The U.S. Postal Service needs greater authority to control its rates and services in order stop losing money, according to the agency’s head.

(David Goldman/AP) (David Goldman/AP)

Postmaster General Patrick Donahoe told the Senate Homeland Security and Government Affairs Committee that the agency is on track to default on its congressionally mandated, $5.6 billion prefunding requirement for retiree health benefits at the end of the month.

“The Postal Service is quickly moving down a path of becoming a massive, long-term burden on the taxpayer,” Donahoe warned. The agency, which ran a deficit of $16 billion last year, estimates it will lose $6 billion this year.

Donahoe on Thursday urged lawmakers to pass legislation granting the USPS greater control over its prices, services and products. This year, the agency head nearly implemented a plan to end Saturday mail delivery, but he backed off amid pressure from lawmakers and labor groups.

The post office board of governors is now considering an emergency rate increase, which would have to be approved by the Postal Regulatory Commission. Under the Postal Accountability and Enhancement Act of 2006, the agency’s price increases cannot exceed the rate of inflation except under extraordinary circumstances.

Postal Regulatory Commission Chairman Ruth Goldway testified that the statutory cap protects customers from “large, unpredictable increases” and ensuring that the USPS does not pass along the costs of potentially inefficient operations to mailers.

But Donahoe called for greater flexibility or no limit at all, saying the agency can be trusted to set its prices according to market conditions. “We have a very reasonable and responsible board of governors,” he said. “They will not make decisions to put the organization out of business. They will not make decisions that hurt the industry.”

John Beeder, speaking on behalf of the Greeting Card Association, argued against giving the board more authority, saying it “lacks both time and readily available independent expertise to examine rate and service proposals critically and in detail.”

Donahoe and labor leaders have called on Congress to repeal or restructure the post office’s prefunding requirement for retiree benefits. Sens. Tom Carper (D-Del.) and Tom Coburn (R-Okla.), the top members of the Senate panel, have proposed legislation that would adjust the payments.

The Carper-Coburn bill would also end door-to-door delivery for businesses and new homes, allowing a gradual end to Saturday mail delivery if such a move is financially necessary, and permit the Postal Service to ship alcohol like competitors such as UPS and FedEx.

Carper on Thursday urged his fellow lawmakers to use the bipartisan measure as a starting point for negotiations over how to make the USPS sustainable. “I don’t want to be back here in a few years discussing how we can dig ourselves out of yet another postal crisis,” he said.

The Senate panel has scheduled a second hearing for Sept. 26 to discuss overhauling the post office.

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