Flexibility and Authority Needed to Close $20 Billion Gap
WASHINGTON — Postmaster General Patrick R. Donahoe told a House committee today the Postal Service continues to face systemic financial challenges because it has a business model that does not allow it to adapt to changes in the marketplace and it does not have the legal authority to make the fundamental changes that are necessary to achieve long-term financial stability.
“We cannot pretend these marketplace changes aren’t happening or that they don’t require us to make fundamental changes to our business model. We need comprehensive reform now,” Donahoe testified before the House Oversight and Government Reform Committee.
Donahoe said the Postal Service is moving quickly down a road that leads straight to a large financial chasm and postal reform legislation can be the bridge over that chasm. “If we build the bridge properly, the Postal Service can have a bright future. It can adapt and better serve the changing mailing and shipping needs of American industry and the American public. It can be a more powerful engine for economic growth and it can be profitable and operate without burdening the American taxpayer,” he said.
“We need a bridge that gets us all the way to the other side. Half measures are about as useful as half a bridge,” Donahoe added. “We need legislation that, together with our planned changes, confidently enables at least $20 billion in savings by 2016. If not, we go over the edge.”
The Postal Service Five-Year Business Plan provides a roadmap to restore financial stability and preserve affordable mail service for the American public. Much of the savings cannot be achieved without legislative action.
“There is a simple question to ask about the legislation this committee is in the process of developing,” Donahoe testified. “Does it enable $20 billion in savings by 2016? We believe our plan meets this test and provides the most responsible approach for our customers and employees, but we cannot implement it without legislation.”
Donahoe said the Postal Service has been very aggressive in reducing costs, including decreasing its annual cost base by $16 billion and reducing the size of its career workforce by 202,000 employees since 2006. “We have been able to accomplish these incredible operational changes because of the tremendous dedication and effort of our employees. It is to their credit that the organization continues to function at a high level and provide the service our customers and communities expect,” said Donahoe.
Donahoe added that the Postal Service’s package business is strong and growing, and marketing mail will remain strong into the future. “Unfortunately, declines in First-Class Mail overshadow these healthy parts of our business and the efforts we have taken to adapt to lost revenue.”
The Postal Service’s legislative requirements, as part of its Five-Year Business Plan, include:
1. Require USPS Health Care Plan (Resolves Retiree Health Benefits Prefunding Issue)
2. Refund FERS Overpayment and Adjust Future FERS Payment Amount
3. Adjust Delivery Frequency (Six-Day Packages/Five-Day Mail)
4. Streamline Governance Model (Eliminate Duplicative Oversight)
5. Provide Authority to Expand Products and Services
6. Require Defined Contribution Retirement System for Future Postal Employees
7. Require Arbitrators to Consider Financial Condition of Postal Service
8. Reform Workers’ Compensation
These legislative requirements are fully explained in the written testimony, available at: http://about.usps.com/news/testimony-speeches/welcome.htm
Below is the Postmaster General’s oral testimony before the committee. Please note that the remarks as delivered may vary from the prepared text.
“Good afternoon Chairman Issa, Ranking Member Cummings, and members of the Committee. Thank you, Mr. Chairman, for calling this hearing.
Let me begin by thanking this committee for taking on the important challenge of restructuring the business model of the Postal Service. The Postal Service continues to face systemic financial challenges because it has a business model that does not allow it to adapt to changes in the marketplace. We cannot pretend these marketplace changes aren’t happening or that they don’t require fundamental changes to our business model. We need comprehensive reform now.
In the past eighteen months, the Postal Service recorded $19 billion dollars in net losses, and has defaulted on $11.1 billion dollars in retiree health benefits payments to the U.S. Treasury. And, without legislation, we will be forced to default on our $5.6 billion dollar payment due September 30, 2013. Our liquidity also remains dangerously low.
Our financial condition should not obscure the fact that the Postal Service plays a vital role in American commerce and delivers great value to its customers. Our package business is strong and growing, and marketing mail will remain strong for the long-term. Unfortunately, declines in First-Class Mail overshadow these healthy parts of our business and the efforts we have taken to adapt to lost revenue.
