President Obama has proposed providing USPS with more than $25 billion in relief over the nexttwo years and allowing it to end Saturday deliveries from next year, as part of wider reforms for
the postal service in his 2013 budget proposal to Congress.The previous year’s White House budget, which contained a number of similar proposals relatingto USPS, was blocked in the Senate last year by members of his own party, and it is unclear whetherthis year’s budget will have any easier passage through Congress, with some observers suggesting itmay have to wait until the end of the year to have any chance of progressing.
The presidential budget proposal includes a number of the measures that are part of the proposedpostal reform legislation currently being considered by the Senate, although the Obama measuresalso called for a postal rate rise and excluded a requirement for a two-year delay before cuttingSaturday deliveries.
The Obama reforms include plans to provide USPS with a refund over two years of the $10.9billion positive credit balance in its contributions to the federal pensions programme, andaccelerate moving USPS’s retiree health benefit payments from a pre-funding to an accruing-costbasis, and reducing near-year payments.
As well as giving USPS authority to reduce mail delivery from six days to five days from 2013,it proposes to further reduce postal operating costs by allowing USPS to increase collaborationwith State and local governments; give USPS the ability to better align the costs of postage withthe costs of mail delivery while still operating within the current price cap; and permit USPS toseek the balance of the “modest” one-time increase in postage rates it proposed in 2010.
The White House claimed these reforms would provide USPS with over $25 billion in cash reliefover the next two years, and in total would produce savings of $25 billion over 11 years.
Stressing that it recognised “the enormous value” of the US Postal Service (USPS) to the nation’s commerce and communications, as well as the urgent need for reform to ensure its future viability,the Administration added: “USPS faces long-term, structural operating challenges that have beenexacerbated by the precipitous drop in mail volume in the last few years due to the economic crisisand the continuing shift toward electronic communication.
“Bold action is needed to ensure that USPS can continue to operate in the short-run and achieveviability in the long-run.”
USPS welcomed the proposals in the budget. Postmaster General Patrick Donahoe said: “I wouldlike to thank the president for continuing to acknowledge the enormous value of the United StatesPostal Service to the nation’s commerce and communications. In his budget proposal for FY 2013, thepresident continued to recognise the urgent need for postal reform to ensure the Postal Service’sfuture viability.
“The president has offered helpful recommendations to stabilise the Postal Service’s financialcrisis. We look forward to working with the White House and Congress on specific proposals thatinvolve the Postal Service.”
Senator Tom Carper, chairman of the Subcommittee that oversees the US Postal Service, alsowelcomed Obama’s proposals. “The Administration has put forward a plan that appears to include someof the recommendations that I suggested to President Obama last year and that were included incomprehensive reform legislation Senators Lieberman, Collins, Scott Brown and I introduced thisfall,” said Carper.
“Just last week the Postal Service announced that it lost $3.3 billion in the first quarter offiscal year 2012. The fact that these devastating losses came during a period of the year that isusually the most successful for the Postal Service is truly shocking and underscores the seriousnature of the crisis this American institution faces.
“The Postal Service has reiterated that if nothing is done, it could be insolvent by fall 2012.We can’t let the Postal Service fail on our watch. Congress and the Administration are in agreementthat key reforms and resources are necessary if we hope to help the Postal Service recover andthrive. I look forward to working with the Administration and my colleagues over the coming monthsto provide the Postal Service with the tools and resources it needs.”
USPS last week reported a net loss of $3.3 billion for the three months to 31 December, withvolumes dropping 6% and operating revenue falling 1.1% to $17.7 billion. The postal operator saidit expects large losses to continue until it has implemented its network re-design and downsizing,and has restructured its healthcare programme.
Additionally, it said the return to financial stability requires legislation that gives thePostal Service “typical commercial freedoms”, including delivery flexibility, returns over $10billion of amounts overpaid to the Federal Government and resolves the need to prefund retireehealthcare at rates not assessed any other entity in the United States.
In the absence of significant changes in the law to allow normal commercial freedoms, the PostalService will default on both retiree health benefits pre-payments to the federal government duethis year, said chief financial officer Joe Corbett. Even if legislation changes or eliminates thepre-funding payments, he said that USPS may reach its $15 billion debt ceiling this autumn.
