Cumberland Times-News

Local News

May 10, 2013

Postal service needs to save $20B annually

CUMBERLAND — The U.S. Postal Service needs to save up to $20 billion annually over the next five years, with nearly half of the proposed plan requiring legislative action.

Without legislative reform, debt would climb to $58 billion in 2017, according to the postal service’s five-year business plan.   

“The plan provides an achievable road map to restore financial stability and preserve affordable mail service for the American public,” said Postmaster General and CEO Patrick Donahoe in a news release. “The major elements of the plan must be pursued and executed within a short window of opportunity to avoid unsustainable losses and potentially becoming a long-term burden to the American taxpayer.”

Some of the key legislative goals for the postal service to regain financial self-sufficiency are pursing the six-day package/five-day mail delivery frequency; refunding the Federal Employee Retirement System; requiring a health care plan that resolves the Retiree Health Plan prepayment issue; and allowing the authority to expand products and services.

“The things we can control we are being very aggressive about,” said Donahoe during a Friday morning news teleconference. “We need legislative action to get back on firm financial footing.”

The postal service has delayed plans to cut Saturday mail delivery because Congress didn’t allow the change.  

In August, the postal service planned to cut back to five-day-a-week deliveries for everything except packages as a way to hold down losses, according to the Associated Press.

Phil Jones, president of American Postal Workers Union Local 513 in Cumberland, expressed the need to keep the Saturday mail delivery for packages, especially for Cumberland, where there is an aging population.

Going to a five-day mail delivery would result in $2 billion in annual savings, according to the plan.

The postal service wants employees to pay more for health care. How that affects employees will be determined by how it’s modified, according to Jones.

“I can understand why they want employees to pay more,” said Jones. “But, as the saying goes, they can’t keep robbing Peter to pay Paul.”

The postal service projects approximately $8 billion of annual savings from the adoption of a new user-administered health care program, according to the plan. The postal service does not control its health care benefit program.

In 2012 and 2013, approximately 22,500 employees represented by the APWU and 2,925 mail handlers accepted incentives to retire or resign, according to the plan.

Jones thinks that services at the post office should be expanded.

In the past, the Cumberland post office offered passports, but more people are going online to order items.

“The package business is unbelievable,” said Jones.

While the continuing shift to electronic communication alternatives had a pronounced negative effect on first-class mail volume and revenue, the growth of e-commerce and successful marketing campaigns continued to grow postal service shipping and package business, according to the news release. Total shipping and packages revenue in the second quarter increased $267 million, or 9.3 percent, compared to the same period last year.

The postal service is taking aggressive actions to increase operational efficiency and improve its liquidity position, which include the accelerated consolidation of mail processing, retail and delivery networks in order to better align them with mail volumes and changing customer needs and continued administrative reductions, according to Joe Corbett, chief financial officer.

“The postal service now has the lowest number of career employees since 1966,” said Corbett during the news conference.

The number of career employees decreased by approximately 25,000 in the second quarter and by 46,000 in the last year. The reductions have been accomplished primarily through attrition and separation incentives, according to Corbett. By September, about 33 employees at the Cumberland post office will be excessed, which is similar to a furlough, according to Jones.

The postal service also continues to decrease costs by reducing work hours. The plan calls for reduced hours in 13,000 post offices in 2013 and 2014. A lot of people still try to pick up their mail on Saturdays and only a few post offices in the area have Saturday hours, according to Jones.

“If they (the postal service) are in the business of drawing people back in and they lock the doors, then people are going to say ‘To heck with it,’” said Jones.  

In the second quarter, work hours were reduced by approximately 7 million hours, a 2.4 percent reduction compared to the same period last year, according to the news release.

Work hour reductions have been the single largest contributor to the ongoing achievement of savings targets, according to Corbett.

The postal service ended the second quarter of its 2013 fiscal year with a net loss of $1.9 billion, according to a news release.

The greatest revenue loss is in first-class mail, which has a 53 percent profit margin, according to the plan.

The postal service continues to grow revenue and reduce expenses by using the tools available to it under existing law, officials said.

“The post office is very regulated in what they can do by law,” said Jones.

To view the five-year plan in its entirety, go to http://about.usps.com/strategic-planning/fiveyearplan-04162013-final.pdf.

Contact Elaine Blaisdell at eblaisdell@times-news.com.

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