The U.S. Postal Service, which says it is facing a potential loss of $500 million this year, is cutting the salaries of its 30 top officials -- from the postmaster general on down -- by 3.5 percent as part of a major belt-tightening exercise.
Also, a 3.2 percent pay raise effective tomorrow has been put on hold for 700 other officials, including the postmasters of Washington, New York, Los Angeles and other cities.
Postmaster General Paul N. Carlin sent a letter Monday to top managers spelling out problems in the Postal Service, which had been remolded in the early 1970s as an independent agency so it could be weaned from its heavy federal subsidies and could function like a private business. Carlin said the service, after several years of making a profit or breaking even, is losing about $1 million a day even though daily mail volume is up to 370 million pieces and the price of the first-class stamp jumped in February from 20 to 22 cents.
The Postal Service has already lost $288 million this fiscal year, which began in October, officials said.
Carlin, a career postal official who became postmaster general in January, said efforts to reduce costs in the labor-intensive Postal Service, the largest U.S. agency, are "not working." Although overtime has been cut, the number of postal employes has risen from 702,000 in October to 740,000, he said. The service says that about 8 of every 10 cents it collects goes for payroll costs.
Carlin's annual salary will drop from $86,200 to $83,200, still more than the $80,100 that Cabinet members make. Other management cuts and freezes will save $2 million a year, officials say.
Under the budget cuts, postal brass will have to fly coach, and the twin-engine Cessna jet the Postal Service bought last year will be rented out. Carlin said it will be used by officials only for trips to cities not serviced by airlines.
Maintenance costs of the jet, which is kept at National Airport, ran about $180,000 last year, according to Postal Service records.
In his directive, Carlin applauded the "intensity" of cost-cutting efforts but said they are "not showing up in the financial results."
New actions include a hiring freeze at the 3,100-person Postal Service headquarters and use of supervisory personnel in some offices to help move the mail.
Other cutbacks will be made on supplies, telephones, travel and training.
The Postal Service was created in 1971 from the old Post Office Department after a wildcat strike by postal workers over pay.
The postal department, a politically supercharged agency whose local postmasters were picked by Congress, was told to operate like a business and charge customers the going rate.
The postmaster general became a chief executive officer responsible to a board of governors. Congress, which liked to keep postal rates low, turned over rate-making to an independent commission.
As part of the changes, congressional appropriations dwindled to little more than enough to cover the costs of certain public services. Last month Congress refused a request for $20 million to cover the costs of handling nonprofit mail and some other categories that do not pay their way.
Postal workers, unlike other federal employes, no longer depend on Congress or the White House to set their salaries or their fringe benefits.
An estimated 80 percent of rank-and-file postal employes voluntarily belong to unions that bargain for them.
In December, after a breakdown in talks on contract costs, an arbitration panel wrote a new three-year labor-management agreement. It provides for three annual pay raises plus partial cost-of-living protection.
Also, it allowed the Postal Service to set up a two-tier wage system that permits it to hire clerks and letter carriers at $19,032 a year, which is about $5,000 less than the old starting salary for those employes. Postage rates, kept artificially low for more than 100 years through taxpayer subsidies, rose dramatically after the service began running like a business.
The price of a first-class stamp, now 22 cents, was 8 cents in 1971.
Although the government still has a legal monopoly on first-class mail, which accounts for about 60 percent of its volume, various private firms offering guaranteed overnight delivery have gradually taken away much of the parcel business the government once dominated.
Postal officials yesterday stressed that while the financial picture is poor, they believe it will be possible to turn things around.