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  • April 2014
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Facing Financial Crisis, USPS Plans to Downsize; Withdraw from Federal Health-Care Plan

The Washington Post reported last week that the United States Postal Service (USPS),

…is proposing to cut its workforce by 20 percent and to withdraw from the federal health and retirement plans because it believes it could provide benefits at a lower cost.

The USPS’s proposal comes in the wake of  a chorus of outside criticism that has been steadily increasing over the past several years.  The plan, which would require Congressional approval in order to be enacted, would serve as a major step toward returning the USPS to fiscal solvency.

Despite the dire need for reform, labor agreements between the USPS and its unionized employees are acting as a major impediment to the restructuring of the organization.  A statement from the USPS, again from the above Post article:

..the collective bargaining agreements between the Postal Service and our unionized employees contain layoff restrictions that make it impossible to reduce the size of our workforce by the amount required by 2015,” according to the optimization document. “Therefore, a legislative change is needed to eliminate the layoff protections in our collective bargaining agreements.

Several lawmakers have introduced bills that would help to address many of the USPS’s problems.  On June 23, 2011, Rep. Darrell Issa (R-Calif.) introduced H.R. 2309, the Postal Reform Act, which would modernize the USPS and reform its outdated business model.  On February 2, 2011, Sen. Susan Collins (R-Maine) introduced S. 261, the Federal Employees’ Compensation Reform Act, which would convert retirement eligible employees on workers compensation programs to retirement plans when they reach retirement age.  Between July 1, 2009 and June 30, 2010, the Federal Employee Compensation Act paid approximately $1.1 billion dollars in monthly benefits to USPS employees – constituting nearly forty percent of the program’s total cost of $2.78 billion during that span.

As American society shifts to a heavier reliance on electronic-based communications, the USPS business model becomes increasingly antiquated.  Decreased demand has resulted in dwindling incomes; first class mail, which makes up more than half of USPS revenue, peaked in 2006, and fell 20 percent over the next four years.  With the agency’s long-term fiscal outlook appearing equally grim, it is time for Congress to deliver sweeping structural and regulatory reforms to the USPS that will prevent its continued hemorrhaging of red ink.

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