We have taken aggressive steps to reduce costs. Since 2006, we have reduced our annual cost base by $16 billion dollars. We have reduced the size of our career workforce by 202,000 employees. We have consolidated more than 350 mail-processing facilities. We are modifying hours of operation at 13,000 Post Offices. We have eliminated 21,000 delivery routes.
We have been able to accomplish these incredible operational changes because of the tremendous dedication and effort of our employees. It is to their credit that the organization continues to function at a high level and provide the service our customers and communities expect.
America deserves a Postal Service that can adapt to basic marketplace changes and invest in the future. It needs a Postal Service that can evolve and change over time. The Postal Service has advanced a plan that can meet these expectations. It requires making fundamental changes to the way we currently do business.
Mr. Chairman, we are seeking the authority under the law to control our healthcare and retirement costs. We can completely eliminate the need for Retiree Health Benefit prefunding if we can move to our proposed solution. Our goal should be the elimination…not just re-amortization…of any prefunding, and this is achievable. Our employees and retirees will also benefit from lower premiums and get the same or better health benefits. Just by pursuing this one element of our plan, the Postal Service can reduce its annual costs by up to $8 billion dollars.
We seek the ability to establish a defined contribution retirement system for new employees. Given the changes that will occur in our industry in the coming decades, I believe it is fundamentally unfair to lock the postal service…and future employees…into a defined pension system.
With the authority to move to a schedule that includes six days of package delivery and five days of mail delivery, the Postal Service can save nearly $2 billion dollars annually. The American public supports this delivery schedule and it’s the financially responsible step to take.
We require a more streamlined governance model, and flexibility under the law, to develop, price and implement products quickly.
And, we are also seeking a refund of the approximately $6 billion dollars in overpayments to the Federal Employees Retirement System.
If Congress can pass legislation that addresses each of these areas, we can close a $20 billion dollar budget gap by the year 2016 and operate on a financially sustainable basis. If we do not gain this flexibility, our unsustainable losses will continue and we risk becoming a significant burden to the American taxpayer.
There is a simple question to ask about the legislation this committee is in the process of developing: Does it enable $20 billion dollars in savings by 2016? We believe our plan meets this test and provides the most responsible approach for our customers and employees– but we cannot implement it without legislation.
Mr. Chairman, we are quickly moving down a road that leads straight to a large financial chasm. Postal reform legislation can be the bridge over that chasm.
If we build the bridge properly, the Postal Service can have a bright future. It can adapt and better serve the changing mailing and shipping needs of American industry and the American public. It can be a more powerful engine for economic growth. It can be profitable and operate without burdening the American taxpayer.
However, we can’t get to that future if we don’t build that bridge. And, we need a bridge that gets us all the way to the other side. Half-measures are about as useful as half a bridge. We need legislation that, together with our planned changes, confidently enables at least
$20 billion in savings by 2016. If not, we go over the edge.
I strongly urge this committee to pass comprehensive reform legislation that affirmatively grants us the authority to operate the Postal Service in a financially responsible manner and creates a financially sustainable business model for the next decade and beyond.
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.”
I’ve read the post here and am really impressed by what these employees know. I cannot say it any better or any clearer. We are not just USPS employees trying to save our job, thats a no-brainer…but everyone on the inside knows what is happening and those voice of the employee surveys do not get the truth out.
Enough of this already! I am a 25 yr postal employee…I have heard gloom and doom talk since day ONE….But NO ONE does ANYTHING to fix it. Management in ALL levels don’t want to be held accountable for anything..therefore, no one makes any logical, responsible decisions. And the Union protects individuals that AREN’T worth protecting. I have seen it OVER and OVER again. The two entities are killing the Postal Service. THEN throw Congress in the mix. Is it any wonder we are going down the crapper?
