USPS makes a case for debt relief

Wednesday - 4/6/2011, 7:46am EDT

WFED's Jared Serbu

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By John Buckner
Federal News Radio

The Postal Service says Congress needs to make changes to laws that are hindering its efforts to return to profitability and pay down its debt.

Postmaster General Patrick Donahoe and two members of the USPS Board of Governors told a hearing of the House Oversight and Government Reform Committee that a 2006 postal reform law requiring the agency to make accelerated prepayments for retiree health benefits was the primary reason the service was deeply in the red and likely to hit its $15 billion debt ceiling later this year.

Donahoe asked for help during hearing scrutinizing a contract approved in recently-completed negotiations between USPS and its largest collective bargaining unit, the American Postal Workers Union (APWU).

"This contract falls short of the goal. It is very clear that the intention is good; the Postmaster has worked diligently to get some concessions," said Rep. Darrell Issa (R-Calif.), chairman of the committee during the hearing Tuesday. "However, we will hear today that we, in fact, under current law, may not be able to negotiate the contract that needs to be negotiated."

Postal officials said the tentative contract was the best they could do under a system which threatens to move any negotiations that reach the stage of impasse into the hands of a third-party arbiter.

"Failure to reach a negotiated agreement places us in binding arbitration," said Louis Giuliano, chairman of the Board of Governors at the Postal Service. Arbitration "would not have allowed us to realize most of the benefits we see under this negotiated contract."

James Miller, another postal governor, said past experience has shown that the arbitration system does not produce favorable results for USPS.

"Our current system, from all the evidence we have, is biased in favor of labor and against management," said Miller, who said his testimony represented only his own views. "Our unions know this, and we know this. So in our decision to accept the best we could get or go to arbitration, we had to keep this in mind. If you want a better deal, you have to change the law."

USPS officials told the legislators that they would also like to see Congress change the mandatory Retiree Health Benefits (RHB) pre-payments and resolve the over-funding of the Federal Employees' Retirement System (FERS).

"[T]he $5.5 billion per year accelerated payments, mandated in the 2006 Postal Accountability and Enhancement Act (PAEA), are an extraordinary burden," said Giuliano in his written statement.

Giuliano said that if they did not have to pre-pay health benefits as the PAEA requires, at the end of 2010, the Postal Service would have made a $9 billion profit instead of being $12 billion in debt.

In the FERS program, the Postal Service already has over-paid by $6.9 billion and continues to pay $3 billion per year into it, officials said.

Giuliano and Donahoe reassured Congress that they do not want to cut the benefits being paid to retirees or current employees but rather the benefits being paid for potential employees.

USPS will default on its debts on Sept. 30 if they continue operating under both of these mandates, Donahoe said.

"We are not asking for a bailout, just a level playing field," he said. "Take care of these unfair financial burdens and you'll never hear from us again except about how great we're doing."

Many of the Republicans did not immediately appear to be inclined to make the changes USPS requested.

"While we are able to identify there is a big issue out there, the bigger issue is really the systemic changes we need to make to the Postal Service," said Rep. Dennis Ross (R-Fla.), chairman of the Subcommittee on the Federal Workforce, Postal Service and Labor Policy.

Ross said that long term solutions need to be made in the areas of worker's compensation, over-capacity in the workplace, under-performing facilities and labor costs.

Donahoe said the Postal Service's overall plan addresses these concerns and that the union contract will set them on the right path for long term solutions. On the opposite side of the aisle, Democrats agreed with the requests to change the laws.

"In the short term, however, we must relieve USPS from the 100 percent prefunding requirement, which would obviate any need to lay off Postal Service employees or reduce mail delivery to five days," said Congressman Gerald Connolly (D-Va.) in his written statement.

Rep. Edolphus Towns (D-N.Y.) suggested that USPS look into expanding services beyond its traditional mail business to generate revenue, in the spirit of the passport application services it provides at most offices.

Miller said that if USPS is to retain its monopoly over the mail system, it needs to focus on that core business.

He said trying to diversify outside of those boundaries would be disastrous for the organization, however the Postal Service could and should continue to develop and market new postal products such as its successful flat rate shipping boxes.

John Buckner is an intern with Federal News Radio. Federal News Radio Defense reporter Jared Serbu contributed to this report.

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