The struggling U.S. Postal Service began asking customers to pay an extra 3 cents for every stamp they buy this week even as it fell short on some promised cost savings and failed to more aggressively cut spending identified by Congress as excessive.
Postal workers continue to get fringe benefits that are more generous than those afforded to government workers in general. Last week, the mail service announced that it had postponed indefinitely a plan to close mail processing centers it identified in 2011 as redundant and unnecessary.
The Postal Service stands to save about $2 billion annually if it closes all the duplicative mail centers, but it decided this month to keep 80 of those facilities open indefinitely.
The service has struggled from the downturn in mail that coincided with the economic crisis of 2007 and 2008, and from growing competition from the Internet. It acknowledged recently that it still needs more savings and revenue to balance its books.
It has defaulted on $16.7 billion in payments to the U.S. Treasury and is operating on a mainly cash-on-hand basis. In addition, it reached its statutory debt ceiling in 2012, meaning it no longer can borrow money from the government.
Frustrations over the pace of change are poised to boil over in Congress, where a powerful House committee chairman is pressing legislation that would force the Postal Service to make the sorts of spending cuts it has resisted.
A Senate Homeland Security and Governmental Affairs Committee markup session Wednesday worked through a string of amendments without coming to a final vote. The panel is working on a blueprint for postal reform first offered last summer by committee Chairman Thomas R. Carper, Delaware Democrat, and ranking Republican Sen. Tom Coburn of Oklahoma. Key points in the bill would ease the service’s huge health care benefit bills for workers and give Postal Service officials more flexibility on setting stamp prices and delivery standards.
House Oversight and Government Reform Committee Chairman Darrell E. Issa, California Republican, has led the charge for postal reform in his chamber, proposing legislation last year that would overhaul the service’s operations while prohibiting a taxpayer bailout.
Mr. Issa used Monday’s enactment of the 3 cent hike in a first-class stamp to 49 cents to press the case why the Postal Service needs to be forced by legislation to begin saving more money.
“Instead of continuing to free itself from excess costs created by competition from the Internet, raising rates effectively asks current customers to pay more for unneeded capacity,” Mr. Issa told The Washington Times. “If the Postal Service does not bring its infrastructure in line with declining mail volume, it will run out of money in the near future.”
Mr. Issa said he fears the service is headed either for a stoppage in service that could wreak havoc on the economy or a government bailout.
Toni DeLancey, senior manager of public relations for the Postal Service, told The Washington Times on Friday that they had been making efforts to cut back on spending in the past year.
“We have implemented aggressive cost-cutting measures. Last Fiscal Year (2013) we reduced work hours by 12 million work hours showing our ability to optimize our work force flexibility and drive down hourly costs. This contributed to approximately $1 billion in savings. And, as a result, our productivity reached an all-time high in 2013. This is the fourth consecutive year of record total factor productivity since the depths of the recession in 2009.”
Ms. Delancey added that in FY 2013, the Postal Service consolidated 97 mail processing facilities, adjusted operating hours at 7,985 post offices to match the level of transactions to hours of operations, established 338 new village post offices, and consolidated or reduced 1,847 delivery routes.
“We continue to make significant progress on becoming more efficient in areas where we have the legal and commercial flexibility to do so. We are indeed aggressively cutting costs and pursuing all opportunities to continue to do so,” Ms. Delancey said.
Mr. Issa’s legislation would force a modified Saturday delivery schedule. Packages and medicine still would be delivered on Saturdays, but bills, advertisements and ordinary letters would be phased out. According to the research firm Ipsos, the Saturday change is supported by 80 percent of the American people. The change is estimated to save at least $2 billion annually, according to Mr. Issa’s staff.
Postal Service employees have benefits not offered to most general federal workers. For example, postal workers pay 5 percent to 6 percent lower co-pays for their health care premiums and are given free life insurance. By equalizing postal worker benefits to align them more closely with the rest of the federal workforce, the mail service could save up to $700 million per year, Mr. Issa estimates.
Even the location of a mailbox, whether it’s a traditional curbside flag box or a slot in the door, can have a huge effect on costs.
The Postal Reform Act would seek to phase out expensive “to the door” mail delivery in favor of more efficient curbside delivery. A quarter of addresses today have “to the door” mail delivery, and phasing those locations out would save an estimated $4 billion annually.
The service has refused to make such draconian cuts, instead opting for another stamp price increase, which is set to expire after two years.
In a letter to customers, Postal Service Board of Governors Chairman Mickey Barnett described the “precarious financial condition” of the Postal Service and the “uncertain path toward enactment of postal reform legislation” as primary reasons for seeking stamp price changes.
“Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges,” Mr. Barnett said. “However, if these financial challenges were alleviated by the timely enactment of laws that close a $20 billion budget gap, the Postal Service would reconsider its pricing strategy. We are encouraged by the recent introduction of comprehensive postal reform legislation in Congress, and despite an uncertain legislative process, we are hopeful that legislation can be enacted this year.”
The Postal Service has made some spending adjustments, but says the savings have not been enough.
“To preserve the long-term affordability of mail, we have consolidated 350 mail processing facilities, aggressively streamlined Post Office operations, reduced 22,000 delivery routes, and reduced our workforce by 203,000 employees and our annual operating costs by $16 billion since 2006. These measures, while impressive, have been insufficient to restore the Postal Service to financial stability,” Mr. Barnett wrote in the letter.
“America needs a Postal Service that is financially stable, and we will continue to take the difficult steps necessary to meet our obligations as a self-funding organization that serves every American business and residence.”
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