The U.S. Postal Service's announcement last week that it intends to shed a third of its workforce by 2015, scrap its pension plan for new employees, and pare down employees' health benefits came as a bombshell.
It shouldn't have.
Postmaster General Patrick Donahoe and his predecessor, John Potter, have been telling anyone who will listen that the Postal Service is on an unsustainable path: Mail volume is plummeting, yet the agency has been prevented by labor contracts and Congress from shrinking its overwhelming labor and infrastructure costs in a sizable way.
no one in Congress, or anywhere else, wants to hear the message. But ignoring reality year after year has only worsened the Postal Service's financial condition. This year, the Postal Service is expecting $8 billion to $9 billion in financial losses — the latest in a string of annual multibillion-dollar losses.
The difference now is that the Postal Service will literally run out of money next month. Its borrowing authority is maxed out and it has few options left until Congress grants the agency the flexibility it needs to dramatically lower its costs. Thus, the threat of large layoffs and cutbacks of employees' pension and health plans.
In overseeing the Postal Service, lawmakers have been irresponsible, even delusional. Congress expects the Postal Service to absorb billions of dollars in business losses each year while insisting that it:
• Continue overpaying hundreds of millions of dollars a year into its pension funds.
• Continue prepaying retiree health benefits at an accelerated rate that no other organization is required to pay.
• Maintain a six-day delivery operation that is unjustified by fast-declining mail volume.
• Keep open thousands of postal facilities that are losing money.
And the Postal Service's collective-bargaining agreements prevent it from shrinking its workforce adequately to adapt to a shrinking business.
In a meeting with Federal Times editors earlier this year, Donahoe insisted that he can make the Postal Service sustainable — but only if he gets the free hand he needs from Congress to run the agency like a responsible business.
He also said he ultimately wants to get the workforce down from the current 660,000 employees to roughly 400,000, but he added that most, if not all, of that difference, can be achieved through attrition as an estimated 300,000 employees become eligible for retirement in the coming years.
Congress' unwillingness to respond to the agency's dire predicament is what prompted last week's jarring announcement by the Postal Service. In that announcement, the Postal Service appears to be saying that it may be forced to resort to forced layoffs if it cannot get the other flexibilities it seeks, such as smaller prepayments for pension plans and retiree health care, and permission to deliver five or fewer days a week.
Hopefully, the prospect of massive job cuts will prompt lawmakers to give the Postal Service needed flexibility to respond to the fundamental changes affecting its business.