Last reorganized in 1970, the Postal Service has about 635,000 full-time employees and 164,500 part-time workers, and generally relies on revenue from operations rather than taxpayer funding. The organization recently has been plagued by stagnant revenue, rising costs and declining mail volume, leading to several consecutive years in the red before a return to modest profitability last year.
Especially worrying to postal officials is the accelerating decline in letters and other first-class mail, a lucrative line of business that has traditionally covered two-thirds of the Postal Service's costs. Officials predict further erosion as Americans increasingly turn to the Internet, e-mail and cell phones to pay bills and stay connected. As revenue has declined, however, the number of addresses the Postal Service must deliver to has continued to increase.
"We add about 1.8 million new addresses every year," Moden said. "That comes at a cost. The business model had always assumed that those costs could be covered by growing mail volume. . . . The concern -- and we're starting to actually see it now -- is that volume growth may not be as self-generating as we once thought it was."
Congress provided some financial relief last year when it passed a law allowing the Postal Service to scale back by billions of dollars its annual payments into its over-funded pension accounts for longer-serving employees. The measure helped temporarily restore the Postal Service to profitability, but it also gave rise to two thorny issues that now complicate efforts to pass the larger overhaul legislation.
One is a technical but important dispute over whether the Treasury Department or the Postal Service should pay about $27 billion in retirement benefits to some workers related to their military service. Historically, Treasury has paid such costs, but the responsibility was shifted to the Postal Service last year as part of the postal pension legislation.
Postal officials want to switch the burden back. Both the House and Senate bills would do so, but the White House opposes such a move, which would add billions to the budget deficit.
A second issue is the fate of about $3 billion a year in postal pension savings starting in fiscal 2006. Congress allowed the Postal Service to keep that money this year, but required that it be deposited in an escrow account in later years as a check on wasteful spending until the prospective postal reorganization could be put in place.
Postal officials say that unless they gain access to that money, and the larger pension payment issues are resolved, rate increases will be higher than they otherwise would have to be. The administration is wary of releasing the money, however, because that, too, would add to the deficit.
The uncertainty of the situation is bad for large mailers, who are now trying to budget for future mailing expenses without any guarantee that legislative relief is on the way.
"We're worried about this notion that mailers are going to be forced to pay a 'stamp tax,' " said Neal Denton, executive director of the Alliance of Nonprofit Mailers, an association of charitable groups, referring to prospective rate hikes tied to political disputes about the pension contributions rather than to actual costs. Mailers "are all assuming now that we're going to get stuck with double-digit rate increases, because it's been years and Congress still hasn't gotten postal reform passed."
Denton said Congress should consider a two-track approach, releasing the former pension payment money as a short-term fix to hold down mailing rates, while still pursuing the larger legislative package.
Michael J. Critelli, chief executive of Pitney Bowes Inc. and president of the Mailing Industry CEO Council, disagreed, saying such an approach would only delay the larger effort.
"If we at this point in time peel off the pension issue from everything else, we will have a very great deal of difficulty reassembling the coalition that has come together behind comprehensive postal reform legislation," Critelli said. "We need to keep going on the present track."
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