Washington — Despite significant cost-cutting, the U.S. Postal Service has “an inflexible business model” that will make it unable to pay huge bills without legislative fixes, the postmaster general testified Wednesday.
The agency cut $3 billion in costs last year and will see about $2 billion in savings this year, but it still won’t have the revenue to meet its obligations, Patrick R. Donahoe told the House postal oversight committee.
Despite cutting 230,000 positions in recent years, without significant changes, he said, the Postal Service, which is not taxpayer funded, cannot survive as a self-financed entity.
Prefunded retiree medical benefits of $5.5 billion a year lead the list of ails facing the agency, he said. The $5.5 billion is due September 30. No other entity must bear “the incredible burden” of such an amount, he said.
The agency also must pay in October $1.2 billion for workers’ compensation, according to the postmaster general.
Current models show the Postal Service will be $2 billion to $3 billion short of the amount needed for the workers’ comp and the prefunded medical benefits payments, Donahoe said.
Donahoe reiterated the agency’s request to deliver mail five times a week, rather than the current six.
The agency also is earning less from first-class mail, suffering a $544 million revenue loss in comparable three-month periods over two years. “Any business that takes this kind of monetary hit is destined to struggle, and the Postal Service is no different,” the postmaster general said.
Donahoe said the Postal Service plans to strengthen the business-to-consumer channel, improve customer service, better compete for the package business and become a “leaner, faster and smarter organization.”
The agency is discussing changes in compensation with unions representing workers, he said.
“We will not need a bailout,” Donahoe said. But the $5.5 billion payment is the principal reason for the Postal Service not breaking even this year, he said. He is expecting a $6.4 billion loss this year.