Postal Service seeks Congressional help to cut costs

In addition to closing post offices and consolidating mail facilities around the country as part of cost-cutting measures, the U.S. Postal Service is now asking Congress for relief from $5.5 billion in annual benefit payments and flexibility in some operational matters.

Saying that the USPS is in “a dire financial predicament,” Board of Governors Chairman Louis Giuliano and Postmaster General Patrick Donahoe asked Congress on Monday (June 27) to support three key measures:
• Eliminate current mandates requiring $5.5 billion annual retiree health benefit pre-payments;
• Allow the Postal Service to access Civil Service Retirement System and Federal
Employee Retiree System (FERS) surpluses; and,
• Give the Postal Service the authority to determine the frequency of mail delivery (possibly eliminate Saturday delivery).

In Arkansas, the letters were specifically targeted to U.S. Sen. Mark Pryor, D-Ark., and U.S. Rep. Steve Womack, R-Rogers. Pryor and Womack are members of oversight committees in their respective chambers that have jurisdiction over the USPS.

USPS officials have said they wanted to obtain $2 billion in cost savings in fiscal year 2011, including a reduction of 40 million work hours. However, the report notes that rising fuel prices could offset many of the cost-cutting initiatives. According to the USPS letter, the agency has in the previous four fiscal years cut 110,000 “career positions” and “saved $12 billion in costs.”

Eliminating Saturday delivery could save the USPS an estimated $1.7 billion annually.

The USPS, according to the letter, “receives no tax dollars for operating expenses, and relies on the sale of postage, products and services to fund its operations.”

LOCAL CUTS
Part of the cost savings included the April 28 decision to consolidate mail processing operations from Fort Smith to the Northwest Arkansas Processing & Distribution Center (P&DC) in Fayetteville.

David Camp, USPS manager in Arkansas, said the first year of consolidation will save the USPS $1.478 million, and $1.936 million each year thereafter. The move is expected to result in a loss of 75 jobs in the Fort Smith area.

Also, the USPS has closed two post offices in the Fort Smith area since November 2010. The station on South 32nd Street was closed Nov. 20, and the Rogers Avenue Station (near Creekmore Park) was closed March 26.

In recent weeks, the USPS has closed three rural post offices in western and northwestern Arkansas.

Pryor’s office issued this statement about the USPS requests: “USPS has lost billions over the past few years, and must take steps to improve efficiency and service. I support cost-cutting measures on behalf of taxpayers, but they must be done in a smart and responsible manner. As a member of the Homeland Security and Governmental Affairs Committee, I am working with the postal service and local communities to find a viable solution.”

FINANCIAL RESULTS, DEADLINES
The USPS, which has seen a more than 20% decline in mail volume since 2007, posted a net loss of $2.557 million for the first half of fiscal 2011 (ended March 31), up from the $1.881 million loss in the fiscal 2010 period. Net revenue for the period was $34.111 million, down from the $35.052 million in the 2010 period.

Giuliano and Donahoe said making the mandated $5.5 billion pre-payment due Sept. 30 will not be possible.

“This pre-payment for future retiree health benefits is no longer tenable given present-day financial challenges,” they said in the June 27 letter.

Federal retirement law has resulted in a $6.9 billion surplus for Postal Service contributions into the Federal Employees Retirement System (FERS). The letter calls for the money to be transferred to the USPS to “help avoid insolvency.”

The Postal Service informed the Office of Personnel Management (OPM) that it is suspending employer contributions for the defined benefit portion of FERS annuities effective June 24. The move is expected to save about $800 million in the next six months of the fiscal year.

The Postal Service will continue to transmit employees’ FERS contributions to OPM, as well as employer automatic and matching contributions and employee contributions to the Thrift Savings Plan, and employees will continue to receive service credit. The annuity payment suspension is an emergency cash conservation measure expected to free about $800 million in the current fiscal year.

“The need for legislative change is immediate,” Giuliano and Donahoe said in the letter. “We urge your support of this vital postal legislation and ask that you work for immediate enactment this fiscal year to avoid the possibility of mail and package delivery disruptions.”

OTHER USPS CUTS
The following data comes from the most recent quarterly statement (PDF) filed March 31 by the USPS.

Other cost-cutting actions implemented or planned in the past year include:
• Work hours during the first half of 2011 were reduced by 16 million hours. This is in addition to reductions of 75 million, 115 million, and 50 million work hours in fiscal years 2010, 2009, and 2008, respectively.

• In January 2011 the Postal Service announced plans to change administrative functions by reducing headquarters management positions, reducing the number of area and district offices, and decreasing the number of administrative, supervisory, and Postmaster positions by approximately 7,500.

• In addition, the Postal Service has and will continue to review the possible closure of “a significant number of post office locations,” that could result in annual savings of $750 million.

• A tentative contract (reached March 11) with the American Postal Workers Union (which represents about 205,000 members) would lower by 10% existing pay schedules, allow for “significant workforce flexibility” and the increased use of temp labor.