Federal Diary: House Committee Passes USPS Bill

By Joe Davidson
Tuesday, July 14, 2009

A House committee has thrown the U.S. Postal Service a lifeline, but it won't be substantial enough to allow the agency to fully escape the financial quicksand pulling it under.

The Oversight and Government Reform Committee advanced legislation Friday that would allow the USPS to pay for the health benefits of current retirees out of its Retiree Health Benefit Fund instead of from its operating budget. That would save about $2 billion a year.

That figure sounds good until you realize that the Postal Service -- which is funded by customers, not tax dollars -- lost that amount in just the second quarter and expects to lose $6 billion this fiscal year. Changing the funding source of retiree benefits will help, but it won't stop the recession from sucking revenue from the agency.

Postmaster General John E. Potter says that while he is grateful for the relief the bill would provide, "it's quite simply not enough."

The recession has cut deeply into mail volume, damaging the financial stability of the Postal Service. Officials there say a more drastic remedy is needed than what the retiree funding bill provides. Cutting delivery from six days a week to five is the fix they have in mind.

Changing the way the agency funds retiree health benefits, however, does allow officials the ability to continue to fight for the bigger change they insist is necessary.

"Without this legislation, the Postal Service will reach its mandated debt ceiling and could very well have to -- inconceivably -- end operations," Bill Krejci, the National League of Postmasters' legislative co-chairman, said in a message to the organization's members. The measure, H.R. 22, "would help provide relief for three years, at which time the economy hopefully will be on road to recovery along with the mailing industry. Keep in mind, H.R. 22 alone will not save the Postal Service, but it does provide some 'breathing room' and in effect could also be considered a jobs bill as well."

The current retiree funding mechanism eats up about 10 percent of USPS operating revenue and has become prohibitively expensive, according to Potter. "The Postal Service is the only public or private entity required to prepay health benefit premiums at these extremely high levels," he told Congress in March.

In fiscal 2007, the first year of the current retiree funding structure, the Postal Service delivered more than 212 billion pieces of mail, and its operating revenue was at its highest point ever: $75 billion, Potter said.

This year, the men and women who haul the bags, push the carts and drive the trucks will deliver only 180 billion pieces. That 15 percent drop in volume resulted in USPS losing $12 billion in income since 2007, William Galligan, a USPS senior vice president, told the committee in May. Yet, while the number of pieces of mail has plunged, the number of addresses served by postal workers has grown by about 2 million.

"In virtually any other industry, this type of income gap could be addressed through price increases, offering new product lines, strict inventory and production controls or changes in service availability," Galligan said. "For the Postal Service, with a legal requirement to maintain six-day mail delivery, with significant limits on our authority to develop new products, and with price caps that apply to 90 percent of our products, these are not options that are available to us."

Five-day delivery also is not an option, at least not for the moment. But there is greater willingness in Congress to consider a cut in service that a few months ago was unthinkable for many members.

The agency's worsening financial picture and polling data indicating that the public can accept five-day delivery "have created a situation where people are more open-minded about moving from six- to five-day delivery," Potter said in an interview yesterday. A Rasmussen poll in February indicated that 69 percent of Americans would rather cut a delivery day than pay more in postage. A Gallup poll last month found a similar result -- 66 percent of those polled favor cutting a delivery day to save the Postal Service money, while 33 percent oppose it.

But while the public largely has no problem with that option and members of Congress are more willing to consider it, the postal unions are determined to fight it.

"NALC will fight any attempt by the Postal Service to convince Congress to make this radical change," the National Association of Letter Carriers said in a statement. "NALC will proceed professionally and vigorously to oppose the elimination of six-day delivery on its merits."

But there may be no other choice.

Contact Joe Davidson at federaldiary@washpost.com.

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