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Postal Service, lawmakers clash over improving finances

May. 5, 2014 - 06:00AM   |  
By ANDY MEDICI   |   Comments
Postmaster General Patrick R. Donahoe
Postmaster General Patrick Donahoe wants Congressional approval to enact some dramatic reforms. (Colin Kelly / Gannett Government Media Co.)

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The Postal Service’s improving financial situation is fueling a debate between the agency, lawmakers and unions over what kind of legislation is needed to save the struggling agency.

At stake are billions of dollars, tens of thousands of jobs and the future of the agency.

The debate centers on which income best represents the Postal Service’s financial health: operating or net. Measured by operating income — revenue minus expenses — the Postal Service has made more than $1 billion in profit since the beginning of fiscal 2014. However, net income factors in the Postal Service’s obligation to prepay for retiree health benefits and fund its worker compensation fund, and there the service shows a net loss of $1.7 billion.

The Postal Service is lobbying lawmakers for a major overhaul, including: removing the requirement that the Postal Service prefund 75 years of retiree health benefits in only about 10 years — to the tune of $5.6 billion a year. Opponents and supporters of reform alike confirm that no other federal organization has that requirement.

USPS would also like the ability to end Saturday letter delivery, while expanding package delivery to the entire week and flexibility to change prices and add new products in the future while closing underused post offices. Finally, the service wants authorization to further reduce its workforce. The agency has already shrunk by about 320,000 employees since fiscal 2000, but Postmaster General Patrick Donahoe has said legislation would allow the Postal Service to move from 485,000 career employees to 400,000 over the next few years.

Lawmakers are divided on postal legislation, but there is a growing consensus that the Postal Service cannot cut its way to growth by closing post offices or ending services, Rep. Gerry Connolly, D-Va., said.

Legislation that would end the prefunding requirement would represent a “huge victory,” but he said the Postal Service is holding back that legislation by only supporting a major overhaul.

“It is incredibly disappointing that as the proverbial ship is sinking, the postmaster general appears obsessed with stubbornly insisting that the deck chairs be arranged precisely as he wishes, rather than urgently acting to secure relief in plugging the hole that responsible for the sinking the entire ship,” Connolly said.

Legislation waiving the prefunding of retiree health insurance would reduce the need for a drastic overhaul, according to Marnee Banks, spokesperson for Sen. Jon Tester, D-Mont., the only person on the Senate Homeland Security and Governmental Affairs Committee to vote no on postal legislation.

“Sen. Tester believes that as Congress considers postal reform legislation, it should not reduce mail delivery service standards, particularly for rural customers,” Banks said.

Rep. Elijah Cummings, D-Md., said any postal legislation would have to focus on bipartisan areas of agreement and would give the Postal Service the authority to explore new products and innovative measures.

“The improving economy and the significant growth in postal package services have helped the financial condition of the Postal Service, especially compared to several years ago, but we still need comprehensive reform legislation to ensure the long-term financial stability of the Postal Service,” Cummings said.

Though the Postal Service has improved its financial outlook, the major factors that have contributed to a decline in mail revenue — such as the loss of letters to email — remain a drain on its resources, according to a Senate Homeland Security and Governmental Affairs spokesperson.

Tom Carper, D-Del., the chairman of the committee, will keep working in the Senate to pass the Postal Reform Act of 2014.

“Congressional inaction has forced the Postal Service to take drastic measures to reduce its costs, including cutting its workforce and closing distribution facilities. It remains imperative that Congress come to agreement on a plan that fixes the Postal Service so it no longer has to function on the brink of failure,” the spokesperson said.

A few months of increasing operating profits does not come close to making the Postal Service financial viable, according to Joseph Corbett, the chief financial officer at the Postal Service. The Postal Service is continuing to work with members of Congress to show why reform is needed.

“We are in a very big hole — a huge hole — financially. It’s going to take years of sustained profits in order to get us back to a firm financial footing,” Corbett said.

He said the Postal Service only has 13 days of operating costs in cash even though it needs to make $10 billion in capital investments over the next few years — in its package sorting systems, its scanner technology and other technologies — in order to boost future operating revenues.

The Postal Service needs the legislation to help spur growth in new areas and give the agency the flexibility it needs in its workforce and prices, according to Corbett.

Right now even a minor economic downturn could erase all the progress the Postal Service has made and plunge the agency into insolvency, Corbett said. The agency is at the ceiling of its $15 billion line of credit with the Treasury Department.

But lawmakers should take into account the recent financial turnaround at the Postal Service and avoid taking action based on ideology, according to Fredric Rolando, the president of the National Association of Letter Carriers.

He said the improving economy has led to the stabilization of mail revenue, while the Internet has spurred huge growth in online shopping and package delivery services. The Postal Service proposal to end Saturday mail delivery would just hurt a mailing network that is no longer shrinking drastically.

Legislation should focus only on removing the prefunding of retiree health benefits and avoid damaging what he said is an organization that has turned the corner and is now showing profits.

“Without this prefunding fiasco, rather than talk of ‘red ink,’ the narrative would be a success story — an agency that, without a dime of taxpayer money, operating in a still-soft economy and facing the challenges of the Internet, is profitable while providing Americans with the world’s most affordable and efficient delivery network,” he said.

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