WASHINGTON — The U.S. Postal Service is on the verge of financial collapse and should eliminate Saturday delivery, close thousands of local post offices, restructure its health plan and lay off 120,000 workers to survive, according to Postmaster General Patrick Donahoe.
Donahoe asked lawmakers to allow him to make “radical” changes to the centuries-old institution so it can avoid defaulting on its obligations. At a Senate hearing Tuesday, he said the Postal Service is all but certain to miss a $5.5 billion payment to its retiree health fund due at the end of the month. And that only begins the trouble, he said, warning that the postal system is heading toward a $10 billion net loss this fiscal year and is near its borrowing limit.
With operating cash running out quickly, trucks, mail-processing centers and mail delivery could come to a halt by this time next year, Donahoe said.
“Failure to act could be catastrophic,” Donahoe told members of the Senate Homeland Security and Governmental Affairs Committee, which oversees the Postal Service.
The new proposals reflect heightened desperation at an agency that has been on the decline for years. The rise of e-mail has sharply curbed demand for old-fashioned letters, while competitive delivery companies have put the squeeze on the post office’s business model. Last year, the post office delivered 171 billion pieces of mail, down 20 percent from four years earlier.
But Donahoe put the blame for the current crisis on federal laws and labor agreements that he said unduly restrict his agency’s ability to adapt. Labor costs amount to 80 percent of the Postal Service’s expenses, and current contracts contain a no-layoff provision. Labor costs are 53 percent of expenses at United Parcel Service and 32 percent at FedEx, its two biggest private competitors, according to The New York Times.
Changes to the frequency of service or delivery areas require federal legislation.
The proposed changes to mail service probably will draw the broadest opposition. Representatives of the newspaper and magazine industry, both dependent on mail subscribers, told Congress to act carefully in eliminating Saturday delivery and post offices.
Postal unions also oppose much of Donahoe’s plan.The layoffs Donahoe has proposed would amount to about a fifth of the workforce. Donahoe also has suggested that the Postal Service withdraw from the federal employee health insurance plan and sponsor its own.
The Postal Service and the unions are pushing the administration to lessen the immediate crisis by giving the service between $50 billion and $75 billion they say has been overpaid into federal retirement funds. The Obama administration has appeared reluctant to support anything that could be labeled as another bailout.
