The US Postmaster General has urged Congress to re-evaluate the two separate postal reform billscurrently passing through the House and Senate, claiming that neither comes close to enabling the
cost reductions of $20 billion by 2015 he said USPS needs to achieve long-term profitability.In his first public commentary on the postal reform packages, Patrick Donahoe saidcherry-picking the best elements of each bill could provide the Postal Service with a more flexiblebusiness model that would enable it to quickly implement the cost cutting measures needed for it tosurvive.
In a speech yesterday to the National Press Club in Washington DC, he said: “Unfortunately,both bills have elements that delay tough decisions and impose greater constraints on our businessmodel. Taken as they are, they do not come close to enabling cost reductions of $20 billion by 2015– which they must do for the Postal Service to return to profitability.
“If passed today, either bill would provide at best one year of profitability, and at least adecade of steep losses,” added Donahoe. “However, by taking the best of both the House and Senateapproaches, Congress can provide the Postal Service with the legal framework and the business modelit needs.”
Donahoe said the Republican-backed House bill, HR 2309, would quickly give USPS the abilityto close post offices and end Saturday mail deliveries. But the bill’s proposal to establish afinancial control board to overhaul postal finances would just add another layer of unnecessarybureaucracy.
In the Senate bill, S 1789, Donahoe said he appreciated its call to return around $7 billionin money paid by USPS into a federal employee retirement account, but said the bill’s requirementof up to two years of feasibility studies regarding the end of Saturday mail delivery would merelyprolong the inevitable.
Donahoe expressed his gratitude for the “strong leadership and engagement of the Congress andthe Administration in advancing reform legislation”, and expressed confidence that an effectivesolution would be enacted. Both HR 2309 and S 1789 were introduced earlier this year to respond toan urgent liquidity crisis and to address long-term structural constraints in the Postal Servicebusiness model.
“It’s just a matter of trying to get what’s out there right now thought through and pushed sowe can get something done quickly,” Donahoe said.
He said that throughout its recent fiscal crisis the Postal Service had advanced proposalsthat would allow it to operate more as a business would, with greater flexibility to quickly reducecosts and respond to a dynamic marketplace for mailing and shipping services.
The Postal Service is seeking changes in the law that would provide it with the authority to:determine delivery frequency; develop and price products quickly; control healthcare and retirementcosts; rapidly realign mail processing, delivery and retail networks; operate under a streamlinedgovernance model; and leverage its workforce with greater flexibility.
“Within the constraints of its current business model, the Postal Service has aggressivelycut costs, reducing the size of its workforce by 128,000 career employees and annual operatingexpenses by $12.5 billion over the past four years,” Donohoe said. “America needs a Postal Servicethat can operate more like a business. I have no doubt the Postal Service will endure as a greatAmerican institution. But to do so, we need to operate with a great business model.”
Darrell Issa, one of the sponsors of the House bill, reacted angrily, calling Donahoe “disingenuous” for arguing that his bill, which aides said would save $10.7 billion annually, doesn’t go far enough.
“He’s not even willing to embrace the cuts it contains or even the smaller savings containedin the Senate bill,” Issa said in a statement. “The Postal Service still seems to hold themisguided belief that accounting gimmicks and an increased reliance on taxpayer support will giveit flexibility to push back insolvency for a few more years.”
Meanwhile, negotiators for USPS and two of its labour unions said on Monday that they wouldcontinue talks for two more weeks after current labour contracts expired at Sunday night. Thatgives USPS, the National Association of Letter Carriers and the National Postal Mailhandlers Unionuntil 7 December to negotiate an agreement.
USPS last week reported a $5.1 billion loss in the year ending 30 September that would havebeen more than double the size at $10.6 billion without a delayed payment of $5.5 billion in healthbenefits. It is now warning of a mammoth $14.1 billion loss next year unless radical reform ismade.
The US postal operator, which had made an $8.5 billion loss in 2010, again suffered fromfalling mail volumes and revenues in its October 2010 to September 2011 fiscal year, achieved somecost savings and continued to be burdened by heavy contributions to health benefits and pensions.
Its revenues dropped 2 per cent to $65.7 billion and total mail volume declined by 1.7 percent to 168 billion pieces. Electronic substitution of letters, and the impact of the weak USeconomy, more than outweighed good growth in the relatively small parcels and express businesses.
Donahoe said last week: “The Postal Service can become profitable again if Congress passescomprehensive legislation to provide us with a more flexible business model so we can respondbetter to a changing marketplace. To return to profitability we must reduce our annual costs by $20billion by the end of 2015. We continue to take aggressive cost-cutting actions in areas under ourcontrol and urgently need Congress to do its part to get us the rest of the way there.”
