Post Office wants pension reform to cut $8.5 billion deficit

The United States Postal Service is running a $8.5 billion deficit and Postmaster General Patrick R. Donahoe told Congress it would have been worse if the USPS hadn't already cut $9 billion in costs the last two years.

Postmaster Donahoe testified on Wednesday in the House of Representatives before the Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy on Oversight and Government Reform, a very long name for members sitting in judgment on how the USPS goes about its business.

In proposing more cost cutting for fiscal year 2011, Donahoe said $2 billion more will be eliminated from the Postal Service budget. Despite that and the $9 billion from the last couple of years, USPS cannot make ends meet without deficit spending and borrowing, in a mini-version of the total federal budget woes.

The fact that most U.S. citizens are using fewer USPS services due to improved electronic and computer communication, turns out not to be the main source of the problem. Congress learned from the Postmaster General that the decrease in usage and the attendant fees that they have taken out of the system rank second to “...the result of an inflexible business model due to the laws that govern the Postal Service.”

Most particularly, Donahoe cited a federal regulation instituted in 2007 that "...required the Postal Service to pre-fund retiree health benefits (RHB) in amounts of approximately $5.5 billion per year." There is no other entity in the federal bureaucracy that must abide by similar rules. There is a direct correlation, said Donahoe between the Postal Services' budget woes and the institution of the rule on RHB.

Audited financial results for the four years prior to RHB taking effect show the USPS running in the black. But for the requirements of the RHB, the Postmaster General insists the Postal Service would still be running within its budget and showing revenue above and beyond that. In addition to asking Congress to reconsider its decision to burden the agency in this way, Donahoe reiterated some familiar and introduced some new remedies for the budget woes.

Serious consideration must be given at this point to reducing the work week to five days, by eliminating weekend deliveries all together, Donahoe insists. He proposed some methods to better compete in the world-wide package shipment business and to connect with customers outside the physical post office locations. He also testified that streamlining work routines and labor rules, unrelated to labor unions, must be reviewed to assist in getting the agency back to fiscal health.

Donohue was sworn in as the 73rd Postmaster General of the United States in October 2010. He is what is known as "lifer", having begun a career with the USPS as a clerk in Pittsburgh, Pennsylvania. Prior to assuming his role at the top spot in the USPS, Donahoe served as the Chief Operating Officer and Deputy Postmaster General.