Congress Starting Bipartisan Postal Talks, Carper Says

Congressional leaders will begin negotiating next week on bipartisan legislation to overhaul the U.S. Postal Service, toward a goal of sending President Barack Obama a bill by August, a Senate committee chairman said.

Tom Carper, a Delaware Democrat, said he’s optimistic an agreement can be reached, with the Postal Service’s mounting financial troubles becoming obvious to the public.

“I think it’s eminently doable,” Carper, chairman of the Senate Homeland Security and Governmental Affairs Committee said, said in an interview today.

He said the group includes Senator Tom Coburn of Oklahoma, the top Republican on his committee; House Government Reform and Oversight Committee Chairman Darrell Issa, a California Republican, and Representative Elijah Cummings of Maryland, that panel’s top Democrat. Issa’s committee will hold a hearing on the future of the Postal Service April 17.

Carper disclosed the talks a day after the Postal Service’s board said the service doesn’t have legal authority to end Saturday mail delivery without authorization from Congress and must halt plans to take that step in August.

The Postal Service is losing about $25 million a day even after cutting 25,000 jobs this year, and the board’s decision left it with few cost-saving options short of a congressional overhaul. The service said it would save $2 billion a year by delivering only packages on Saturdays.

The pressure is on Congress to allow changes in the service’s business model before it runs out of cash, which management has said will happen temporarily in October.

Racing Clock

Without being able to cut back to five delivery days from six, the Postal Service will take its board’s advice and ask its employee unions to renegotiate multiyear contracts, consider asking regulators for an emergency rate increase and cut administrative costs, Postmaster General Patrick Donahoe said in an interview. He said he broached the notion of renegotiating union contracts with labor leaders yesterday.

“They know we’re in a fix in terms of our operating costs,” Donahoe said. “I’m hoping they’ll at least entertain the idea.”

The service’s two largest unions questioned the need to reopen their contracts, which don’t allow career employees to be fired without cause, saying they made concessions when those agreements were negotiated. The service, which lost $15.9 billion last year, estimated it would save $2 billion annually by ending Saturday mail deliveries.

Leadership Needed

“The board’s call to reopen and renegotiate the postal labor contracts is yet another sign that the Postal Service needs new executive leadership,” Fredric Rolando, the president of the National Association of Letter Carriers, said in a statement. “Asking the NALC to renegotiate a contract that was just settled in January is insulting and unnecessary.”

The reduction in the service’s workforce this year is almost equal to the employment of Mattel Inc. (MAT), the maker of Barbie dolls and Hot Wheels toy cars. The service is down to about 497,000 career workers after offering buyouts. Still, that’s barely helped stanch the cash drain posed by operations.

Members of the American Postal Workers Union have already compromised, Sally Davidow, a spokeswoman for the union, said in an interview. They believe cuts should come from other places.

“The Postal Service saved $3.8 billion on account of compromises that the APWU made during negotiations,” she said. “APWU members have done their part.”

The service and its unions have asked Congress to relax a requirement to pay about $5.5 billion a year to the U.S. Treasury for future retiree health-care costs, an expense they say accounts for most of the service’s financial losses. With barely enough cash to pay labor expenses, the service defaulted on the past two years’ payments.

Senate Measure

The postal board’s decision on Saturday mail delivery “calls for us to act with some urgency,” Cummings said yesterday in an interview. “We need to get comprehensive legislation done.”

Carper said last year’s Senate-passed bill is a framework for next week’s negotiations.

The measure would have authorized the Postal Service to provide non-postal products and services and revise benefit payment obligations. The bill also would have made it more difficult for management to close facilities and delayed a reduction to five-day mail delivery for at least two years.

Authority to end Saturday delivery was included in a measure last year from Issa, whose panel oversees the service, that wasn’t voted on by the House. It was left out of the Senate-passed postal bill.

Congress first required mail deliveries six days a week in 1981. Lawmakers have authority over the service because it gets an appropriation to reimburse it for mail the law mandates it must process for free. Yet Congress provides less than 0.1 percent of the service’s annual budget.

GAO Opinion

The postal board’s action yesterday followed a Government Accountability Office opinion last month saying the service lacks the authority to stop delivering on Saturdays.

Donahoe has said he relied on a new interpretation of a law governing the service and the government’s temporary funding status to declare he didn’t need Congress’s permission to cut back delivery days to five a week.

Commercial customers are happy to have greater certainty to plan mailings for later this year, said Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association, based in New York.

The association doesn’t have an opinion on cutting Saturday delivery because its members don’t agree, he said, suggesting closing facilities as a way to cut costs.

“The Postal Service still has excess capacity; a lot of processing plants that are going to be scheduled to close,” Cerasale said. “They can speed that up and get a lot of capacity out of the system.”

To contact the reporters on this story: Laura Litvan in Washington at llitvan@bloomberg.net; Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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