In Special Delivery to Lawmakers, U.S. Postmaster Signals SOS

By Joe Davidson
Thursday, March 26, 2009

If the U.S. Postal Service delivered mail by boat, it would be a sinking ship.

A large hole in the hull, punched by a huge iceberg named Recession, is draining mail volume while it allows financial losses to flow in and drown the service in a financial swamp.

The Postal Service is in dreadful shape and needs quick help from Congress to continue delivering the mail.

That was the message repeated over and over by a parade of witnesses yesterday before the House subcommittee on federal workforce, postal service and the District of Columbia.

"At this moment, the survival of the Postal Service -- a venerable institution that is literally older than our country -- hangs in the balance," warned William H. Young, president of the National Association of Letter Carriers. "The Great Recession we face today threatens to destroy the most trusted and universal connection most Americans have with their national government."

There might be some hyperbole in that. The postal service likely will rebound as the economy does. But how much will it suffer until then?

Postmaster General John E. Potter was deadly serious.

"We are facing losses of historic proportions," he said. "Our situation is critical."

The volume of losses, he added, are "of a magnitude we have not experienced in the 75 years since the Great Depression."

Here are the numbers: USPS moved 213 billion pieces of mail in fiscal year 2006. This year, that number is expected to fall to 180 billion. The amount of money the postal service has been losing goes up and down, but it's all bad -- $5.1 billion in 2007, $2.8 billion in 2008, and a projected $6 billion in both 2009 and 2010.

Potter pushed two ideas to help bail out the postal service. The first would allow it to pay for retiree health benefits out of its Retiree Health Benefit Fund instead of its operating budget. That change would have allowed the service to reach a $1.6 billion profit in 2007, instead of a $5.1 billion loss.

Bipartisan legislation allowing the change, sponsored by Reps. Danny K. Davis (D-Ill.) and John M. McHugh (R-N.Y.), was widely endorsed, including by employee representatives.

Potter's other suggestion was not so warmly welcomed. It would allow the post office to cut delivery to five days a week from six.

"Delivery is one of our most labor-intensive activities," Potter said. "Delivery remains our largest, single cost center . . . . In effect, we are financing a level of service that exceeds a declining demand."

Going to five-day delivery could save the post office $3.5 billion annually, Potter said. Later in the day, however, Dan G. Blair, chairman of the Postal Regulatory Commission, said the savings would be closer to $2 billion. Potter's figure does not take into account a likely decline in volume caused by a drop in service days, according to Blair.

Potter's compensation is a minuscule part of the postal service's losses, but it was a significant part of the hearing. Chairman Stephen F. Lynch (D-Mass.) questioned the wisdom of giving Potter a $135,041 bonus, even though it is not paid by taxes, when the finances of the post office are in such dire shape.

But Carolyn Gallagher, chairwoman of the postal service Board of Governors, strongly defended the payments. "Mr. Potter has earned the compensation he has received," she said. "His achievements in 2008 were both remarkable and unprecedented given the magnitude of the challenges the Postal Service faced."

She said he and his team "reduced costs by over $2 billion, more than double what had been planned, while still providing record levels of service."

Utah Rep. Jason Chaffetz, a freshman and the top Republican on the panel, surprised the hearing by leading his interrogation of Potter with an allegation in a Republican report that Countrywide Financial waived fees for a loan to Potter. "It does not smell right," Chaffetz said in an interview.

Potter said "the terms of my loan were consistent with my credit history" and that he put 50 percent down on the property.

Postal Service Inspector General David C. Williams confirmed during his testimony that his office is working with the Justice Department on a broader investigation that includes the Countrywide financing and other Potter loans. Justice is concerned about the possibility of a quid pro quo, according to Williams. But Chaffetz did not point to any favors Potter might have performed for the company.

Because the allegations seem to have nothing to do with the agency's finances, the conversation quickly returned to what needs to be done to keep the postal service afloat.

Lynch has reservations about both of Potter's suggestions to improve USPS finances, but by the end of a long day he said the Davis/McHugh bill, in some form, probably would be part of the solution. But the proposal for cutting back mail delivery to five days a week appears to be a dead letter.

"The public wants Saturday delivery," said Rep. Elijah E. Cummings, a Baltimore Democrat. "I would bet everything I've got that's not going to happen."

You can read statements prepared for the hearing at: http://federalworkforce.oversight.house.gov/story.asp?ID=2355.

Contact Joe Davidson at federaldiary@washpost.com.

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