Donahoe Presses for Legal Framework to Act With Speed and Flexibility
WASHINGTON — Postmaster General Patrick R. Donahoe told a U.S. Senate committee today that the U.S. Postal Service is in the midst of a financial disaster and that its cash liquidity remains dangerously low.
Donahoe is seeking legislation that will enable the Postal Service to act with speed and flexibility in the mailing and shipping marketplace and help it close a $20 billion budget gap by 2017.
“The Postal Service plays an incredibly important role in the American economy and in America’s communities,” said Donahoe. “And yet, it is in the midst of a financial disaster.”
Over the past two years, the Postal Service recorded roughly $20 billion in net losses and defaulted on $11.1 billion in retiree health benefits payments to the United States Treasury. Donahoe told the Senate Committee on Homeland Security and Governmental Affairs that the Postal Service will default on another $5.6 billion retiree health benefits payment that is due Sept. 30th.
“Our cash liquidity remains dangerously low,” said Donahoe. “The Postal Service, as it exists today, is financially unsustainable….[and] burdened by an outdated and inflexible business model.”
Donahoe added that mail needs to be kept affordable so that it remains competitive and continues to deliver value for America’s businesses.
“Unfortunately, because our financial condition is so precarious, and the legislative process is so uncertain, we’ve reached the point that we have to consider price increases above the rate of inflation,” said Donahoe. “I believe it is important that we discuss this issue today, because the prospects for legislation have a direct bearing on pricing decisions that may impact the health of our business customers.”
Donahoe said that in 2006, Congress gave the Postal Service the flexibility to better compete in the package delivery business. “We made the most of that flexibility. We created effective products and marketing campaigns. And now our package business is growing rapidly. But we need this kind of flexibility across all of our businesses.”
Earlier this year, the Postal Service published a Five-Year Business Plan designed to restructure the organization and return it to profitability. If fully implemented, the plan will generate $20 billion of savings by 2017, including the repayment of our debt.
Donahoe said that the Postal Service is pursuing elements of the plan “very aggressively” and is “achieving some great results,” especially in consolidation of mail processing facilities, elimination of delivery routes, optimization of the retail network, and generation of new revenue in the package business.
“We agree with the overall approach taken in Senate bill 1486,” said Donahoe. “It provides important pricing and product flexibility, and a strong framework for restructuring the Postal Service. However, to meet the goal of generating savings of $20 billion by 2017, the legislation must resolve our long-term health care costs.”
Below is the Postmaster General’s oral testimony before the committee. Please note that the delivered remarks may vary from the prepared text.
Good morning Mr. Chairman Carper, Dr. Coburn, and members of the Committee. Thank you, Mr. Chairman, for calling this hearing.
The Postal Service is a tremendous organization. It has a proud, dedicated workforce that delivers mail and packages to every business and residence in America. It does so affordably, securely, and reliably. The Postal Service plays an incredibly important role in the American economy and in America’s communities. And yet…. it is in the midst of a financial disaster.
Over the past two years, the Postal Service recorded roughly $20 billion dollars in net losses, and defaulted on $11.1 billion dollars in retiree health benefits payments to the United States Treasury. We will default on another $5.6 billion payment due September 30th, and our cash liquidity remains dangerously low.
The Postal Service as it exists today is financially unsustainable. It is burdened by an outdated and inflexible business model. Without significant structural changes, it will continue to record large financial losses. We must get on the path to financial stability quickly, and we need your help to do so.
Earlier this year, the Postal Service published a comprehensive business plan designed to restructure the organization and return it to profitability. If fully implemented, our plan will generate $20 billion of savings by 2017, including the repayment of our debt.
The Postal Service is pursuing elements of this plan very aggressively and we are achieving some great results – especially in areas relating to the consolidation of mail processing facilities, elimination of delivery routes, optimizing our retail network and generating new revenue in our package business.
Unfortunately, the strategies we are allowed to pursue cannot get us to the $20 billion dollar mark by 2017. To fully implement our plan, we require the enactment of legislation that reforms our business model.
I want to make the point that the legislation we are seeking is not merely about closing a very large budget gap. We want to be an organization that can readily adapt to the changing demands of our customers. The marketplace for mailing and shipping services is changing and the Postal Service requires a legal framework that enables it to act with speed and flexibility.
Will we always meet our universal service obligations – and – meet the basic product and service expectations of the American public? This legislation could determine whether we can continue to do so in the future.
Can we be much more nimble and efficient and continue to invest in the future of the mailing industry? Yes…. but we need the flexibility under the law to do so.
