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Postal Service Rescue: Benefits Big Part of S. 1789

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WASHINGTON (AP) — Members of the Senate have voted 62-37 to pass S. 1789, a bill that calls for Congress to stabilize the ailing U.S. Postal Service by giving it a short-term cash infusion and changing some of the agency’s retirement and health benefits program funding rules.

The Postal Service, an independent government agency, says it wants to deal with declining volume and $12 billion in debt by closing up to 252 mail-processing centers, shutting down 3,700 post offices and eliminating about 100,000 jobs. Otherwise, the agency says, it will lose about $14 billion by the end of the year and could run out of the cash it needs to handle day-to-day operations as early as this fall. The agency says the cuts it is seeking would save $6.5 billion a year.

“The Postal Service is at a crossroads,” Postmaster General Patrick Donahoe said recently at a House hearing. “Our business model is broken. We have insufficient revenue to cover our costs… If the Postal Service were a private company, we would be engaged in Chapter 11 bankruptcy proceedings.”

Late last year, Donahoe agreed to delay the facility closings until May 15, to give Congress time to pass legislation to shore up the agency’s finances.

Now, postal employees are holding rallies to oppose the cuts, and campaign season is under way. Lawmakers appear to be leaning toward putting off making big decisions about facility closings and proposals for ending Saturday mail delivery by requiring further review of those proposals.

The bill being debated on the Senate floor this week was recently modified to take into account the concerns of mostly rural states. The bill would, for example, cut the number of mail processing centers the Postal Service would close to 125, from 252, and allow more U.S. areas to maintain overnight first-class mail delivery for at least 3 more years. Today there are about 500 mail processing centers.

The bill also would require the Postal Service to wait at least 2 years before it could reduce mail delivery to 5 days a week. The Obama administration has estimated cutting Saturday mail delivery could save between $2 billion and $3 billion a year.

In the meantime, the Postal Service would get a cash infusion of roughly $11 billion.

The cash infusion would come in the form of a refund of payments the agency has made to the federal retirement fund. The Postal Service says the retirement fund payments were bigger than they should have been.

The Postal Service wants to use the retirement fund refund money to pay down debt and offer buyouts to 100,000 postal employees.

The current version of S. 1789 also would let the Postal Service make smaller annual payments into a retiree health benefits account.

Federal law now requires to prefund retiree health benefits by paying about $5 billion per year into a special fund.

Supporters of the prefunding requirement argue that a prefunding requirement is the only way to ensure that Postal Service retirees get the benefits they have been promised; critics say the prefunding requirement is extremely and does not apply to Federal Express, UPS or other Postal Service competitors.

S. 1789 could give the Postal Service more flexibility in the area of workers’ compensation benefits, and it would require the agency to appoint a chief innovation officer. The chief innovation officer would be in charge of finding new ways to bring in postal revenue.

S. 1789 drafters have left out a proposal to raise the price of a first-class postage stamp by 5 cents, to 50 cents. Some estimated the increase could bring in $1 billion in revenue. Opponents said the rate increase could end up reducing overall revenue, by pushing consumers to shift even more quickly to other forms of delivery, such as the Internet.

Sen. Joe Lieberman, I-Conn., is the bill’s lead sponsor.

The House has not yet debated its version of the bill. The House version would create a national commission that would make major decisions on postal cuts.



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