WASHINGTON — Postmaster General Patrick R. Donahoe told a House committee today that the Postal Service is currently operating with a broken business model and the gap between revenues and costs will only get worse in the coming years unless the laws that govern the Postal Service are changed.
“Our financial problems are due to the restrictive laws that prevent us from fully responding to changes in consumer behavior,” Donahoe testified before the House Oversight and Government Reform Committee. “Any private sector company could quickly adapt to the market changes we have experienced, and remain profitable. However, we do not have all of the flexibility we need to adapt to a changing marketplace.”
Donahoe said the Postal Service continues to be very aggressive in cost-cutting actions it can take within the law, reducing its cost base by $15 billion since 2006. “No other organization, public or private, that I am aware of, can claim a similar cost reduction while continuing to function at a high level. And yet, we have to go much further and much faster and we are prepared to do so.”
The Postal Service would have reduced costs an additional $2 billion annually by implementing the new delivery schedule announced in February. However, according to Postal Service legal opinions, House Resolution 933 to fund government operations for the remainder of the fiscal year included language specifically designed to prevent the Postal Service from changing to the new delivery schedule.
“The Postal Service is a responsible, law-abiding arm of the executive branch. Congress passed a law, we reviewed it carefully, we complied with it and we informed our customers – which is what we did last week,” Donahoe told the Committee. “Our customers require certainty, especially about something as fundamental as our delivery schedule. And so, we announced that we would delay implementation of our new schedule until we gained legislation giving us the ability to move forward.”
The Postmaster General urged Congress to include delivery flexibility as part of comprehensive postal reform legislation to help return the Postal Service to long-term financial stability and avoid the risk of becoming a significant burden to the American taxpayer. He also urged passage of other legislative provisions that would provide for the following:
- The ability to develop and price products quickly.
- The ability to control healthcare and retirement costs.
- The ability to switch to a defined contribution retirement system for new employees.
- The ability to quickly realign mail processing, delivery and retail networks.
- A more streamlined governance model.
- More flexibility in the way the Postal Service leverages its workforce.
Below is the Postmaster General’s oral testimony before the committee. Please note that the remarks as delivered may vary from the prepared text. The full written testimony is available at: http://about.usps.com/news/testimony-speeches/welcome.htm.
“The Postal Service is currently operating with a broken business model.
Since the economic recession of 2008, we have been experiencing a significant imbalance between revenues and costs. This imbalance will only get worse in the coming decade unless the laws that govern the Postal Service are changed.
In the past two years, the Postal Service recorded $21 billion dollars in losses, including the default of $11.1 billion dollars in payments to the United States Treasury. The Postal Service has exhausted its borrowing authority. It also continues to contend with a dangerous liquidity crisis. We are losing $25 million dollars every day and we are on an unsustainable path.
Primarily due to the rise in on-line bill payment, the use of First-Class Mail has dropped by 28 percent since 2007. This equates to roughly $8 billion in annual revenue that we would otherwise have today. That is a steep decline in our most profitable product category – but – it is not the cause of our financial problems.
Our financial problems are due to the restrictive laws that prevent us from fully responding to these changes in consumer behavior. Any private sector company could quickly adapt to the market changes we have experienced, and remain profitable. However, we do not have all of the flexibility we need to grow revenue, reduce costs and adapt to a changing marketplace.
There are areas where we can act within the law, and we have been very aggressive in these areas. Since 2006, we have reduced the size of our workforce by nearly 200,000 career employees – that’s a 28 percent reduction without layoffs. We have consolidated more than 300 mail-processing facilities. We are in the process of modifying hours of operation at 13,000 Post Offices. We have eliminated 21,000 delivery routes. These actions have bent the cost curve and reduced our annual cost base by $15 billion dollars.
We have examined and acted on every reasonable and responsible action to match volume loss with cost reductions. No other organization, public or private, that I am aware of, can claim a similar cost reduction while continuing to function at a high level. And yet, we have to go much further and much faster – and we are prepared to do so.
In February of this year, the Postal Service announced that it would introduce a new national delivery schedule designed reduce our costs by approximately $2 billion dollars annually. We did so after receiving the advice of our legal counsel.
