Obama administration moves to save debt-ridden Postal Service from default

The Obama administration will include a financial blueprint for the nearly bankrupt U.S. Postal Service (USPS) in a deficit-reduction package that will be submitted to Congress, an administration official told lawmakers Tuesday. 

With the Postal Service speeding toward default, John Berry, the director of the Office of Personnel Management, also said the administration would like to delay the deadline USPS faces for a massive benefits payment by 90 days.

Berry said the extra time would allow the White House, Congress and Postal Service to find a path forward for the agency.

“Both the president and I know of the critical importance to our nation’s economy that the Postal Service provides,” Berry said at a hearing of the Senate Homeland Security and Government Affairs Committee.

Postmaster General Patrick Donahoe said at the same hearing that pushing the $5.5 billion payment for future retiree healthcare costs back to the end of the year would give USPS some financial breathing room.

But he also reiterated that the service would default on the payment regardless of the deadline — and that, with technological advancements continuing to eat into its bottom line, USPS needed to radically restructure its business model, with some help from Congress.

If changes are not made, Donahoe told reporters, “we think that around the August, September time frame next year we would be out of cash.”

The Postal Service is fast approaching its borrowing limit of $15 billion, leaving officials concerned about a first-ever USPS default. Donahoe told the Senate panel that the Postal Service’s net loss for this fiscal year could run as high as $10 billion, and projects to around $9 billion for next year.

USPS, which does not use taxpayer revenue for operations, also expects to handle 167 billion pieces of mail this year, 22 percent less than it did in 2006. Officials say the economic struggles of the last five years are at least partly to blame for that decline, but admit that the increasing ability to communicate and pay bills online is a major factor as well.

Lawmakers at Tuesday’s hearing appeared to see a USPS overhaul as a potential area for bipartisanship in the aftermath of the polarizing debt-ceiling debate.

“Are we going to fight about the Post Office, too?” Sen. Scott Brown (R-Mass.) asked.

Sen. Joe Lieberman (I-Conn.), the chairman of the Homeland Security panel, said during the hearing that lawmakers would not be able to act as quickly as Donahoe had wanted. The postmaster general had asked for congressional action by the end of September.

But Lieberman added that he wanted the panel to move quickly to meld separate pieces of USPS legislation from Sen. Susan Collins (R-Maine), the committee’s ranking member, and Sen. Tom Carper (D-Del.), chairman of the subcommittee that oversees the Postal Service.

Donahoe told reporters that, at a bare minimum, he would like for Congress to give USPS the authority to scrap Saturday delivery and give the service access to what it says is a nearly $7 billion overpayment into a federal retirement program.

The postmaster general also wants lawmakers to allow the service to either look into overseeing its own healthcare benefits or give it access to what USPS says is an even larger overpayment.

USPS has indicated that it wants the authority to lay off tens of thousands of workers over the next three years, despite labor contracts that contain no layoff provisions, and announced that it is looking into closing thousands of local branches.

Unions and Democratic lawmakers like Reps. Elijah Cummings (Md.) and Stephen Lynch (Mass.) are pushing back against the labor proposal, with contracts covering roughly 45 percent of the service’s 560,000 career employees expiring in November. 

Rural-state lawmakers have expressed concern about allowing USPS to move to five-day delivery and to shutter offices.

Still, senators at Tuesday’s hearing at least appeared open to giving USPS a broad makeover. Sen. Tom Coburn (R-Okla.) urged his colleagues to ignore what he called rosy projections about how much mail the service will deliver in the coming years.

Collins also prodded Berry for answers about why the administration is waiting to offer its USPS plan, given the service’s financial straits. The White House is expected to deliver its deficit-reduction plan, which could exceed the $1.5 trillion mandate given to the new congressional supercommittee, in the coming weeks.

On Tuesday, Berry said the administration agreed that USPS deserved access to the $6.9 billion surplus it paid into the Federal Employees Retirement System. But he also drew Collins’s ire after noting that the White House did not have a formal opinion on other potential fixes.

“I just don’t understand why the administration doesn’t have a concrete plan to put before us today, given the dire straits that we’re in,” the Maine Republican said.

Donahoe, meanwhile, appeared satisfied with the progress Congress was making, even though it seems unlikely lawmakers will work through four separate proposed overhauls of the service by the end of September.

“We appreciate all the attention, and want to work together with both parties to get this rolling,” he said.