Obama plan to seek remedy for struggling USPS

President Obama is set to unveil a White House plan “soon” to tackle the financial crisis at the US Postal Service, Senator Joseph Lieberman said today. The senior senator spoke as he chaired the Senate Committee on Homeland Security and Government Affairs hearing on the financial difficulties at USPS.

Lieberman noted that mail volumes had declined 22% and USPS revenues dropped by more than $10bn in the last five years, and that it was expecting to post a more-than $8bn loss for a second year in a row later this month.

He said: “President Obama will soon offer an Administration plan to respond to the fiscal crisis at the Postal Service. But for me, we must act quickly in the Senate to protect the future of the Postal Service.”

The White House had put forward ideas within this year’s Budget to try to break a partisan dead-lock over how to fix the USPS problems, but were not taken up by Congress, which has had its attention diverted over the summer by the national debt crisis.

John Berry, director at the Administration’s Office of Personnel Management said this afternoon in the Senate hearing that the Administration would include assistance to the Postal Service as part of the national debt reduction plan.

He said the Administration was keen to provide USPS access to its $6.9bn federal retirement fund overpayment and delay its Retiree Healthcare Benefits payment for this year, which runs to $5.5bn by 90 days.

Berry said: “This will allow the Congress, the Postal Service and the Administration the time to carefully assess and analyse the details of the (USPS) proposal. This is a very complex proposal and will need further cost analysis.”

The OPM director said the White House did not currently have a position on the US Postal Service proposals to fix its financial problems, but warned that withdrawing postal employees from federal pension systems would have a “very significant” impact on those federal pension systems.

Berry later said that the White House plan will be submitted along with the deficit reduction plan “within the next few weeks”.

During the hearing, Senator Susan Collins attacked the Obama Administration for failing to put a plan together in time for today’s Senate hearing, given the “many months” she and Senator Thomas Carper had been highlighting the financial crisis at the Postal Service.

She also criticised OPM’s opposition to some of the key proposals of the USPS in reforming its pension arrangements and whether there was or was not a $50bn overpayment into the Civil Service Retirement System.

Donahoe

This afternoon, Postmaster General Patrick Donahoe warned the US Senate that the USPS is now on the brink of defaulting on multi-billion government payments.

The Postal Service is already acting to close up to 10% of its post offices and more than half of its processing infrastructure to stem the losses.

But, Donahoe told the Senate this afternoon that it also urgently needs Congress to pass legislation that helps with its massive pension and healthcare burdens, and allows a move to drop Saturday deliveries.

USPS wants a restructuring of its federal government pension and healthcare payments, or the ability to run its own healthcare system independent from the federal system.

“The Postal Service is in a crisis today because it operates within a restrictive business model and has limited flexibility to respond to a changing marketplace,” Donahoe is expected to say to the Committee on Homeland Security and Governmental Affairs.

“We need the ability to operate more as a business does. This applies to the way we provide products and services, allocate resources, configure our retail, delivery and mail processing networks and manage our workforce.”

In the past four fiscal years, the Postal Service has reduced costs by more than $12 billion and reduced its career workforce by 110,000 employees, USPS says.

“As impressive as these reductions have been, we must significantly accelerate the pace of cost reduction in the next four years,” said Donahoe. Based on current revenue and cost trends, the Postal Service must reduce its annual costs by $20 billion by 2015 to return to profitability.

“We do not currently have the flexibility in our business model to achieve all of these cost reductions. To do so, the Postal Service requires the enactment of comprehensive, long-term legislation to provide it with needed flexibility,” Donahoe added.

Workforce

Donahoe also discussed the size of the Postal Service workforce today, and how in order to return to profitability, the Postal Service needs to reduce its career workforce by approximately 220,000 by 2015, but cannot do so under the terms of existing collective bargain agreements.

To accelerate workforce reductions, the Postal Service is asking Congress to allow it to utilize the Reduction-in-Force (RIF) provisions currently applicable to federal competitive service employees for positions held by bargaining unit employees.

“We have advanced these and other proposals to provide Congress with a range of legislative options while we aggressively do what we can within our current business model,” Donahoe said. “We need the flexibility to operate more as a business would, in order to return to sound financial footing so we can meet America’s evolving mailing and shipping needs for generations to come.

• More on today’s Senate hearing will be available later on Post&Parcel.