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U.S. Postal Service faces insolvency without Congressional action

By control on September 7, 2011

In testimony before the Committee on Homeland Security and Governmental Affairs Tuesday, Postmaster General Patrick Donahoe pleaded with Congress to aid the ailing U.S. Postal Service before it becomes insolvent at the end of the month. Without government action, Donahue asserted, the Postal Service will be unable to pay a $5.5 billion retiree health benefits bill and will lose $9 billion. But he’s not asking for a bailout.

“The Postal Service is in a crisis today because it operates within a restrictive business model and has limited flexibility to respond to a changing marketplace,” Donahoe told members of Congress. “We need the ability to operate more as a business does. This applies to the way we provide products and services, allocate resources, configure our retail, delivery and mail-processing networks and manage our workforce.”

The problem is multifaceted, Donahoe explained. The increasing dependency on electronic mail, coupled with the crippling economic conditions, has decreased the Postal Service’s profitability tremendously. In fact, the Postal Service must slash its annual costs by $20 billion by 2015 to make a profit.

To get the Postal Service out of the red, Donahoe laid out a plan before Congress. In addition to suspending the government mandate forcing the Postal Service to pay $5.5 billion annually for pre-fund retirement health benefits, he also encouraged lawmakers to give back $6.9 billion in Federal Employees Retirement System overpayments.

Donahoe also touted the importance of legislation enabling the Postal Service to control delivery frequency and enact an employee-contributed retirement plan for new hires, rather than the current benefit plan. Other areas he touched on included expediting the product development and pricing process and making the Postal Service’s healthcare system autonomous from government programs.

After all, Donahoe explained, the current model isn’t working. “We do not currently have the flexibility in our business model to achieve all of these cost reductions,” he explained to Committee on Homeland Security and Governmental Affairs. “To do so, the Postal Service requires the enactment of comprehensive, long-term legislation to provide it with needed flexibility.”

Unfortunately, staff reductions are also key to returning the Postal Service to profitability, Donahoe explained. Although the government agency already laid off 110,000 workers in the past four fiscal years, the Postal Service needs to slash its workforce by an additional 220,000 employees by 2015, he said. Such cuts aren’t possible unless Congress grants the Postal Service Reduction-in-Force provisions, however.

It’s why Donahoe touts the immediacy of Congressional action. “We have advanced these and other proposals to provide Congress with a range of legislative options while we aggressively do what we can within our current business model,” he stated. “We need the flexibility to operate more as a business would, in order to return to sound financial footing so we can meet America’s evolving mailing and shipping needs for generations to come.”

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