Postmaster General Asks Congress for Help

Our mission is to unite and educate our members for their strength and prosperity.

Donna E. Hanbery, Executive Director
Saturation Mailers Coalition

On January 28, 2009, Postmaster General John Potter appeared before the Subcommittee on Federal Financial Management, Government Information, Federal Service and International Security of the Committee on Homeland Security and Government Affairs of the United States Senate. The PMG told the subcommittee that the Postal Service “is in acute financial crises.”

The PMG’s testimony made a plea to the Postal Service for help in two areas. Potter stated, “I am asking for flexibility in the number of days we deliver mail and an 8-year adjustment to our funding schedule for retiree health benefits.”

The Postmaster’s testimony described the changing communication patterns that were eroding the Postal Service’s business model. The impact of electronic communication on first class mail, combined with the economic problems affecting the entire U.S. economy, led the Postal Service to see mail volume declines of over 9 billion pieces, or 4.5% of all volume, in 2008. The Postmaster General described a business model that assumed the Postal Service could continue to expand its delivery point network based upon increases in volume. Potter stated, “With the rise in electronic communications driving profound and permanent changes in the mail mix as we enter the new century, it became clear that this model was being rendered obsolete.”

Potter described steps the Postal Service has taken to reduce costs, consolidate operations, and achieve productivity gains. He described measures taken to halt the construction of new facilities, a freeze on executive pay, reductions in headquarter staffing and efforts to consolidate duplicative mail processing operations. The PMG appealed to Congress for understanding when efforts to improve postal efficiency resulted in a consolidation or closure of operations in a specific community. Potter described efforts to work within the constraints of the Postal Service’s union agreements to achieve an agreement to more rapidly adjust postal delivery routes (to reflect reductions in mail volumes) and to achieve agreements from postal labor to require employees make greater contributions to the employee’s health benefits.

Potter also described the regulatory and business constraints that affected the Postal Service as a unique institution. “We must serve every customer in every community equally. Rich or poor, from the biggest cities to the smallest towns, we must provide the same high level of service. We must provide the same access. We must make our services available at the same price – in both easy to serve locations and locations so remote they can only be reached by mule, by swamp boat, or by bush plane.”

Describing the Postal Service as the “link that connects every American,” the Postmaster General stated he was turning to Congress for help.

First, the PMG asked Congress to remove the requirement that the Postal Service deliver mail six days a week. Potter stated a reduction in delivery service would only be taken “when absolutely warranted by financial circumstances.” But he asked Congress to give the Postal Service and its Board of Governors the flexibility to take this action. Second, Potter asked for a legislative change to give the USPS relief from the crippling cost burden to prefund the costs of health benefits for future retirees at the same time it fully funded health care premiums for current retirees. The Postmaster General explained the details of the relief the Postal Service was seeking.

Under current law, the Postal Service must prefund its retiree health care costs over a 10 year period from 2007 through 2006. This prefunding is required at the same time the Postal Service is paying costs for current retirees. In 2008 these combined payments for retiree health benefits came to $7.4 billion. This represented almost 10% of the Postal Service’s operating budget. In 2009 it faces higher costs.

The Postal Service is supporting a proposal that would keep the aggressive ten year payment schedule but would allow the costs for current retirees to be paid out of the existing Postal Service Retiree Health Benefits Fund. This would give the Postal Service an additional two billion dollars to offset other costs in 2009.

The Postmaster General stressed that this would not change the benefits or health premiums paid by current or future Postal Service retirees. The exceptionally aggressive pre-funding schedule imposed on the Postal Service by the 2006 Reform Act is not directly related to the actual cost of benefits or the Postal Service’s future retirement obligations, but were related to budget “scoring issues.” Potter stated, “While we recognize that budget neutrality can be an important public policy goal, we believe, in this case there is an urgent need to balance current responsibilities against future responsibilities. Our proposal creates the needed balance.”