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Joe Davidson's Federal Diary

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By Joe Davidson
Tuesday, March 24, 2009

The news is that the U.S. Postal Service wants to cut its huge losses by letting 150,000 employees -- that's more than the population of Hampton, Va. -- take early retirement.

The sideshow is the the postmaster general's compensation package.

Both will be on the agenda tomorrow as Congress looks at the declining fortunes of the post office and the increasing compensation of its boss.

First the news.

The Postal Service says it is trying to save $100 million annually through a series of measures that include closing offices and eliminating positions.

Postal district-level administrative positions are being cut by 15 percent, or about 1,400 people. Another 1,400 mail processing supervisors and management positions are being eliminated at almost 400 facilities nationwide.

And six offices -- in Lake Mary, Fla.; North Reading, Mass.; Manchester, N.H.; Edison, N.J.; Erie, Pa., and Spokane, Wash. -- will close.

Postal officials assure us that the office closings won't hurt service. The facilities "house only administrative functions and will not adversely affect customer service, mail delivery, Post Office operations," says a statement that the USPS issued Friday.

The cuts are needed because the nation's financial health is in the dumps and mail volume has sunk along with it. "Our fiscal condition is pretty serious," said Patrick R. Donahoe, deputy postmaster general, in an interview. "We're greatly affected by what is going on in the economy."

As the number of unemployed people, foreclosures and store closings go up, the amount of advertising -- a huge part of the postal business -- goes down. The year with the highest volume was 2006, when the Postal Service handled 213 billion pieces of mail. That was down to 204 billion pieces last year, and 180 billion pieces are expected to be delivered this year, Donahoe said.

Advertising for banks, real estate and cars is way off. Contrary to popular opinion, the Internet is not a major cause of the big hole in the postal bank account. The Web was engrained in our lives three years go, when mail volume was the greatest. Paying bills online does take away some postal business, but that's been a "slow and methodical" drop of a couple percentage points a year, according to Donahoe.

A big factor is the money the Postal Service must pay for future retiree health benefits. Without that, the service would have had a net income of $1.6 billion in fiscal 2007 instead of a $5.1 billion loss, a spokesman said.

Now the sideshow.

John E. Potter, widely known as Jack, has been postmaster and chief executive officer since 2001. Whenever the Postal Service talks about its losses or the need to raise rates, as will happen in May, stories fly about how much Potter makes.

His compensation is on the agenda for a hearing tomorrow by the House subcommittee on federal workforce, postal service and the District of Columbia.

"Given the ongoing financial losses at the Postal Service, there has been a considerable backlash among postal customers and current and former employees regarding the postal executives' compensation packages, including that of Postmaster General Potter," said Rep. Stephen F. Lynch (D-Mass.), the panel's chairman.

That backlash comes from people who believe Potter makes $857,459 a year.

On Feb. 17, ABC News reported: "Potter's base salary went from $186,000 in 2007 to more than $260,000 last year. On top of that, an incentive bonus of $135,000. Add in retirement benefits and other perks, total compensation was more than $850,000."

But Potter's salary was not that high, as this and other reports would lead you to believe, if you miss the point about retirement. Almost $381,500 of the $850,000 was due to an increase in the value of his retirement fund, which will be paid, of course, after he retires. Another $70,000 covers the cost of his security detail, insurance, annual physical and other items.

A bonus of $135,041 also is included in the $857,459, but that will be paid out over 10 years after he leaves federal service. And note this: Postal operations and salaries, including Potter's, are funded by the postage we buy and not the taxes we pay. Congress, however, has said that postal employee pay should be comparable to that in the private sector.

Given the sad shape of the Postal Service, tough questions certainly should be raised about Potter's compensation, particularly the bonus and 40 percent raise. But those questions should be based on fact and not erroneous impressions easily fueled by reports that skim over the details.

Contact Joe Davidson at federaldiary@washpost.com.


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