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Postmaster: Postal Service In Dire Financial Straits

U.S. Postmaster General Patrick Donahoe said Monday that the Postal Service is in "a deep financial crisis" because it has a "business model that is tied to the past."
Karen Bleier
AFP/Getty Images
U.S. Postmaster General Patrick Donahoe said Monday that the Postal Service is in "a deep financial crisis" because it has a "business model that is tied to the past."

U.S. Postmaster General Patrick Donahoe appealed to Congress on Monday to help him reform the Postal Service.

"We're in a deep financial crisis today because we have a business model that is tied to the past. We are expected to operate like a business, but do not have the flexibility to do so," he said at the National Press Club.

Donahoe also rejected the postal reform bills that have passed committees of the Republican-controlled House and the Democratic Senate.


"Both bills have elements that delay tough decisions and impose greater constraints on our business model," he said.

And, Donahoe said, speed is of the essence.

People now send messages and pay bills online. First-class mail volume is falling at a rate of 7 percent a year. Last fiscal year, the Postal Service spent $70 billion and took in $65 billion. Most of its budget is payroll. There are 557,000 postal workers. In the private sector, only Wal-Mart employs more.

And now, new legislation aims to shrink the Postal Service. While no one expects the Postal Service to be restored to the grandeur it knew 100 years ago, members of Congress who oversee the Postal Service speak of reforming and rescuing it.

Two Different Bills


Sen. Tom Carper, a Delaware Democrat, supports a bipartisan Senate bill. It would help the Postal Service cut its workforce.

"They have more employees than they need, they have more post offices than they need, and they have more processing centers than they need," Carper says. "What the leadership of the Postal Services — the board of governors — would like to do is do what the auto industry did. Not necessarily fire people, not lay people off, but incentivize them to retire."

The Senate bill says the Postal Service should get $7 billion to pay for buyouts.

This is the most disputed part of the Postal Service's financial dilemma. Past laws forced the service to prepay so much of its obligations to retirees that it has overpaid the Treasury Department by at least $7 billion. Critics of the bill — and they include the Postmaster General and the postal unions — say the Postal Service has overpaid by much more than that. Give them a fair refund, they say, and they're in the black.

We're not the auto industry. We're not competing with Japanese stamps. In fact, we deliver 40 percent of the world's mail — we're the cheapest mail system in the world.

In the House, Republican Rep. Darrell Issa of California has a bill that passed his committee, and that takes a more robust view of creating incentives for reducing the workforce. It would create an emergency financial control board that could mandate layoffs, not just encourage retirement.

"The post office cannot through attrition get right-sized for a generation," he says. "And that's probably $100 billion of taxpayer money wasted, when in fact we need to act more like a business and do what's right for retirees, but do it now, not later."

For Postmaster General Donahoe, these two bills both deliver a couple of years of profitability, but they don't address the big picture at the Post Office.

"We need provisions in the final legislation that provide us with the speed to reduce our cost by $20 billion by 2015," he says.

That would be a remarkable U-turn for an institution that grew bigger and bigger as the country grew bigger and bigger.

Soon, the Post Office may be marking a milestone in retreat: the end of Saturday delivery. The Postal Service says only a fifth of Americans value six-day-a-week service. The Senate bill requires the Postal Service to wait two years before eliminating six-day-a-week service. The House Bill requires a waiting period of just six months.

Donahoe says he wants to do it now.

"If we're unable to implement the five-day delivery schedule now," he says, "we will needlessly carry a $3 billion operating cost. Multiply that by several years, and you got a pretty big number."

Curbside Delivery

There's also talk of improving efficiencies. How do we get mail delivered? And where's the post office?

One idea would increase the number of homes that letter carriers reach on their rounds by expanding curbside delivery.

According to Rep. Issa, "109 million homes walk out of their door to get their mail, while 37 million get it delivered inside their door. We believe that most of those 37 million homes should have a safe, secure box — either at the curb or very close by — and that saves an additional $5 billion."

Those extra steps saved would mean fewer letter carriers.

Of course, if you felt you were disadvantaged by the shift to curbside delivery, you could complain at a community meeting, or directly to your member of Congress. And those complaints work against another big efficiency the postmaster wants to undertake: close thousands of post offices around the country.

"Most retail companies would close retail stores that have failed to turn a profit," Donahoe said. "Roughly 25,000 out of our 32,000 post offices operate at a loss."

Donahoe says they should offer more postal services in supermarkets and consolidate collection facilities.

But for every proposed closure, there could be a member of Congress protesting the loss of service.

Postal workers, and their unions, don't buy the argument that there are too many of them, even if supporters of the Republican House bill and the bipartisan Senate bill say there are.

"Their agenda seems to be to dismantle the Postal Service. And if that's your goal, then obviously you have too many employees," says Fredric Rolando, president of the National Association of Letter Carriers, the biggest of the four postal unions. "We're not the auto industry. We're not competing with Japanese stamps. In fact, we deliver 40 percent of the world's mail, we're the cheapest mail system in the world. I think it's really just a matter of restructuring what we need to do to replace the revenue. I don't see us on par with the auto industry at all."

The unions observe that the post office does very well delivering parcels the last mile for the private companies that used to be its great rivals: UPS and FedEx. They are now big post office customers. They actually have a stake in continued Saturday delivery.

That underscores a fundamental problem for the Postal Service. It's supposed to act like a business. But it's not going door to door all over the country because it's a business — it does that because it's the Postal Service.

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