In 2006, the Congress gave the Postal Service some flexibility to better compete in the package delivery business. We made the most of that flexibility. We created effective products and marketing campaigns, and now our package business is growing rapidly. We need this kind of flexibility across all of our businesses.
We believe there are tremendous opportunities to leverage data and technology to make mail a more compelling investment for America’s businesses. We also believe there are great opportunities for the Postal Service to provide digital offerings in the future.
If we are able to operate with greater product and pricing flexibility under the law, and if we can do so from a strong financial position, I am confident that we can develop and market products and services that drive growth in the American economy – and – benefit America’s mailing industry.
Mr. Chairman, we are highly focused on the health of America’s mailing industry. Mail is a communications channel that competes against digital, print, broadcast and other media channels. Industry-wide innovation is very important, and the Postal Service should have the flexibility to support and speed that innovation.
We also need to keep mail affordable so that mail remains competitive and continues to deliver value for America’s businesses.
Unfortunately, because our financial condition is so precarious, and the legislative process is so uncertain, we’ve reached the point that we have to consider price increases above the rate of inflation. I believe it is important that we discuss this issue today, because the prospects for legislation have a direct bearing on pricing decisions that may impact the health of our business customers.
Let me conclude with the following thought:
The Postal Service is quickly moving down a path that leads to becoming a massive, long-term burden to the American taxpayer. The legislation you are considering is a great starting point to get us off the path to disaster and onto the path toward financial stability.
We agree with the overall approach taken in Senate bill 1486. It provides important pricing and product flexibility, and a strong framework for restructuring the Postal Service. However, to meet the goal of generating savings of $20 billion by 2017, the legislation must resolve our long-term healthcare costs. I believe this is achievable, and I’m greatly encouraged by the recent discussions on this topic – which I know we will be discussing further next week.
I would like to thank the committee for taking up postal reform legislation this year. I look forward to supporting your work and hope to help in any way I can. This concludes my remarks.
The OIG should ahow a report on how much overtime is still being given out because of mis-management but they won’t admit that. Nothing against a guy making extra cash but Donahoe needs to close the financial gaps he can before tossing everyone else under the bus. In Boston they send every clerk imaginable to automation for overtime and N/S days. Mail handlers are off the chain! There’s some guy named Rich they gave a (in-plant support) title to…former flat sorter operator paying him level 18-20? taking care of the APPS machine. He changes certain sack locations, zipcode sequences on the machine that type of thing. He’s there all freakin night! This should be a clerk level 7 job nothing more! So, get your own house in order Mr. Donahoe before you start bitchin!
So, USPS is broke?
Why did you give the big discount to ADvo mailings; why did you give the 2nd ounce at zero cost to big first class mailers like Goldman Sacks; why did you stop competing with USPS and FedEX and make them the tail that wags the dog; and at this time while you want about 6% increase in postage for ordinary Americans WHY are you asking for upto 20% discount for big mailers whose postage payment doesn,t even cover USPS costs?
And the big question:
If USPS is to be run by a CEO why is Issa falsely computing all management costs as labor cost?
Donuthole says “we’re not gonna have the liquidity to make payroll soon”…as I sit and watch 25 USPS commercials a night during MNFootball, The Voice, etc. Where is that $ coming from???? Mmmm…
Does everyone realize something has to be done…We are losing money everyday…And the prefund is only going to be scaled back from 5.5 Billion to around 2 Billion….It’s never going away….Stop blaming all the executives and management and look at some of the pathetic workers we all work with. Get rid of them and everyones job will be alot smoother..And last the people who fake injuries, pathetic get back to work…Its not fair for the people who really get hurt and can’t work….5 day, I can’t wait…
Shall we all bow our head’s an pass wind together?
Will all join you.
How do the $hit for brains think a RIF of this size is going to go over in the work force without incentive’s to help pry those old timers into the land of milk an honey?
Help me out here? 100 Thousands employee’s RIF all from the state of Texas?
Or maybe 20 thousand from the Big 3, Calif. Florida,Texas? remaining 40 thousand from? An is it just 100 thousand? Or is it more like 120 thousand. I don’t trust postal math, do you?
Is this like the final solution? Oh wise men do tell ye of little faith. For God so love the world he said screw you? No he gave his only son, So here we are at the great crossroads. Which road taken? Heaven or hell. Being Congress can’t walk on water or split fish an chips were screwed.
Women an children first? The sick an the old? Who you know last?
Tucker’s who think they know it all?
Moses: Sarah left you in a basket and later retrieved to insure you received priority delivery by FED X and later expedited delivery by UPS when you left Egypt to be informed by the burning bush and wander around for 40 years; later took the VERA to go into raising sheep with Jethro as you had to pay a price to marry his daughter.
