Feb. 8 (Bloomberg) -- Lawmakers who wouldn’t help the U.S. Postal Service as its annual losses reached almost $16 billion may be spurred to act after Postmaster General Patrick Donahoe said he would end Saturday mail delivery without Congress’s approval if necessary.
Donahoe’s Feb. 6 announcement prompted U.S. House and Senate leaders to say that passing legislation to restore the service’s financial viability is a top priority this year, even as Senate Majority Leader Harry Reid yesterday joined other Democrats and postal unions in questioning the move’s legality.
The Postal Service, which is losing $25 million a day, says it can’t do more than narrow its losses without congressional action on big-dollar changes. The service today said it lost $1.3 billion in the quarter ended Dec. 31, its strongest period because of holiday mailing, despite cutting costs by 9.8 percent from a year earlier.
“I’d like to say we can solve these problems on our own,” Donahoe said today at a postal board meeting in Washington. “The scale of our challenge requires major legislative reform to our business model. We do not want to be a burden on the American taxpayers.”
Donahoe has said the Postal Service, which is supposed to be self-sufficient, needs to cut costs by $20 billion a year to pay off its debt to the U.S. Treasury and return to profitability.
Mail volume is down 26 percent from its 2006 peak as individuals and businesses have shifted toward e-mail and e-billing, and the service exhausted its borrowing authority last September.
It has asked Congress to defer or restructure a requirement to pay about $5.5 billion a year to the Treasury for health-care costs for future retirees. The service defaulted on the last two payments to preserve cash, and Chief Financial Officer Joseph Corbett today said this year’s payment won’t be made.
Donahoe has also proposed taking the approximately 521,000 postal workers out of the U.S. government employee health-benefits system. The service last year projected it would save $7.1 billion a year by managing its own benefits.
Ending Saturday mail delivery would save $2 billion annually, according to the Postal Service.
“They cannot cut costs in a way that will make them sustainable,” said Richard Geddes, a Cornell University associate professor who studies the Postal Service and advocates changing its business model. “It’s like if you reduce the costs of horses and buggies in the automobile era.”
The Democrat-controlled Senate last year passed a measure giving the service much of the relief it sought, while requiring it to study the impact of ending Saturday delivery for two years. The Republican-controlled House didn’t bring up the Senate measure or vote on an alternative proposal criticized by Donahoe that would have set up an independent commission to close post offices while imposing a control board to oversee postal finances.
Now, with his move on Saturday delivery, Donahoe is drawing support from Republicans and criticism from Democrats.
The top Republicans on the House and Senate committees with postal oversight, Representative Darrell Issa of California and Senator Tom Coburn of Oklahoma, praised Donahoe’s move. Representative Jose Serrano, a New York Democrat on the House Appropriations Committee, said it would be illegal, and Frank Lautenberg, a New Jersey Democrat who leads the Senate appropriations subcommittee with postal jurisdiction, said it “circumvents the will of Congress.”
The service previously said it needed a change in law to cut a day of delivery because language first added to appropriations bills in 1981 dictates six days of delivery. Donahoe said Feb. 6 the service, which gets less than 0.1 percent of its revenue from taxpayers, would rely on a new legal intrepretation that it could take that step under a continuing-funding resolution that expires next month.
“The postmaster general relied on flawed legal guidance to claim that he can circumvent Congress’ authority on the matter,” Reid said in an e-mailed statement yesterday.
David Partenheimer, a Postal Service spokesman, said the service responded to the biggest criticism of five-day delivery by preserving Saturday package service.
“Given our worsening financial situation, the strong public support for this change, and the plan to maintain six-day package delivery, it is anticipated that most members of Congress will understand the urgent need to implement this change,” he said in an e-mail.
Reid, while criticizing Donahoe, blamed House Republicans for stalling postal service changes last year. The Nevada Democrat called it a top priority for this year, echoing statements made the previous day by House Speaker John Boehner, an Ohio Republican.
While Donahoe said ending six-day mail delivery isn’t a ploy to goad Congress to act, Farrokh Hormozi, chairman of the public administration department at New York’s Pace University, said it may have that effect. Millions of Americans depend on receiving physical mail, he said.
“The fact of the matter is that the Postal Service is what economists call the public good,” he said in an interview. “It doesn’t matter whether I get my Visa bill today or tomorrow. But for those people who depend on government subsidies or welfare checks or Social Security and they live from one paycheck to another, this is a significant issue we’re talking about.”
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