Would barring ban on layoffs save Postal Service?

Thursday - 11/17/2011, 11:27am EST

Debra Roth, partner at Shaw, Bransford and Roth

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By Michael O'Connell
Web Editor
Federal News Radio

The Postal Service has been facing what it calls "dire" financial troubles and could face insolvency.

USPS, which has about 560,000 full-time positions, wants to renegotiate union contracts as part of its plans to stop the bleeding. They may not be the last agency to turn to this option as budget cuts get deeper.

"A lot of people inside and outside the government on the Hill are watching how Congress deals with the Postal Service because they are having fiscal problems," said Debra Roth, a partner at Shaw, Bransford and Roth, who spoke to the Federal Drive with Tom Temin and Amy Morris. "Not the same kind of fiscal problems the rest of the government's having, but labor contracts are getting in the way of dealing with one aspect of getting out of their fiscal crisis."

At least one Postal Service contract protects senior employees, who have been with the agency for a significant length of time, from layoffs.

"That's the kernel of the problem here," said Roth.

The Postal Service has gone to Congress, she added, and the House is considering a bill that would allow the Postal Service, as an act of law, to ban requirements in negotiated agreements that bar layoffs. If passed, the new law would prohibit union contracts from barring layoffs, which would allow the Postal Service to downsize further.

The Postal Service currently has about 650,000 employees, down from nearly 900,000 a decade ago.

In the last five years, volume of mail has declined by 22 percent. "Other federal agencies, assuming when Congress passes its budget, they at least get funded," she said. "So they're being funded at their current levels and when they see what the cuts are, everybody will know what their budget is. For the Postal Service, it's all based on their mail volume, so they know they're in decline."

The economics of mail delivery are what's hurting the Postal Service, whose wage and benefits account for 80 percent of its overall expenses. By comparison, wage and benefits at UPS and FedEx account for 60 percent of their expenses.

The Postal Service is also hindered by its structure as a hybrid organization — part governmental body, part business. "They have to make their funds by selling a product, mail services," Roth said. "But they're not free to do whatever they want because they are, in some sense, controlled by the government. They're required to have postal offices in many locations that they would rather not have postal offices. When you read their proposals, they want to cut 12 percent of their locations. So, it's not like they're free to be UPS or Fedex."

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