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(NECN: Peter Howe, Boston) - Bleeding $16 billion a year and getting no help from Congress for years on fiscal reforms, the Postal Service said Wednesday it will end home and business delivery of mail after Aug. 5.
It would still deliver packages, and mail to post office boxes.
The move sets up a likely battle with Congress, where many members argue what the USPS is trying to do is expressly banned by law. It also clearly escalates the pressure in a battle between the USPS and Congress over a 2006 law – critics call it an accounting gimmick – requiring the postal service to prepay decades' worth of retiree health benefits. That has the effect of making the federal budget deficit look smaller, but is, according to postal officials, the single biggest factor driving its deficits.
"We’re now at a point where it is absolutely necessary to make that move," Postmaster General Patrick Donahoe said of the Saturday mail termination. With a 20 percent drop in First Class mail since 2010, from 28.9 billion to 23.2 billion pieces, the USPS racked up a $15.9 billion loss last year. "We’ve seen a steady decline in use of First Class mail. It's our most profitable product. It generates the most revenue. But people pay their bills online. It's simple. It's easy. It's free. You cannot beat free."
Donahoe said the elimination of Saturday mail collection from mailboxes and delivery of mail to homes and businesses will eliminate about 45 million person-hours of work, or the equivalent of 22,500 full-year jobs, but indicated that between reducing overtime, leaving jobs unfilled as people retire or move to other employment, and shifting use of part-timers, the reduction can be achieved with minimal outright layoffs.
"We take no tax dollars. We do not want tax dollars. However, we also don't have the ability to reduce costs in the way that a private business would, and we're at the end of our borrowing authority," Donahoe said. "The choice is either change some of the service or raise prices. People don't want prices raised, so make the changes in service."
It would be the first major change in postal delivery schedules since the then-Post Office dropped twice-a-day deliveries in 1958.
U.S. Representative Stephen F. Lynch (D-South Boston) is the ranking Democrat on the House subcommittee that oversees the Postal Service, and is among many in Congress who question the legality of the move.
"I was surprised that the postmaster general came forward and did this unilaterally without congressional approval," Lynch said. "He’s got a tough challenge, and I understand that, but I still would like to see him follow the law."
Rep. Edward J. Markey (D-Malden), New England’s most senior congressman, said in a statement, "Eliminating Saturday mail delivery will negatively affect many of the hardworking people of the U.S. Postal Service who perform such a vital job for our country. It also could harm businesses that depend on Saturday delivery and customers who can’t wait through the weekend to receive the government benefits they rely on. I have co-sponsored legislation in Congress that calls on the Postal Service to take all appropriate measures to ensure the continuation of its 6-day mail delivery service."
A rural letter carriers union even demanded Donahoe be fired, saying the move would destroy a critical communications lifeline for Americans living in areas without robust Internet service.
Donahoe, at the end of a press announcement in Washington, took the unusual step of declaring he would ask himself the first question, and did: "Is this legal?"
Donahoe said the Postal Service believes that because the current budget law, or "continuing resolution," that requires the postal service keep six-days-a-week delivery expires March 27, after March 27, it has free rein to cut the delivery schedule.
Donahoe said delaying the change until August would give businesses plenty of time to prepare for changes – and the list of those affected is huge, everyone from magazine publishers who want to deliver on Saturdays to reach weekend readers to Netflix sending movies for weekend viewing to consumers and businesses who need to be prepared to mail bills a day or two earlier than they do now to make sure they don’t get late fees.
"If you put something in the mail on Friday that would have normally been delivered Saturday, it will be delivered Monday," Donahoe said. "If it's something that's going across the country, it still will be delivered Monday or Tuesday, so no changes."
Donahoe said the postal service faces a $20 billion gap between what it’s taking in and what it costs to operate the system and pay off debts, and $7 billion of that comes from the 2006 law that makes the Postal Service the only entity in the U.S. government that has to put aside money now for future retiree benefits that will be paid by the Federal Employees Health Benefits Program, rather than pay out each year what benefits retirees collect that year. As a practical matter, with the U.S. running $1 trillion-plus annual deficits, all that does is slightly reduce the current apparent deficit, because the pre-paid USPS retiree benefits are being spent, immediately, on current general-government purposes.
"The largest expenditure that we have in terms of the gap is for the employee health benefits, pre-funding that," Donahoe said. "It's health care pre-funding, health care in general. We'd like to own our own health care plan. We think it'd be in our best interest, our employees' best interest, our retirees' best interest. It's a differential on our bottom line."
Lynch agreed that the prepaid retiree health benefit is a critical problem for the USPS. "A comprehensive approach to postal reform is the way to go, not piecemeal changes. We really have to look at the health-care obligation they’ve got. That would save us $5 billion a year. I’d like to see us attack that problem first" before ending Saturday delivery, he said.
"There's a whole docket of things," Donahoe said, "that only the Congress can change."
With videographer Mike Bellwin.