National Press Club

Postmaster General tells National Press Club Luncheon bailout could cost $58 billion

April 19, 2013 | By Jerry Zremski | jzremski@buffnews.com

Postmaster General Patrick Donahoe speaks at a National Press Club Luncheon, April 19, 2013, about the cash strapped USPS.

Postmaster General Patrick Donahoe speaks at a National Press Club Luncheon, April 19, 2013, about the cash strapped USPS.

Photo/Image: Noel St. John

U.S. taxpayers may have to pay $58 billion through 2017 to bail out the U.S. Postal Service but the financially troubled agency would much prefer postal-reform legislation that gives it the ability to right its own ship, Postmaster General Patrick R. Donahoe said at a National Press Club Luncheon April 19.

“Congress faces a simple choice,” Donahoe said. “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.”

With the volume of mail falling precipitously in the Internet era, the Postal Service lost $15.9 billion last year alone.

The agency will suffer even bigger losses in the future, Donahoe said, unless Congress -passes postal-reform legislation that follow the theme of the five-year business plan the Postal Service unveiled earlier.

Outlining the central points of that plan, Donahoe said Congress must allow the Postal Service to:
-- End Saturday mail delivery.
-- Shift its employees and retirees out of the federal health care system and into a privately run plan that could save the Postal Service upwards of $8 billion annually.
-- Create a defined-contribution retirement plan for new employees to replace the expensive tradition pension plan that current postal workers get.
-- Have the power to strike deals and adjust rates with big-volume business customers to allow the agency to compete with private shipping companies that routinely offer big customers such deals.
-- Streamline its governance structure.
-- Have more flexibility in how it uses its work force.

Those changes would come on top of the closing of dozens of mail processing facilities nationwide, which the Postal Service announced last year.

“We’re consolidating because we have all kinds of excess capacity,” Donahoe said.

That excess capacity -– and the Postal Service’s chronic financial troubles -- stem from the fact that the number of pieces of first-class mail that it ships has plummeted from 51 billion a year a decade ago to 21 billion today.

“The key issue we face, far none, is the loss of volume,” Donahoe said.

Worse yet, the downward trend in postal volume is likely to continue as more and more people switch to online bill-paying.

While the agency has many options for cutting costs, “what is not fixable is that paying bills online is free,” Donahoe said. “It’s hard to compete with free.”

Donahoe insisted the agency could do just that, though, if Congress passes legislation that reforms the agency, and if the agency continues to grow its package delivery business while developing innovative products that tie traditional mail delivery to the age of the Internet and smartphones.

Congressional committees are just starting work on reform legislation, but Donahoe insisted: “I’m optimistic that Congress will pass a bill this year.”