Long Road Ahead to Sustain the Post Office

WASHINGTON (CN) - The road to a sustainable U.S. Postal Service likely requires keeping a recent emergency surcharge on certain mail classes on the books, the postmaster general told senators Thursday.

The struggling agency lost $5.1 billion last year, its ninth straight year posting a multi-billion dollar loss and without urgent action the service could face even greater losses in the future, Postmaster General Megan Brennan told the Senate Homeland Security and Governmental Affairs committee Thursday morning.

"The Postal Service currently operates with a business model that is unsustainable," Brennan said.

Brennan laid out a four point request for legislation that would help the Postal Service return to a sustainable business model.

Brennan suggested the senators consider legislation continuing the emergency price increase, requiring Medicare integration for postal service retiree health plans, using postal-specific assumptions to calculate retirement benefit liabilities and measures to allow the service to experiment with new products.

She blamed old, outdated postal service legislation for the agency's struggles. The Postal Accountability and Enhancement Act of 2006 is based on delivery totals that have since crashed through the floor and requires the postal service to prefund retiree health benefits, a unique set up for government agencies, according to the post service's Inspector General David Williams.

But other senators placed the blame for the Postal Service's financial struggles on the agency itself. Sen. Ron Johnson, a Wisconsin Republican and career accountant, couldn't make sense of the agency's balance sheet and lamented the "confusion" in how the postal service's assets work.

"If we're going to pass something we need the information and we need it accurate," Johnson said to Brennan. "And so we've got a long way to go."

Sen. Tom Carper, D-Del., spoke in his opening statement about proposed legislation that largely seemed aligned with Brennan's requests. Carper said his proposal would allow the Postal Service to take full advantage of Medicare, change the data the agency uses to calculate its pension costs and even allow it to experiment with delivering beer, wine, liquor and other services that would put it on even footing with private carriers.

"The key question for us is how do you take a 240 year old delivery network that goes to every mailbox in the country five, six days a week, how do you take that system and actually make money on it, enable the Postal Service to make money on it?" Carper said after the hearing. "And we think we can, and in fact we heard a bunch of good ideas here today."

Johnson suggested Carper's legislation might be premature, as more basic problems remain in the Postal Service that must be fixed.

"I know Sen. Carper wanted a touchdown, maybe we ought to be thinking about a field goal," Johnson said. "What are the things that we absolutely must do to avoid a real calamity in terms postal system pricing?"

Carper pushed back at this contention, saying it is too early to consider anything but a total fix.

Floating above the hearing was the general question of just what the universal service obligation - the Postal Service's broad agency directive - means. Everyone in the hearing room Thursday seemed to agree cutting people out of mail service would be unconscionable, but other changes to service seemed more palatable, such as cutting back how often the agency delivers mail.

"In the long term, and these are the big questions that this committee and this Congress has to face, is what do we want to postal service to be?" James Millstein, former chief restructuring officer at the Department of the Treasury said at the hearing.

Regardless of the form the Postal Service takes in the future, all at the hearing expressed a sense of urgency for Congress to act to help the Postal Service stay afloat.

Brennan at multiple points pleaded with Johnson to take action on Postal Service reform, and told Sen. Cory Booker, D-N.J., the help could not wait until after the upcoming presidential election.

Millstein shared a similar diagnosis of the agency.

"The first thing you need to do is stabilize the patient," Millstein said. "And this patient is bleeding cash, not making revenue. And as it bleeds cash it has really no choice but to cut back on certain standards and cut back on the network in order to be a self-sustaining entity."

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