WASHINGTON — U.S. Postal Service plans to cut billions of dollars in losses would end regular Saturday mail delivery and reduce health benefits to retired postal workers, officials warned Congress on Thursday.
The Postal Service lost $2.4 billion in the last quarter and estimates that it will lose $7 billion this fiscal year.
"Our situation is more tenuous than ever," Postmaster General John E. Potter told a hearing of the Senate Homeland Security and Governmental Affairs Federal Financial Management Subcommittee.
As a result, he suggested cutting Saturday service, explaining that, "It is the lowest-volume delivery day, but with the same level of fixed costs as other delivery days." What's more, he explained, "Most business and professional offices are open Monday through Friday, with many closed on Saturday."
The Postal Service, which has been battered by the recession and a loss of customers to the Internet, faces a $700 million cash shortfall by the end of the fiscal year, Sept. 30. On the same day, a payment of up to $5.8 billion for retirees' health benefits comes due.
Congress is considering legislation that would delay the health benefits payment.
"If the legislation is not passed, we will not make the payment," Potter said.
Killing Saturday delivery would save the agency $3 billion a year, he said. Six-day-a-week delivery was mandated in the Postal Accountability and Enhancement Act of 2006, however, and ending Saturday delivery would be controversial.
Senators vowed to help the 234-year-old institution, but some said they opposed Saturday cuts.
"Is this really the right response to this crisis?" asked Sen. Susan Collins, R-Maine. "The Postal Service cannot expect to gain more business if it is reducing service."
Senators were more sympathetic to a proposal that the Postal Service made earlier to consider closing nearly 700 postal facilities out of 32,000 nationwide.
"We in Congress put up roadblocks whenever the Postal Service even mentions it might be time to close or consolidate some facilities," said subcommittee Chairman Thomas Carper, D-Del. "We just can't afford to do that anymore."
Carriers' hours already have been reduced and will be cut more. Officials are bouncing around ideas for selling nonpostal-related items at post offices. Congress has the final say on Saturday service, but the Postal Service has discretion over layoffs and other matters.
Lawmakers at the hearing agreed that drastic measures were necessary to save the USPS.
"Unless we apply some tough measures, this dizzying downward spiral could become a death spiral," said Sen. Joseph Lieberman, a Connecticut independent.
Dale Goff, the president of the National Association of Postmasters, cited a 2003 report by the President's Commission on the U.S. Postal Service that said five-day delivery would create problems with mail flow, storage and logistics. The agency's financial problems were overblown, he said.
A Gallup poll earlier this year found that 57 percent of the public favored cutting back on branches and a delivery day rather than paying higher stamp prices or seeing a government bailout.
The cash shortfall comes even though the Postal Service implemented cost savings of $6 billion for the year, made through a reduction of 100 million work hours, as well as layoffs and other cost-cutting measures.
Last week, the Government Accountability Office, Congress' nonpartisan investigative arm, put the Postal Service on its "high-risk" list and estimated that its debt could rise to more than $13 billion by the end of next year. The agency is coping with the largest drop in mail volume in its history.
"Mail volume has typically returned after recessions, but the USPS's five-year forecast suggests that much of the recent volume decline will not return," the GAO report says.
MORE FROM MCCLATCHY
For McClatchy politics coverage visit Planet Washington
McClatchy Newspapers 2009