Postal Service Is Pressed to Restructure

By Ed O'Keefe
Washington Post Staff Writer
Thursday, July 30, 2009

Lawmakers on Thursday will consider various proposals to restructure the U.S. Postal Service, just days after government auditors warned that it must quickly address its financial viability.

Confronting a sharp decline in mail volume tied to the recession and the continuing migration to e-mail and online payment options, the Postal Service projects a net loss of $7 billion this fiscal year and debt exceeding $10 billion, leading to a cash shortfall of about $1 billion. Losses are expected next year as well.

The Government Accountability Office added the Postal Service to its list of high-risk government agencies and programs on Tuesday, and it will further explain its decision Thursday at a House subcommittee hearing.

The GAO has urged a rapid overhaul of the Postal Service that includes layoffs, plant closures and changes to retiree health benefits. Since 2006, federal law has required the agency to pay about $5.5 billion annually to cover future retiree benefit costs while paying $2 billion to $4 billion a year to cover current retirees.

"We're paying into something that no one else is required to pay into," said Fredric V. Rolando, president of the National Association of Letter Carriers, which represents most mail carriers in large cities and suburbs. "No other agency is required to pre-fund their future retiree health benefits. Some companies do so voluntarily, but even the few that do aren't going to make payments into something like that, considering the economic conditions we're under now."

Competing House and Senate proposals that would adjust the payment schedule are moving toward votes. Beyond the benefits adjustment, however, it is unclear how best to proceed.

"Any business confronting a situation like this would have to downsize or go out of business," said Arthur B. Sackler, executive director of the National Postal Policy Council, which represents some of the largest mail customers.

"We've got a system for the foreseeable future that is built for mail amounts that are far greater than they're likely to have," Sackler said.

The most obvious cutback would be fewer mail delivery days. A June Gallup survey found that 66 percent of Americans support cutting mail service to five days a week. Postal officials have introduced a plan that would end traditional mail delivery on Saturdays but keep post offices open. Mail would still be placed in post office boxes and carriers would deliver Express Mail packages. Congress would have to make changes to the appropriations process or pass a law allowing five days of service. The plan could save the Postal Service billions of dollars, but it would adversely affect some of the most loyal customers.

"Reducing service is going to cost some of our members delay, and they're going to have to work to adjust," said Jerry Cerasale, a senior vice president with the Direct Marketing Association. Cerasale, Rolando and Sackler will testify at Thursday's hearing.

Few think the Postal Service can afford to expand in the coming years, but Rolando wants it to exploit its delivery network for other sources of revenue: Mail carriers could conduct follow-up interviews for the 2010 Census, partner with private delivery companies to take packages to remote locations, or provide a medication delivery service, he said.

"We're not afraid of work. We're looking for revenue and to assure the future of the postal company," Rolando said.

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