US Postmaster General begs Congress for flexibility in cost cuts

WASHINGTON Wed Feb 13, 2013 11:37am EST

WASHINGTON Feb 13 (Reuters) - U.S. Postmaster General Patrick Donahoe pleaded with lawmakers Wednesday not to block the financially strapped Postal Service from moving ahead with plans to end Saturday first-class mail delivery.

Last week, the Postal Service rattled lawmakers and other stakeholders when it announced plans to end delivery of first-class mail, magazines and direct mail on Saturdays, starting in August. The plan, the Postal Service said, would save the agency $2 billion a year when fully implemented.

No law requires the Postal Service to deliver mail six days a week, but Congress included a provision in legislation to fund the federal government each year that has prevented the USPS from reducing delivery service.

The current funding measure expires in March, and would free the Postal Service to change its delivery schedule unless Congress prohibits it in the next spending resolution.

But some lawmakers and trade groups have argued that the savings from this plan are too small compared to the $20 billion budgetary gap the Postal Service needs to fill.

"The financial problems of the Postal Service are getting bigger every year," Donahoe said. "Congress can avoid a future scenario in which the Postal Service requires a taxpayer bailout - which could be in excess of $45 billion dollars by 2017 if we don't change our business model."

The Postal Service, which lost nearly $16 billion last year, has been grappling with tumbling mail volumes as Americans communicate more online, and has struggled under the weight of massive required payments for future retiree health benefits.

It has repeatedly urged Congress to pass legislation to restructure its operations and allow it to get on better financial footing.

Lawmakers at a Senate committee hearing agreed that urgent postal legislation was necessary, but not over how to save the Postal Service.

U.S. Representative Darrell Issa, California Republican who wants new legislation to help the Postal Service, said in testimony that other countries such as Australia, Canada, Finland and Spain have been successful in shifting to five-day delivery, and the USPS can do the same and save money.

"It's very clear that ultimately, either the rate payer or the taxpayer will have to pay the $20 billion in debt of the Postal Service," Issa said.

Current laws, Donahoe said, limit the flexibility of the struggling mail carrier to implement changes that would help it become more profitable and offer new products and services. He wants lawmakers to allow the agency to control its own employees' healthcare funding.

The Postal Service pays $13.1 billion annually in healthcare costs, including mandatory payments into its future retirees' healthcare fund. The Postal Service has blamed much of its financial troubles on this prefund mandate put in place by a 2006 law.

Over the last six year, the Postal Service has eliminated more than 190,000 jobs, Donahoe said, in attempts to cut costs. But it still needs Congress to free its hands to handle more of its affairs.

"If legislation is not enacted - and soon - to provide the necessary reforms and flexibilities to achieve savings and generate new revenues, we will all be back here again, discussing the same issues," Donahoe told the Senate Committee on Homeland Security and Governmental Affairs.

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