Donahoe: Postal Service bailout looms if Congress doesn't act quickly

Friday - 4/19/2013, 10:13pm EDT

Postmaster General Pat Donahoe's full speech

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If Congress doesn't pass comprehensive postal reform legislation soon, it could find itself forced to bail out the financially troubled U.S. Postal Service to the tune of billions of dollars, said Postmaster General Pat Donahoe.

"Congress faces a simple choice: It can decide to start appropriating a lot of money to prop up a broken Postal Service or it can give the organization the flexibility to operate more effectively," Donahoe said in a speech at the National Press Club Friday.

The cost of a bailout, including paying off current debts, would be about $58 billion through 2017, Donahoe said. But the postmaster general stressed that the agency is not seeking a bailout and believes it would be "completely unnecessary," if Congress instead passed an alternative set of reforms.

Last year, the agency lost $15.9 billion, defaulted on more than $11 billion in mandatory payments to prepay future retirees' health care costs and maxed out its borrowing limit. At one point last year, the Postal Service was down to just four days' cash on hand.

Congress, however, failed to move on a bill.

Donahoe optimistic Congress will pass legislation

But Donahoe, who said he's "tired of talking about" the agency's financial losses, insisted he's increasingly confident Congress will pass comprehensive legislation this term.

"I am optimistic that Congress will pass a bill this year, and I'm optimistic about a restructured Postal Service for the future," Donahoe said.

When asked why he's more confident this time around, he cited the increased scrutiny surrounding the agency's financial woes.

"People know that we have to solve this issue," he said.

Donahoe said he's also been encouraged by the tone of recent congressional hearings.

Lawmakers' intentions are also beginning to become clear.

Rep. Darrell Issa (R-Calif.), chairman of the House Oversight and Government Reform Committee, which held hearings on the Postal Service's financial situation last week, said his goal was to pass a bill by the end of the year.

And Sen. Tom Carper (D-Del.), chairman of the Senate Homeland Security and Governmental Affairs Committee, said he wants to move on a bill by August.

Last term, the Senate approved the 21st Century Postal Service Act, which contained some of what the Postal Service says it needs to restructure. However, the House version of postal reform sponsored by Issa, never came up for a vote. Lawmakers were similarly unable to reach a compromise during the lame-duck session last year.

Donahoe: USPS needs more flexibilty

Donahoe said Congress should look to enact reforms included in the Postal Service's updated five-year plan, which it released last week.

Proposed reforms include:

  • Giving the Postal Service the ability to determine its delivery schedule,

  • Granting more flexibility to determine pricing for the products and services the agency offers,

  • Allowing USPS to control its own health care, by breaking out into its own health plan. (This would also negate the requirement to prefund future retirees' health benefits.)

  • Moving to a defined-contribution retirement system for new employees.

In the absence of legislation, USPS officials have also acted on their own. Since releasing the first draft of the five-year plan last year, the agency has reduced its workforce by 28 percent through buyouts and early retirements.

The Postal Service has also consolidated mail-processing facilities, reduced hours at thousands of post offices and cut delivery routes.

In February, the agency announced it would end Saturday delivery of first-class mail in a bid to save $2 billion annually. But Congress blocked that move last month in its 2013 appropriations bills.

Following that, the Postal Service went back to the cost-savings drawing board, Donahoe said, evaluating pricing and reaching out to unions and management associations.

"So we've got to keep every option open," Donahoe said. "What we'd really much rather do is get this legislation moving now, because time is money."

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