Postal Service letter carrier Michael McDonald gathers mail to load into his truck before making his delivery run in Atlanta in February. The agency says it will delay plans to cut Saturday delivery because Congress isn't allowing the change. (David Goldman/AP)

The U.S. Postal Service backed away Wednesday from its plan to end Saturday mail delivery in August, bowing to bipartisan congressional opposition that the postmaster general said two months ago he had the authority to bypass.

After a closed meeting, the agency’s board of governors directed Postmaster General Patrick R. Donahoe to continue delivery of first-class mail Mondays through Saturdays, citing language in the latest law to fund government spending that blocks the proposed change.

The service will instead pursue other avenues in its effort to stem massive financial losses, such as asking regulators for permission to raise mailing rates, asking labor unions to open their contracts for give-backs and hoping Congress will pass a bill to stop losses that hit $15.9 billion last year.

Postal officials described the new strategy as a last resort for “extreme circumstances.”

“It is not possible for the Postal Service to meet significant cost reduction goals without changing its delivery schedule,” the agency said in a statement. “Any rational analysis of our current financial condition and business options leads to this conclusion.” Postal officials had planned to continue delivering packages on Saturdays.

The surrender came nine weeks after Donahoe stood before TV cameras and announced that he did not need Congress’s blessing to end a 150-year hallmark of the mail system.

His declaration in February that he had the legal authority to do so faced widespread opposition. Democrats and Republicans representing rural communities rejected the idea, along with postal unions that fear job losses. Advocates for the elderly who still rely on the mail and others who said the Postal Service would be giving up a competitive advantage also opposed the decision.

The Postal Service’s reversal may complicate lawmakers’ efforts to find common ground on a bill to shore up the agency’s finances.

Rep. Gerald E. Connolly (D-Va.), who requested a legal opinion from the Government Accountability Office that said the move was not legal without congressional approval, said the decision ended Donahoe’s “misguided efforts to blatantly disregard the will of Congress.”

President Obama’s budget, also released Wednesday, calls for five-day delivery starting in June, two months before the Postal Service proposed.

The administration’s support is not new, nor is the budget’s plan to refund one of the service’s biggest financial burdens —$11.5 billion in payments it has made for health-care benefits for retirees.

But the endorsement, coming on the same day postal officials withdrew support for their own plan, highlighted the complex politics of mail delivery.

Among the biggest conundrums for the service is who controls its decisions. Although the mail system finances itself with minimal funding from Congress, the legislature oversees the system and controls its finances.

Lawmakers have required six-day delivery with language in the federal budget since 1983. They kept the requirement in a stopgap budget they approved in March to fund the government through the fiscal year.

Donahoe had seen an opportunity in the weeks before a previous stopgap budget was set to expire. He assumed momentum would be on his side and Congress would not keep the language in the new budget. And he said that even if it survived, it might not be binding since the Postal Service gets so little money from Congress.

“We think we’re on good footing with this,” he said in February.

It turned out he was not.

Some lawmakers say the Postal Service could still legally end Saturday delivery, since it planned to continue delivering packages on Saturdays.

Among them is the chief House negotiator on any legislation to give the agency more financial flexibility.

On Wednesday, Rep. Darrell Issa (R.-Calif.) criticized Donahoe for succumbing to political pressure, not legal barriers.

“It’s quite clear that special interest lobbying and intense political pressure played a much greater role in the Postal Service’s change of heart than any real or perceived barrier to implementing” a change to five-day delivery, the chairman of the Committee on Oversight and Government Reform said in a statement.

He called the reversal a “setback” to legislation. Aides said that means postal officials have lost credibility with Issa and some conservative Republicans, who want to make sure the agency is serious about cutting costs in exchange for a subsidy from Congress.

Sen. Thomas R. Carper (D-Del.), Issa’s counterpart in the Senate, said in a statement that the “only way to save the Postal Service” is for Congress to pass legislation that, among other changes, reimburses the retiree payments.

It’s unclear when negotiations on a bill will begin and whether it will have bipartisan backing. The last Congress failed to reach an agreement.

Labor leaders had condemned five-day delivery as an unnecessary ploy to kill up to 25,000 letter-carrier, clerk and mail-sorting jobs through attrition, reassignments and buyouts. On Wednesday, they praised the decision to backtrack. But they also opposed any effort to reopen contracts that the four largest postal unions have recently negotiated with management.

“Asking the [union] to renegotiate a contract that was just settled in January is insulting and unnecessary,” Fredric Rolando, president of the National Association of Letter Carriers, said in a statement.

Postal officials declined to give details of what concessions they plan to seek from unions.

If the agency wants regulators to approve an increase to rates, it must convince them that its financial condition requires an override of a 2006 law that does not allow increases above the rate of inflation.

The Postal Regulatory Commission turned down such a request for a 5.6 percent jump in 2010.

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