By Joe Davidson
Thursday, May 21, 2009
If we still used the Pony Express to deliver mail, someone would shoot the horse to put it out of its misery.
The U.S. Postal Service is like a once-proud thoroughbred now crippled with a broken leg -- or two. It remains a venerable institution, but it has been so severely handicapped by the recession that lawmakers are beginning to seriously consider cutting a day of delivery.
That gradual -- and reluctant -- shift in attitudes was evident at a congressional hearing yesterday at which the Postal Service again made a plea for legislation that would allow it to cut mail delivery from six days a week to five.
"The only way we'll embrace it is if we have no other choice, and we're getting to that point," said Rep. Stephen F. Lynch (D-Mass.), chairman of the House Oversight and Government Reform subcommittee on federal workforce, Postal Service and the District of Columbia.
Compare that with the words of one subcommittee member, Rep. Elijah E. Cummings, a Baltimore Democrat, at a hearing just two months ago: "I would bet everything I've got that's not going to happen."
Rep. Jason Chaffetz (R-Utah) said yesterday that while his "immediate reaction is 'No way,' " he might be willing to consider some combination of delivery-day cuts and a taxpayer subsidy -- another term for a bailout. Currently, the Postal Service gets zero tax dollars.
"I don't think we can get rid of any possibilities at this point," Chaffetz added.
The difference between March and now is the devastating and escalating decline in Postal Service finances.
William P. Galligan, a USPS senior vice president, told the panel that the agency posted its second-quarter financial results after the last hearing. Compared with the same period last year, total mail volume fell almost 15 percent. Revenue is down 10.5 percent. Almost $2 billion was lost in the second quarter.
"We are projecting a loss of more than $6 billion for this fiscal year," Galligan said.
This year the service expects to move 180 billion pieces of mail. That sounds like a lot, but it's 32 billion less than in fiscal 2007. The collapse in volume is the largest since the Great Depression.
Postal officials have implemented several cost-cutting measures, including a hiring freeze, closing a few district administrative offices and reducing work hours. Unfortunately, that's not enough to keep the agency from going broke.
"Even if the Postal Service is successful with all of its cost-control and transformation efforts, it appears likely that without legislative relief the Postal Service will run out of cash this year and face serious financial difficulty in 2010 and beyond," said John D. Waller, director of accountability and compliance at the Postal Regulatory Commission.
The legislative relief the Postal Service wants is permission to change the way it funds retiree health-care benefits and to cut the sixth delivery day, most likely Saturday. Legislation the subcommittee is considering would allow the agency to pay for the health benefits of current retirees out of its Retiree Health Benefit Fund instead of its operating budget, saving about $2 billion this year.
"Unfortunately, as mail volume continues to plummet, even [the legislation] will be insufficient to close the gap between costs and revenue," Galligan said. "That is why we must make fundamental changes to our service network -- including reduced delivery frequency."
But just how much reducing delivery will save is the big question, and an important factor in determining congressional support. Last year, the Postal Service projected $3.5 billion in savings annually, if the cutback did not lead to a reduction in volume. The Postal Regulatory Commission assumed mail volume would decline with a cut in delivery days and projected a savings of $1.9 billion.
Del. Eleanor Holmes Norton (D-D.C.) said Congress will want an independent assessment of the savings a five-day schedule would bring. "I would seriously consider it if we had an independent study showing that it would make a structural difference" in postal operations, she said.
Galligan is prepared for strong congressional opposition to the five-day proposal, but he thinks it must be done.
"In the simplest words I can find, we can no longer afford the costs of six-day mail delivery," he said. "In my mind, it is no longer a question of if, but rather when, will economics require this change," he said.
"The time, I believe, is now."
Written statements from the hearing can be found here: http://federalworkforce.oversight.house.gov/story.asp?ID=2444.
Contact Joe Davidson at email@example.com.