lets see 7000 employees at HQ,for what? 1.2 million rent for the area offices in gaitherburg md,an annex in balitmore md rent 80,000 a month,a no bid contract in Portland or.,59 dollars an hour they their drivers.it goes on an on
I watched this yesterday and couldn’t help notice a few things. 1. How chummy Donahoe and Issa are. It’s not surprising knowing they both want a bill consisting of the same things. 2. How Guffey seemed a little to willing to compromise with Donahoe. He was reluctant about the health care saying he preferred to keep “ours” meaning the APWU plan which in a trade off in negotiations all new clerks sign on to that plan. He certainly wasn’t thinking of workers who may want to keep their BCBS insurance! Other then that one got the feeling through this bill being worked on we may lose even more. Donahoe’s five year business plan number 7… Require Arbitrators to Consider Financial Condition of Postal Service….. that is what they attempt to do in the first place. It seem Mr. Donahoe wants to praise postal workers in one breath for all they do and in another wants to impress on arbitrators to stifle any idea of raises for the same work we are being praised for. Fully understanding the postal services financial condition still it’s hypocritical of Donahoe to ask for his employee’s to keep up the excellent service in their jobs with no incentives. We have gone without a raise for two years and now through this last contract receive minimal increases, yet he and Issa beleive we should be held in check. Donahoe mentioned yesterday in his testimony that the postal service needs to be able to offer buyouts to get employee’s off the rolls knowing that his strategic initiatives of reducing full time employee’s by 2016 is far behind schedule. He is obviously talking about civil service and fers employee’s with close to or more than 30 years. The past offes of $15,000 over a 2-year period has not been a great success simply because it’s not much once you take the taxes out of it. This combined with attrition was suppose to be the plan for this reduction. It is with some hopefullness that members of congress will be sensible enough to sweeten the incentive by years or years and money which seems unlikely but it would in my opinion not only perk employee’s interes but would be far reaching in reaching his employee reduction plan.
Just end mail delivery on the weekends already!!!! Not much summer left…. And I need to get this tan on!!!!
Its a sad day when I sit here and read what people want of the postal service. We give the mail protection, deliver in all weather conditions, to any know place in the USA. All the mailers want is cheap rates for high profits, our own management want to privitize so instead of getting hunderds of thousands of dollars the can get millions and golden nest eggs. Our PMG is a post master but he calls himself a CEO when did the USPS become a business Oh wait we aren’t. We the people must stand up against congress and the PMG and his cronies if we want a government and postal system that works for us and not the profits of company’s and the senetors and congressmen who get kick backs to destroy us.
Management needs to be fixed first, decades and decades of waste and incompetence has caught up to all of us. Sorry guys but its time to get rid of club fed and put people in postal management who run it not as a business but as it was intended to be run, as a public service.
Every Business has to redefine. And there is no argument that first class mail has dropped. But, you can’t mail a parcel and there are other areas we can expand into. IF WE ARE ALLOWED. There are restraints on the Postal Service that don’t allow them to venture off into other areas. All this can be accomplished without closing Post Offices and plants. The network they have is the best in the Nation. 100 percent delivery network. Nobody needs to check in their area if they can get service like they have to do with their cell phones or cable tv. The Postal Service delivers there no matter where you are. Use that to attain more services to deliver to those people. I have heard a lot of proposals like delivering beer and wine, meter reading, air quality testing on their vehicles, advertising on their vehicles etc. All of these ideas would generate money for the Postal Service and make them profitable. How about you have a kid in CA that needs money now and you walk into a Post Office in PA and give the clerk money and your kid gets a money order or cash right then. They have the network. Use it.
