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Cash-strapped U.S. Postal Service still owes retired postmaster
Question of the Day
In a year when the U.S. Postal Service lost more than $5 billion, former Postmaster General John E. Potter still received more than a quarter-million dollars thanks to a hefty deferred-compensation package, a “lifetime achievement award” and a severance deal, records show.
What’s more, the cash-strapped Postal Service still owes more than $800,000 to Mr. Potter — the result of years of incentive awards that were deferred to avoid running afoul of federal compensation caps.
Under federal rules, top postal executives can receive up to 120 percent of the salary of the vice president of the United States, which is $230,700 for 2011.
But saying the cap doesn’t provide the sort of compensation needed to retain top executives, the Postal Service’s board of governors has paid more money to executives through special incentive awards, particularly to Mr. Potter. Because he was earning the maximum salary as postmaster general, most of his incentive payments were deferred until after his retirement.
Postal officials have said the board had the authority to award the extra money and that key congressional offices were notified.
This year, current officials received no such awards because of the Postal Service’s “dire financial condition,” according to a regulatory filing Tuesday.
But the bill for past incentive awards is still due. Records show that Mr. Potter is owed $815,788 in deferred compensation to be paid over a 10-year period on top of the $286,840 he already has received.
The first payment was made in January, records show. Those future payouts include awards and cash incentives that Mr. Potter earned in the 1990s as a Postal Service employee, as well as cash incentives he received from 2001 to 2008 as postmaster general, records show.
For 2011 alone, the payments to Mr. Potter included deferred compensation, severance money and a lifetime achievement award, records show.
Spokesman Mark R. Saunders said Mr. Potter’s compensation package was a contractual issue, so the Postal Service will compensate him to meet the terms of the contract. He also said that when the size and scope of an organization that employs more than 500,000 people operating among 32,000 locations linked by more than 210,000 vehicles, the Postal Service compensation is well below that of similar private-sector positions.
“If you contrast Postal Service officer compensation versus a typical postal workers’ compensation, you’ll find it to be a 4- or 5-to-1 ratio versus the private sector, where it’s not uncommon to find that ratio in the hundreds if not thousands per single rank-and-file employee,” he said.
Pete Sepp, vice president of the nonpartisan National Taxpayers Union, said Mr. Potter is entitled to the money for fulfilling contractual goals, including some management improvements.
“The trouble is, the Postal Service has many long-term, structural fiscal problems that have been brewing under many postmasters as well as congresses,” he said. “Lawmakers will have to confront these problems more directly when designing future postmaster compensation packages, not to mention their own postal reform legislation.”
Mr. Potter’s compensation surfaced during a March 2009 congressional hearing held the month after The Washington Times reported postal compensation practices. At the time, Carolyn Gallagher, who was chairwoman of the Postal Service’s Board of Governors, defended Mr. Potter’s pay package as fair, especially when compared with those of private-sector competitors.
“Although we governors are a diverse group with varying views on some things, we all agree that Mr. Potter has earned the compensation he has received,” she testified.
The latest financial report also shows that current Chief Financial Officer Joseph Corbett received a $75,000 recruitment bonus for 2009, and $25,000 bonuses were paid to Megan Brennan, the chief operating officer, and Ellis Burgoyne, the chief information officer, as recruitment bonuses in 2011.
Executives are eligible for retention and recruitment awards “designed to attract and retain highly talented and marketable individuals in key postal positions,” the annual financial report states, adding that payment of the awards could be deferred because of the compensation limitations.
Mr. Potter’s replacement, current Postmaster General Patrick Donahoe, received no bonus for 2011, but did receive $30,000 in incentive payments based on awards that were deferred until this year. He previously served as the Postal Service’s chief operating officer.
For fiscal 2011, Mr. Donahoe received a salary of $271,871. He and other top postal executives also received perks that include financial-planning services, parking, physical exams, airline clubs and relocation costs, records show.
According to the report, Mr. Donahoe can earn an extra $103,815 in 2012 depending on his and the Postal Service’s performance. Other top postal executives can earn amounts ranging from $86,250 to $89,525 if they meet performance goals.
The Postal Service reported $5.1 billion in losses for fiscal 2011 this week, after losing more than $8 billion the previous year. However, the overall losses for 2011 would have been more than $10 million if Congress had not postponed a $5.5 billion bill to fund retiree health benefits.
Mr. Donahoe said the Postal Service, which has reduced its workforce by more than 125,000 in the past four years, aims to cut $20 billion by 2015. But he said the Postal Service needs reform legislation from Congress to help return it to profitability.
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