Be careful in climbing mountains and watch out for any falling golden calf stamps or swallowed up by raging waters closing on the Egyptians. A school of ??
who cares,it is all talk,nothing ever happens,no saturdays,clusterboxes and curbside would save a ton of money,so no way it will happen,makes to much sense,hey congress do what you do best NOTHING.
Happy hour!
Nobody needed anymore your all relic’s now go home an never come back.
Problem solved?
WOW! No wonder your making the big bucks, some real deep thinkers.
Let’s just RIF an put hundred’s of thousand of people out of work.
Harvard? No Wait I know? school of fuckers who think they know something?
District and plants need to enforce VERA as a means to reduce over paid positions that fail to make financial contribution that are comparable to high salary paid. Cost effective operations must start at management levels that are no longer justified as monetary returns no longer justify positions existence. Face reality supply and demand for USPS services that now exist will further decline as communication technology continues to create new processes THAT DECREASE THE PHYSICAL ACT OF PURCHASING A POSTAGE STAMP AND AWAITING 2-3 DAYS FOR DELIVERY TO A PHYSICAL DELIVERY POINT. USP primary need was in the 20th century: a past relic that at present only has a future in delivering parcels and expedited mail delivery.
Have each carrier carry 2 residential routes per week. Route 1 m/w/f and route 2 t/t/s with a floater like today. Not enough volume to justify 6 or 5 day delivery any longer. No incentive VERA to carriers then RIF. Problem solved.
Eliminate operational cost that fail to contribute to organizational goal. Headquarters staph, PCES, EAS. Consolidation/eliminate small community post offices that no longer have a need to pay postmasters $60,000+. to box mail and sell stamps, consolidate offices with rural routes that are near each other. Some are 3-4 miles radius. A financial cost that could be reduced without hindering service.
Eliminate forcing 6 day street delivery on American public.
A total waste as only politics, unions, and money seeking pressure group advocate this waste. The need to deliver
mail 6 days a week is history. Eliminate Fri. delivery as volume is lite and Tues. after a Mon. holiday bears no consideration as to the issue. Junk mail. BBM, is high distribution cost and low revenue generator. Efforts should continue to increase parcel delivery market as supply and demand factors create opportunity to compete with UPS and FED X. The government may have to shut down in 11 days but mail delivery will continue as it is critical to place bulk business mail advertising a 15%
discount if purchased in next 30 days. WHAT A JOKE.
Mail delivery is completed by electronic messaging or if critical paper copy expedited by FED X,or UPS. USPS is not
critical to any process connecting American public.
If the Postal Service’s financial condition is so terrible, then time to get rid of some of the Postal big shot jesters! Next the limousines, and don’t forget to sink the executive only gym. Now then time to cut the compensation of his royal majesty king DONAHOE he will be glad to help out! Never ask a man to do that you would not do yourself!
He intends NOT to pay for the retiree health benefit any more, he is using this money to pay for the bonus of the mgmt.
Why is Pitney Bowes still presorting the mail? The 10 cents per letter they get for presorting, can be done in house, and generate 50% more revenue on 3rd class.
This seems like a plan for the USPS to get rid of processing plants, and just do the 1st and last mile like the House Bill suggest.
“Mail is a communications channel that competes against digital, print, broadcast and other media channels.” This is Donahoe’s biggest problem. These other businesses are not our competitors we have to see them as allies and figure out how we fit in the mix. Things change, these other entitieis aren’t going away and our work model must fit in amongst these others using them as assets and more importantly making ourselves assets to them.
Will this mean I can now get that Omega Seamaster watch I’ve been wanting?
Royal Mail in Britain is going to be privatized and shares sold to the public in October, with 10% of the company going to the employees….any bets that is the model for the USPS??
“Will we always meet our universal service obligations – and – meet the basic product and service expectations of the American public? This legislation could determine whether we can continue to do so in the future.”
Like the question mark?
Truth be told you or Congress haven’t lived up to the expectations of the American public nor do you listen to the voice of the American public. That’s bottom line,nor do you or Congress intend to.
Should we take another poll to see??????
Same Rhetoric, same result,no response by politicians. Meanwhile nothing gets done.
Mr. Donuthole;
Over the last five years, you have slashed craft employee numbers, with more planned.
Over this same time frame, USPS mgmt. ranks have *grown* almost eight percent.
If the USPS is in such dire financial straits, why has the above growth in USPS EAS numbers occurred ?
Sorry Donuthole, you’ve cried wolf way to many times already.