We did so because the continuing resolution in existence at that time did not prevent us from taking this fiscally responsible action. That law was set to expire on March 27, and we urged Congress not to act to block our new delivery schedule when it enacted the next continuing resolution to fund the government for the rest the fiscal year.
However, according to our legal opinions, House Resolution 933 to fund government operations for the remainder of the fiscal year included language specifically designed to prevent the Postal Service from changing its delivery schedule. According to this law, we are now required to deliver mail as if it were the year 1983.
The Postal Service is a responsible, law-abiding arm of the executive branch. Congress passed a law, we reviewed it carefully, we complied with it and we informed our customers – which is what we did last week.
Our customers require certainty – especially about something as fundamental as our delivery schedule. And so, we announced that we would delay implementation of our new schedule until we gained legislation giving us the ability to move forward.
Mr. Chairman, we need the flexibility under the law to implement our new delivery schedule.
- We need….the ability to develop and price products quickly.
- The ability to control our healthcare and retirement costs.
- The ability to switch to a defined contribution retirement system for new employees.
- The ability to quickly realign our mail processing, delivery and retail networks.
- We need a more streamlined governance model.
- And, we need more flexibility in the way we leverage our workforce.
Contrary to the arguments we hear from some parties, it is not enough merely to resolve the prefunding of retiree health benefits. We can implement our five-year business plan, close a $20 billion dollar budget gap by the year 2017, and return the Postal Service to long-term profitability – but only if we gain flexibility in each of these areas.
If we don’t gain this flexibility, our losses will continue and we risk becoming a significant burden to the taxpayer. It’s just that simple.
Mr. Chairman, we need Congress to affirmatively grant us the authority to operate the Postal Service in a financially responsible manner. We need full authority to carry out our responsibility to provide universal service to our nation.
Every day we record a loss of $25 million dollars, every day our financial hole gets that much deeper. We cannot stay on our current path.
Let me conclude by thanking this committee for its willingness to address these tough issues and to pass comprehensive reform legislation this year. The Postal Service is a tremendous organization, and it needs your help.”
Click here to read the PMG’s oral and written testimony.
What is wrong with you people? Any change is going to affect us all, whether we like it, or agree with it. If you are not loyal to your job, get out! Times have changed, and the city carrier has to roll with it one way or the other. Do they care about us? Heck no. Do what you were hired to do to the best of your ability, then get out. What happened to caring about other people besides yourself?
No business needs delivery more than 5 days a week. No residence needs delivery more than 3 days a week. Carrier Joe can carry rt 1 on m/w/f and rt 2 on t/t/s with a floater. Git er done!
To the 2 previous postings… First of all I’m not quite ‘gramps’ with 32 years on the job. I’m 55 and a half you moron! And let me break the news to you both… Letter carriers are the most selfish, back stabbing and least loyal people I have met. (It’s the nature of the stupid job!) I am just posting the facts. The job is not the same and the rules have changed. Good luck
If the Union is growing weaker; it is only in direct proportion to the idiots who think only of themselves. The “i’ve got mine-screw the rest of you” group doesn’t seem to understand the purpose of a Union. The NALC is trying to protect the junior carriers and the CCAs, not just the senior carriers. Anyone who believes that we should just throw away one out of every six letter carrier jobs, so that you can have Saturdays off, is too selfish to understand Unionism. I didn’t stop caring about my coworkers and Union brothers and sisters just because I retired. I want them to be able to reach the same position I enjoy after nearly 40 years service.
If i have less than 20 years i’m screwed? If you have more than 30 you wasted your life old timer. Always a couple of lazy old carriers on here grumbling about the good ol’ days of max overtime and lots of mail and bragging about leaving. These same people retire and realize their wife ran off w/ another man years ago b/c they were never around and their kids don’t know who they are. Maybe now you’ll find some time to enjoy life before ya croak gramps. Meanwhile i’ll be working 8 hours a day and let all the new cheap workers do the job. I’ll only stick around long enough to find a way out rather than resign myself to an alarm every morning. 32 years. What a joke.
You letter carriers better be careful what you ask for, remember Donahoe also said 3 day delivery will be coming if he has his way. Do you want to be off sat, sun, tue and thur? Then get only 24 hours work a week? Donahoe is one of the most incompetent people in the country. The US Postal Service is NOT a private company and they must face this, it needs to be placed back on the books as a sole federal agency and not an independent agency. That’s the bottom line.
