Postmaster General Patrick Donohoe was on Capitol Hill this week to tell a Senate subcommittee that the U.S. Postal Service is facing default unless legislation is passed by the end of the month. The organization is unable to make a congressionally mandated payment of $5.5 billion to prefund retiree health benefits.
A combination of weak economic conditions and diversion to electronic communication has led to declines in first-class mail volumes and standard mail, and the downward trend is expected to continue, according to a USPS news release.
“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,” Donohoe told the Committee on Homeland Security and Governmental Affairs Sept. 6. “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 work force.”
Specifically, the USPS seeks legislation that will resolve the law that requires the $5.5 billion annual prepayment requirement; return $6.9 billion in Federal Employees Retirement System overpayments; grant USPS the authority to determine delivery frequency; allow a restructuring of the USPS health care system to make it independent of the federal system; grant USPS authority to provide a defined contribution retirement plan or new hires instead of the existing defined benefit plan; and streamline the process for product development and pricing.”
USPS announced in July that it is studying possible closure of 3,700 retail locations nationwide, mostly in smaller, rural areas, as a cost-savings measure. USPS has posted state-by-state lists of locations being studied, including Missouri’s
. The agency also is weighing whether to cut delivery to five days a week.
In the past four years, USPS has cut costs by more than $12 billion and reduced its work force by 110,000 people, the release said, but in order to return to profitability, costs must be cut by $20 billion, and employees by 220,000, by 2015.
During the Sept. 6 Senate hearing, however, U.S. Sen. Claire McCaskill, D-MO, shared concerns she’s heard from Missourians about proposed USPS cutbacks. She emphasized the importance of Saturday delivery to residents of rural communities, noting that some rely on the post office for access to news goods and services that might not otherwise be available.
“We are in the middle of hearings in Missouri on the 167 post office closings being proposed in my state,” McCaskill said in a separate news release. “Eighty-five percent of those are in counties of less than 50,000 residents.”