Without that congressional mandate, the USPS would have cleared $611 million.
But does that mean that simply reversing the mandate is the answer to postal problems?
No.
“Eliminating the prefunding for retiree health benefits will not solve all our financial problems,” said David A. Partenheimer, a USPS spokesman. The agency is going broke even faster than it recently predicted. “Mail volumes and revenues have fallen below what we estimated just a few months ago, and we expect these declines to continue.”
Donahoe didn’t quibble with a “radical” label for his new proposals when asked about them during an interview.
“To your point it’s a radical change . . . you’ve got to start to take a look at some creative solutions. We can’t sit back and hope things resolve themselves.”
Donahoe plans to tell Congress that a failure to act on the Postal Service’s finances “would be catastrophic.” Last month’s white paper on “Workforce Optimization,” meaning layoffs, says the USPS “will be insolvent next month,” meaning this month.
But Donahoe was quick to explain during the interview that insolvency does not mean the Postal Service will go out of business.
“We will not shut operations down,” he said, adding that the USPS has the money to pay employees and suppliers until next August. But it could miss a retiree health benefit payment, which would allow it to be considered insolvent.
“We will continue to deliver the mail,” he said.
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