September 19, 2011 / 5:10 PM / 6 years ago

Obama's Postal Service plan would cut Saturday mail

<p>A mail carrier makes his rounds in the Cow Hollow neighborhood in San Francisco, California March 20, 2009. REUTERS/Robert Galbraith</p>

WASHINGTON (Reuters) - The Obama administration’s plan to rescue the U.S. Postal Service would allow the agency to end Saturday mail delivery and sell non-postal products, according to documents released on Monday.

The plan, introduced alongside a deficit-reduction package, also would restructure a massive annual payment to prefund retiree health benefits and refund $6.9 billion the mail carrier says it overpaid into a federal retirement fund.

The White House says its plan would save the Postal Service more than $20 billion in the next few years.

“The administration recognizes the enormous value of the U.S. Postal Service to the nation’s commerce and communications, as well as the urgent need for reform to ensure its future viability,” the White House document said.

The Postal Service has watched its core business of delivering mail erode as consumers send email and pay bills online. The agency has said it needs to downsize drastically or it will be unable to deliver mail by the end of next summer.

The agency has said it needs to reduce payrolls by about 220,000 by 2015 and is studying thousands of post offices and about 300 processing facilities for possible closure.

Analysts have said the move to five-day mail delivery could hurt e-commerce businesses that rely on the Postal Service to carry their products to consumers.

Shares of eBay Inc fell more than 6 percent this month on concerns that proposed cuts could raise costs for the site’s small sellers.

The Postal Service contends that weekend mail traffic is too light to support Saturday delivery.

“The president’s proposal would help the Postal Service update its business model to reflect Americans’ changing communications habits,” said Senator Tom Carper, a Democrat.

Many lawmakers in Congress back five-day mail delivery, but little consensus has emerged on how to overhaul the agency. Republican Darrell Issa has refused to consider revamping the prepayment or returning retirement fund money, which the White House plan and several Democratic lawmakers’ bills would do.

Issa, chairman of the House of Representatives Oversight Committee, offered an amendment on Monday that he says brings the savings in his USPS bill to more than $10 billion per year through cuts and restructuring.

His bill would end Saturday mail and set up groups to close facilities and cut costs if the agency misses payments. The amendment doubles the amount the agency would have to save by closing processing facilities and phases out delivery to front-door mail slots.

Issa’s plan, which allows USPS to override contracts and cut the workforce, could spark arguments in Congress when a subcommittee takes up the bill on Wednesday.

Obama administration officials said their plan supports retirement incentives but not layoffs, which postal unions and many Democratic lawmakers fiercely oppose.

The Postal Service relies on revenue from stamps, packages and other services, not tax dollars, to fund its operations. The agency lost more than $3 billion last quarter.

The agency expects to default on the $5.5 billion retiree health payment due at the end of September unless Congress provides relief. Lawmakers have indicated they want to extend the due date for the payment.

Editing by Doina Chiacu

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