Panel Disputes Cutback Savings From The Postal Service

The decision whether to cut back U.S. mail delivery to five from six days a week was complicated Thursday by a report that suggested the U.S. Postal Service had overstated the savings to be gained by the change.

The U.S. Postal Regulatory Commission on Thursday said it found only $1.7 billion in savings, compared with the Postal Service's estimate of $3.1 billion. The commission also warned that the Postal Service had underestimated by as much as $386 million annually the loss of revenue that could come by dropping Saturday delivery.

The Postal Service, which anticipates operating at a $238 billion cumulative loss over the next decade, said last year it would pursue a five-day delivery schedule as soon as this year to cut costs. Congress currently mandates six-day delivery and would have to approve any changes.

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The commission, which approves postal rates and operates independently of the Postal Service, made no recommendations about dropping a delivery day. Its members were evenly split over the proposal, said Ruth Goldway, the commission chairwoman, who supports maintaining a six-day service schedule. Read the Farm Forum classifieds updated daily on >>

Rural areas

She also warned that the Postal Service plan does nothing to address what she believes is an inequitable effect on delivery to rural and remote areas.

"It's really going to be up to the Congress to say whether they think the service cuts and the impact on rural areas, and the questions about how you interpret the law, are enough of a concern to outweigh some of the savings," Goldway said.

She also noted that many rural weekly newspapers have a special concern with Saturday delivery. If it is to be ended, she said, the commission urged that the post office allow private services to place the newspapers in people's mailboxes. Currently only the Postal Service is allowed to place items in individual mail boxes.

The commission held two field hearings in South Dakota and Wyoming, and asked senators from Alaska and Hawaii to weigh in on the delivery change.

Sen. Lisa Murkowski, R-Alaska, who testified before the commission in September, said she's relieved it took into account some of her concerns.

"I am pleased that the commissioners have taken seriously the negative impact the proposal could have on Americans who live in rural and remote areas of the nation, including Alaska," she said Thursday. "I anticipate that the Senate will take their findings and recommendations just as seriously."

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The Postal Service doesn't receive taxpayer funding, so cuts don't have an effect on the federal deficit or the national debt. However, the Postal Service anticipates losing $7 billion this fiscal year. Of that loss, about $5.4 billion is money the Postal Service must pay into a fund to pre-pay health care expenses for future retirees.

Postmaster General Patrick Donahoe said the Postal Service will not only continue to stick by its proposal for a five-day plan, but will push for Congress to approve it. The Postal Service "remains in the midst of a period of great financial instability," Donahoe said in a statement, and they "remain convinced of our findings."

Since announcing the proposal, the Postal Service has argued that profound technological and social changes have changed the way Americans communicate, and that as a result, they need to rethink their delivery schedule in the digital age.

Imposed savings

Donahoe also announced a series of other savings Thursday that he will impose, including eliminating about 7,500 administrative and executive jobs and the closing of seven district offices across the country that handle managerial functions. He said he expected the changes to save $750 million annually.

Officials said they hoped to eliminate the jobs by offering buyouts, but did not rule out that some workers would be laid off.

The seven district offices that are closing are Columbus, Ohio; Troy, Mich.; Carol Stream, Ill.; Providence, R.I., Macon, Ga.; Billings, Mont. and Albuquerque. Officials hope to close the offices this year. The functions of these offices will be assumed by other district offices.

The postal service said it will offer a financial incentive program to eligible employees to take early retirement.

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Employees must be 50 years old, with at least 20 years of service; or any age with at least 25 years of service to qualify for the incentive. Employees who accept the program will receive $20,000 paid over two fiscal years to leave.

Donahue said additional staff reductions would also occur, but he provided no details.

What's ahead

The chairman of the House Committee on Oversight and Government Reform announced this week that he would be looking into the Postal Service's recent labor agreement with the American Postal Workers Union. And the top Republican on the oversight subcommittee that oversees U.S. mail warned that the Postal Service's proposal alone wouldn't close the gap. The agency also has issues with legacy benefits, workers compensation, its facilities, and other potential costs, said Rep. Dennis Ross, R-Fla.

"The real issue facing the Postal Service right now is labor costs, which make up 80 cents of every dollar they spend," Ross said.

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