On the day before he was set to take over as the nation's 73rd U.S. postmaster general, Patrick R. Donahoe sought to explain to a Senate panel how he plans to reverse a string of multibillion-dollar annual losses and lift the Postal Service out of the worst financial crisis in its history.
Mr. Donahue, a 35-year postal veteran who began as a clerk and became deputy postmaster general, takes over Friday for retiring Postmaster General John E. "Jack" Potter, who oversaw the agency for nearly a decade.
The Pittsburgh native assumes the top job at a time when financial problems are so dire that Sen. Tom Coburn, Oklahoma Republican, asked Mr. Donahue in a private conversation why he would even want the position. Mr. Coburn jokingly likened taking the job to getting four root canals with no anesthesia.
In prepared remarks to a Senate Homeland Security subcommittee, Mr. Donahoe, calling the Postal Service the second-largest civilian employer in the nation (Wal-Mart ranks first), said, "Our survival is vital to the American economy.
"In order to preserve the Postal Service, in order to keep the economy as a whole, not just the Postal Service thriving, we must make changes in how we operate," he said.
Mr. Donahoe warned that without changes, it's unlikely the Postal Service will have enough money to make a $5.5 billion payment to prefund retiree health benefits due Sept. 30, 2011.
"Any major disruption such as mail volume declines, weather-related challenges or emergency circumstances could cause us to experience an earlier cash shortfall resulting in defaults on financial obligations earlier" in fiscal 2011, he told the Senate. "Simply put, the risk remains quite high."
Still, he said much of the Postal Service's losses in recent years can be tied directly to the congressionally mandated requirement to prefund retirement benefits to the amount of about $5.6 billion per year. He said no other federal agencies or private companies "have a similar burden."
Mr. Donahoe said he backed pending legislation to restructure the prefunding requirement. In addition, he seemed to favor cutting Saturday mail delivery. He said customer polls show the public would rather lose Saturday mail service than pay for a substantial stamp price increases or see local post offices close. He said eliminating Saturday mail would save about $3 billion per year.
Saying the Postal Service has been doing a good job cutting costs, Sen. Thomas R. Carper, Delaware Democrat and chairman of the subcommittee, cautioned, "The truth is, we're rapidly approaching a time when we may no longer be able to depend on the Postal Service."
He said he's introduced legislation that would help by allowing the Postal Service to use billions of dollars that it overpaid for civil service retirement system benefits toward meeting the retiree health care funding requirements.
Sen. Susan Collins of Maine, ranking Republican on the Senate Homeland Security and Governmental Affairs Committee, said she, too, proposed legislation that would, among other measures, reform postal contracting practices. She cited "stunning" evidence of costly contracting mismanagement.
Fredric V. Rolando, president of the National Association of Letter Carriers, said his 290,000-member group supports moves to restructure the prefunding requirement for retiree health care. But he said the association sharply opposes eliminating Saturday mail delivery.
"It would save very little money and risk the loss of much more revenue over time," he said.
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