Darrell Issa is a clueless putz!
ok..ok…which one of you morons is gonna leave so the postal service can stay afloat by giving up saturdays?? i hear ya talking..but i dont see you going….wake up…management at all levels dont give a hill of beans about you~
I LOVE ISSA.
Fascinating reading about Issa. Thanks John Wayne. His opposition to Federal funds being used in New York after 9/11 really struck a nerve with me. I have family members who are active firefighters for the NYFD. One happened to be off the day of the attacks. His house was in lower Manhattan. Several of his brothers perished that day. Some of these fireman climbed 70 floors with 80lbs of equipment on their backs, to try and save others. Despicable behavior for one who’s sworn to serve. We know what we’re up against.
I’m sure he wouldn’t dare step in the ring with you. However I’d be proud to be your second.
If the unions want the the USPS to obey the law the way it is written, then why are they not forcing the USPS to pay the 5 billion a year into the pension system?? Isn’t that a law that is in writing and needs to be obeyed as well. If union positions were being compromised I’m sure you hear a different tune. “Hello pot” “hello kettle”.
Issa and I are about the same age. I suggest he meet me in the ring and we can decide this that way. I’m sure he’s just a gutless piece of trash.
Darrell Issa is a piece of trash and obviously in somebodies pocket. Congress has to see that at this point. What kind of morons keep putting him office?
http://en.wikipedia.org/wiki/Darrell_Issa
I see a new Vice President of Delivery Flexibility being appointed soon at 100k+ a year and free membership to their “fitness center” in D.C.
I hope 5 day comes sooner than later. That said, I have almost 32 years and the end is near. If you have less then 20 yrs you are screwed. Welcome the CCA’s with open arms. They are the recent retiree’s replacements. Half the pay no benefits no guarantee of hrs. Sounds great! NALC will collect dues from new people but will be MUCH WEAKER and poorer in the future.
PMG is totally correct No company could exist with the multiple governing bodies that limit its ability to operate at a breakeven point. USPS has no business model as Congress, PRC, Board of governors, curb any steps taken to reduce cost. This groups main objective is a control battle among themselves to allow any action by PMG,who has responsibility to operate at a breakeven point, to reduce debt ridden service that failed to have any benefit for American public in past 10 years. The control groups play post office politics to benefit their selfish interest.
Delivering advertising bulk junk mail, the primary postal product, 6 days a week is a built in loosing business operation with no just cause for its existence. The control groups need to have a course in remedial economics as they are failing in a business they have demonstrated they lack the knowledge to be involved in. Laws of supply and demand are not considered by these groups their loud vocal echo is providing service not being used or in demand. Services provided exceed demand resulting in massive monetary loss as posted in quarterly report. Reduce delivery days and eliminate small offices that have outlived their need as a service provide.FACE reality he USPS is no longer the primary means of communication for Americans. Advances in communication technology has made the USPS a past primitive means once used in advancing communications process.
What if 5 days mail delivery, any one guaranty USPS able to earn money or keep lose money?
Why not end saturday delivery? We have contract routes that only deliver every other day so to say that mail is delivered to every address six days a week is not true. Closing mail working facility’s slows mail three to four days in some areas!
Essentially, Issa dragged him down there because he was mad that Donahoe and the Board decided not to break the law. What a waste of time and incredibly stupid. I’d have been all over that clown w/ comebacks. Donahoe should’ve said: “Well, i guess some of us aren’t as comfortable breaking the law as you are, Mr. Chairman.”
You people need to quit being so self centered ! You want Saturdays off then quit the PO and go work at McDonalds. Nixing Sat delivery is not the answer. Repeal the pre-funding mandate and quit tying postage rate increases to the rate of inflation. And while their at it find a PMG who wants to fix the Post Office and fire Donahoe!
Rolando is going to stick it to us…They don’t want to do away with Saturday’s and they wont let us have an early out. The Union knows many of us will leave and it will make the union weak!!
Rolando is going to stick it to carriers just to keep Saturday.
ya…when hopefully september if not august..they have to see if this dont happen there wont be much of a postal system left…dont give up mr donahoe..you r my heero
When do my Saturdays off start?