By Ed O'Keefe
Washington Post Staff Writer
Wednesday, February 16, 2011; B03
President Obama's proposed 2012 budget doesn't say anything about raising stamp prices, ending Saturday mail deliveries or closing post offices, but it tries to remedy the U.S. Postal Service's perilous financial condition by recommending about $11 billion in relief.
With mail volume and revenue plummeting, the Postal Service is on course to run a $7 billion deficit in the fiscal year that ends in September and, in the process, to run out of cash as it exhausts its line of credit with the U.S. Treasury.
The losses stem in part from hefty personnel costs not borne by other federal agencies. One is a requirement, imposed by a 2006 law, that it set aside money each year to cover the costs of future health benefits for its retired workers.
In the Obama administration's first substantive attempt to address the Postal Service's fiscal woes, the budget would allow the agency to pay $4 billion less toward future retiree health benefits than otherwise required. The mail agency would have to pay about $1.5 billion of those costs in fiscal 2012 and make up the difference in later years.
The budget proposal also adjusts the size of the annual payments by taking into account the size of the workforce, which has shrunk to about 583,000 full-time employees since the law passed in 2006.
The Postal Service also pays into the federal retirement fund to cover the future annuity costs of its retirees. Estimates by the Office of Personnel Management suggest that USPS has overpaid the fund by about $6.9 billion. Obama's budget would refund that amount over 30 years, beginning with a $550 million payment in fiscal 2012.
Combined, the steps outlined would "provide USPS with the breathing room necessary to continue restructuring its operations without severe disruptions" as it faces pressures that include decreased volume and customer demands for better service, according to the budget.
Cliff Guffey, president of the American Postal Workers Union, said the costs imposed by the 2006 law have brought USPS "to the brink of insolvency."
"We're pleased that the Obama administration seems to recognize the seriousness of the Postal Service's financial condition and is proposing beginning steps to address it," Guffey said. APWU is negotiating a new long-term contract for postal clerks, maintenance workers and administrative personnel.
The administration's budget also urges the Postal Service to cut infrastructure costs and to make its workforce more "adaptive" - proposals that amount to an endorsement of plans introduced by Postmaster General Patrick R. Donahoe to shutter thousands of post offices and dozens of regional offices and distribution centers while potentially cutting thousands of jobs. Postal officials, who thanked Obama on Monday for his budget proposals, are also seeking the flexibility to end Saturday mail deliveries and raise postage rates as necessary.
The budget would also end $29 million in annual reimbursements to the Postal Service to cover losses from reduced postage rates for nonprofit mailers. The payments amount to a mere fraction of total postal revenue.
Sen. Thomas R. Carper (D-Del.), who chairs a Senate subcommittee on the Postal Service, said the administration also needs to work with Congress to address the Postal Service's overpayments to the federal retirement system. Some estimates suggest that those overpayments have topped $50 billion in the past 30 years.
Sen. Susan Collins (R-Maine), who closely tracks postal issues, called on the president to endorse "top-to-bottom reform," which she said was lacking in his budget proposals.
Staff writer Eric Yoder contributed to this report.