Incoming Postmaster General Patrick Donahoe faces pressure from Capitol Hill to put the Postal Service back in the black. (Thomas Brown / Staff)
As the U.S. Postal Service keeps racking up massive losses, top executives regularly tout their success in cutting employee work hours. But those cuts so far aren't paying off in cash savings, according to figures from the agency's latest annual report.
From 2008 through 2010, work hours fell 14 percent to about 1.2 billion. But pay raises and other expenses cut into the savings, and total personnel costs fell only 6 percent, to $49 billion.
USPS spokesman Greg Frey noted cost-of-living adjustments are required by union contracts. He also said payments aimed at encouraging employees to resign or retire early reduced savings.
The imbalance in savings through cuts in work hours and cuts in payroll underscores how the vast postal work force could face mounting pressure for concessions on pay and benefits.
"It's very clear that addressing costs and labor costs and getting them in line with revenues are going to have to be part of fixing the deficit problem," said Frederick Hill, spokesman for Rep. Darrell Issa, R-Calif., who is expected to take charge next month of the House committee that oversees the Postal Service. Asked last week whether Issa has any particular measures in mind, Hill said the congressman is watching the Postal Service's negotiations with its unions.
At a Senate hearing last week, Sen. Tom Coburn, R-Okla., pressed incoming Postmaster General Patrick Donahoe to do more to put the Postal Service back in the black.
"The biggest problem with the Postal Service is that their labor costs, as a component of their total revenues, are too high," Coburn said. "You either have to increase revenues or you have to decrease costs."
But cutting costs is a predictably hard sell with workers. A management push in that direction apparently contributed to last month's breakdown in contract talks with one of its four unions, the National Rural Letter Carriers' Association.
In a message to members on its website, the union said the Postal Service's final proposal included wage freezes, significant benefit cuts and a lower pay scale for new hires. Although a Postal Service spokesman declined comment, the impasse in negotiations means that the next contract could be decided by an arbitration panel.
As of press time Dec. 3, the Postal Service was still talking to the American Postal Workers Union, whose contract expired more than two weeks ago. A spokeswoman for that union did not reply to a request for comment on Coburn's remarks.
GOP lawmakers aren't the only ones taking aim. From the Postal Service's creation in 1971 until now, labor costs have stayed fixed at about 80 percent of total expenses, mailing industry representative Jerry Ceresale said at the same hearing, held by the Senate Homeland Security and Governmental Affairs subcommittee on federal financial management.
"We urge Congress to look at every single idea to try and improve the collective bargaining process ... and help the Postal Service survive in the 21st century," said Ceresale, a senior vice president with the Direct Marketing Association.
Ceresale's claim was later disputed by James Sauber, chief of staff for the National Association of Letter Carriers, another USPS union. Labor costs have dropped from about 86 percent in the 1970s, Sauber said, while the cost of postage has stayed below the inflation rate and taxpayer help has been phased out.
"You can look at the total number of employees and the volume of mail and the delivery points we serve," Sauber said. "By all those standards, we're a hell of a lot more efficient than we used to be."
As of the end of September, the Postal Service had almost 672,000 career and noncareer employees, down more than 12 percent in just two years. Even so, as Federal Times reported in September 2009, mail volume had fallen so sharply that many postal supervisors didn't have work to keep everyone busy. As a result, the agency was having to resort to "standby time," where workers were idled, but continued to be paid. At that point, the Postal Service was averaging about 45,000 standby hours a week, at a cost of more than $50 million annually.
Standby hours are down more than 40 percent over last year, Frey said last week. In a June report, the agency's inspector general said that the Postal Service had made "substantial progress" in cutting work hours, but added that it has not achieved "all possible efficiencies in mail processing operations" or fully adjusted hours in response to sagging mail volumes related to the weak economy.
The Postal Service lost a record $8.5 billion in fiscal 2010. With a $6.4 billion loss predicted this year, Donahoe said at the hearing, the agency does not expect to have enough money to make a legally required $5.5 billion payment for future retiree health benefits due next September. Donahoe replaced John Potter, who retired as postmaster general Dec. 3.
The hearing highlighted the lack of readily palatable solutions for the Postal Service's long-term difficulties. Sen. Thomas Carper, D-Del., the subcommittee chairman, for example, has introduced legislation that would grant the agency more flexibility to close post offices, reduce mail delivery and move into other product lines. Key provisions are already attracting opposition, however, from members of Congress, regulators and other constituencies.
"There's no silver bullets on helping to meet the fiscal challenges of the Postal Service," Carper concluded, "but there are a lot of BBs."