unfortunately contracts don’t mean a lot to someone who has all the strings to pull and buddies in high places who would benefit quite profitably if dondaho is allowed to continue to destroy a national institute created by the constitution, but even obammy has little respect for it either. if congress is to be of any respect they must be aware of where the postal service(yes Service) is going, either down the privatize road or into their pockets..perhaps both..I personally have had to participate in the closing of a p&dc plant and who knows what happens now…according to upper management there would be a soft landing area for us to land–does that mean boulders or briar patches. it’s too bad everyone is trying to redefine the business model of the USPS when our business was fine when the customers trusted us to give them good service///
The Constitution provides for universal delivery of the mail. If you have an address on a shack in the middle of the woods somewhere you are entitled to service. What Private companies want is to cherry pick the express mail and other services to Urban areas that are more profitable. Delivery to the bottom of the Grand Canyon is performed by the Postal Service. One guy said it best and that was you can walk into a Post Office in New York City and mail a father’s day card to your dad in Alaska and one to your grandfather in Hawaii and give the clerk a dollar and walk out with change. Try doing that with a private company. The Postal Service is more then a delivery company. It is a public service and trust. Tamper with the delivery of an item by them and it is a federal offense. Even if you are an employee of the Service.
So, (5 days of mail delivery)( 6 days of packages )vs no delivery at all or an exorbitant rate increase doesn’t seem that bad in the grand scheme of things.
Hey Jimmy, obviously you are not one of those people that live in an area that won’t be serviced because private companies don’t like the cost or bother to deliver to them. The Postal Service in their last mile program delivers their packages for them in those areas. The total is around 30 to 35 percent of FedEx and UPS packages they do this for. If the Postal Service becomes private that item on Amazon will cost a lot more to get delivered because they won’t want to deliver it either – DUDE.
Sell it to private sectors , problems solved ,dude,
PMG Donohoe is secretly trying to destroy the Service as we know it, privatize it completely and outlaw the unions. Issa controls his strings, and any doubters only need be reminded that Donohoe wholeheartedly supported Issa’s first bill, that would have had disastrous results for everybody except the PMG and a few high ranking cronies in on the fix.
I have never seen a Postmaster General so incompetent and egomaniacal in my 28 years as a letter carrier. No PMG made his employees sit through mandatory videos that were produced like a slick commercial to make him look like a big CEO. He is power mad, inflexible, and encourages every kind of contractual malfeasance he can. Even before the ink was dry on the new NALC contract, management is already trying to refuse to convert eligible CCA’s to full time positions, and that is resulting in lots of grievances. What I don’t understand is why Congress or some other body of oversight doesn’t look at the management’s pathological history of violating contracts every which way. It shows their intent, their dishonesty and total lack of character.
However, those in a position to make management accountable are birds of a feather, and they hate unions too. Therefore, contract violations are an annoyance, nothing more. No wonder the country is fucked up, when we consider who regulates it.
Require USPS Health Care Plan (Resolves Retiree Health Benefits Prefunding Issue)
This only works for working employees.
1) What if you retire and go on medicare and your spouse is 15 years younger than you are, how is your spouse covered?
2) Suppose your spouse has a job with health benefits and wants to retire at 62, then be put on your insurance.
3) What if you still have children and are old enough to use medicare, how are the children covered?
4) What would the cost increase to the FEHB members that are not USPS employees be?
by far, the biggest ‘systemic challenge’ facing the united states postal service and impeding their recovery is a lying buffoon named postmaster general patrick donahoe. the internet and technology can very well be an advantage to the united states postal service, but patrick donahoe must be removed and a competent individual with some proven business savvy and some common sense
put in to serve as postamaster general. i’ve watched the changes that patrick donahoe has
made to the postal service in recent years. almost every time, i believe the changes donahoe claimed were made to ‘save money,’
actually ended up costing the postal service more money as they inflated costs and drove loyal customers away. in fact, the ‘smoking gun’ that predicted this outcome for donahoe’s plan was uncovered during postal regulatory hearings several years ago. it was found that donahoe and postal management paid for a study to see the impact donahoe’s changes would have on revenue, or how much business/revenue the post office would lose due to donahoe’s service slashing plans. the study reported that more revenue would be lost than the post office would save in reduced costs!!!! the post office hid this study but it came out in PRC hearing. after the cat was out of the bag, donahoe and the boys in washington d c said the study was ‘flawed’ and therefore ignored. the company that did the study has publically said they stand by their results.
newsflash to patrick donahoe:
if you make changes to operations that save you $40 million dollars in costs but those same changes cost you $50 million
dollars in lost revenue, then you are in fact hurting your business.