USPS shrinks workforce, changes pension

Monday - 1/17/2011, 7:03am EST

WFED's Jason Miller

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By Meg Beasley
Reporter
Federal News Radio

Patrick Donahoe was sworn in Friday as the 73rd Postmaster General of the United States, taking control of an organization in fiscal crisis. While Donahoe praised USPS employees and promised to return the organization to solvency, much of the cost cutting will mean lost jobs for many agency employees.

Last year was the worst year ever for USPS - the organization realized a net loss of $8.5 billion as a result of declining revenue and rising operating expenses. For the first time the agency will not be able to meet its mandated $5.5 billion payment to the future employees health care fund.

The first step USPS plans to make to address this issue is reduce operating costs by reducing its workforce. In a pre-ceremony interview, Donahoe said he wants to restructure USPS to make it "flatter, leaner organization that has the flexibility to adapt to the coming changes."

The organization's first target is to eliminate 7,500 administrative and line supervisors and postmaster positions. Approximately 2,000 of those will be local postmasters. As more and more post offices close or consolidate, these positions are no longer necessary.

In many rural communities, Donahoe said the agency is looking at contracting postal duties out to a general store or gas station. He said that strategy saves USPS money but also helps the small business remain viable.

Donahoe said in compliance with its contracts with unions, USPS relocates employees whose positions are eliminated. USPS uses a process called "excessing" where employees are moved to another role in the same office, if possible, or to another post office or even a different city.

He hopes to see a significant number of the job reductions happen as employees chose to retire when their positions are eliminated. Donahue said about 30 percent of the current administrative staff is eligible for retirement. He recognized, though, that in this economy, many people are helping support family and friends who have been laid off and may not opt for early retirement.

If the goal of 7,500 jobs is not reached through voluntary retirements, Donahoe might look at financial incentives for retirement. "We'll just have to work through it and see," he said.

The Postal Service also is continuing to reduce its larger workforce as decreases in mail volume are resulting in idle hours paid. Approximately 100,000 positions have been eliminated in the past three years.

Other potential ramifications for employees include pay freezes, reductions in current employee benefits and lower pay scales for new employees. Employee pay and benefits account for 80 percent of USPS's operating expenses.

Donahoe said he wants to exhaust all internal cost cutting measures before making changes that would impact the public. However, even with these steps, the Postal Service will wants more delivery flexibility and to eliminate Saturday service.

The reassessment of pay and benefits and the elimination of Saturday delivery were two of three measures proposed in legislation by Sen. Tom Carper (D-Del.). Carper's POST Act would also take aim at a controversial federal pension.

Currently, USPS pays into three employee programs: the Civil Service Retirement Program (CSRS), the Federal Employment Retirement System (FERS) and a fund for potential future employees' health benefits. Studies by the USPS inspector general and the Postal Rate Commission have recently shown that USPS has been overcharged for its liabilities to the two pension systems, which are calculated based on projections of future workforce numbers. In the past few years, USPS has actually shrunk, and therefore has been contributing money to the funds for employees it does not have.

The Postal Regulatory Commission conducted the assessment last May through an outside firm. It followed a report by the Postal Service's inspector general that found the current payment rate of retirement costs "inequitable," leading to USPS's overpaying $75 billion into CSRS. Similar miscalculations led to USPS overpaying $6.9 billion into FERS.

Additionally, USPS is the only federal organization that pre-funds health benefits for future employees. The calculations around these costs also are likely incorrect, given the shrinking USPS workforce. These costs are between $5.5 and $5.9 million per year.

The POST Act would require the Office of Personnel Management to recalculate the pay schedule to reflect the Postal Service's current workforce situation. It would also give USPS $5 billion each year from the $50 billion overpayment.

Donahoe also hopes to recoup the $6.9 billion overpaid to FERS.