- The Washington Times - Tuesday, February 17, 2009

Postmaster General John E. Potter recently warned that economic times are so dire that the U.S. Postal Service may end mail delivery one day a week and freeze executive salaries. But his personal fortunes are nonetheless rising thanks to 40 percent in pay raises since 2006, a $135,000 bonus last year and several perks usually reserved for corporate CEOs.

The changes, approved by the Postal Board of Governors and contained in a little-noticed regulatory filing in December, brought Mr. Potter’s total compensation and retirement benefits to more than $800,000 in 2008. That is more than double the salary for President Obama.

The new compensation package, much of it deferred to later years, goes beyond a newly beefed-up salary, now $263,575, that Congress arranged for him as part of a 2006 law to make top postal salaries more competitive with those in the private sector. At least four other postal officials got more than a quarter-million dollars in total compensation in 2008, according to Postal Service records reviewed by The Washington Times.

Lawmakers, already trying to limit compensation of Wall Street executives, have taken notice of Mr. Potter’s good fortune when the Postal Service is posting nearly $3 billion a year in losses and now wants to raise the price of a stamp by 2 cents.

The House Oversight and Government Reform federal workforce, Postal Service and the District of Columbia subcommittee “will investigate during this Congress,” said Marcus A. Williams, a spokesman for the panel that oversees the Postal Service.

Outside analysts also said Mr. Potter’s recent vow to freeze postal executive salaries at 2008 levels means little when several got such generous compensation packages.

“It’s easy to freeze your pay when salaries were running as hot as a dragster the previous year,” said Pete Sepp, vice president of the National Taxpayers Union, a nonpartisan groups that monitors spending of the government and its spinoff agencies like the Postal Service.

“There is something to be said for attractive compensation. But at the same time, the Postal Service has a government guaranteed monopoly on the delivery of first-class mail, and UPS and FedEx don’t have that. Because of that, there is a fundamental difference in the Postal Service’s business model and that of package delivery firms.”

In informing the Postal Regulatory Commission of its change, the Postal Board of Governors said it added deferred compensation because federal law made it difficult to pay Mr. Potter “even close to a level of comparability with similarly situated individuals in the private sector.”

By comparison, Frederick W. Smith, chief executive officer for FedEx, received $10.9 million in total compensation last year and $17 million in 2007, according to Securities and Exchange Commission filings.

Gerald J. McKiernan, a spokesman for the Postal Service, said the board of governors has the authority to award extra money through deferred compensation and that key congressional offices were advised of the changes.

Under federal rules, top postal officials can earn up to 120 percent the salary of the vice president of the United States, which was $221,100 in 2008. The deferred compensation - such as bonuses, perks and substantial retirement fund contributions - are designed to augment that pay, according to postal records.

Mr. Potter isn’t the only Postal Service official to benefit. Deputy Postmaster Patrick Donahoe got $600,026 in total compensation in 2008; Anthony J. Vegliante, chief of human resources, received $482,820; and at least two other postal executives got over a quarter-million dollars each, according to Postal Service records.

For the officers, enhancements to the value of their pensions totaled almost as much as their base salaries, which were under the federal pay caps.

Mr. Potter’s compensation also included perks usually reserved for corporate executives, like $69,253 in security. He and other top postal officers are eligible for perks such as life insurance premiums, parking, spousal travel and airline club membership, the records show.

The board of governors also disclosed that it awarded Mr. Potter $135,041 in “pay-for-performance” and incentive payments for his “effective leadership during the difficult economic challenges of 2008.”

Details about Mr. Potter’s compensation, as well as pay packages for other top postal executives, were disclosed in a Dec. 10 filing with the Postal Regulatory Commission by the board of governors. The filing came about six weeks before Mr. Potter told Congress that the Postal Service reported a net loss of $2.8 billion during fiscal 2008.

In his congressional testimony, Mr. Potter said the Postal Service’s financial outlook remains so dire that officials may have to eliminate a day of mail because of declining mail volume. He also said there are plans to reduce staffing at postal headquarters by 15 percent and cut travel budgets, in addition to the salary freeze. Last week, the Postal Service announced it would raise the price of first-class mail stamps to 44 cents, up 2 cents, effective in May.

Mr. Potter also said the losses occurred even as officials cut costs by more than $2 billion, reduced work hours by 50 million compared with the previous year and reached record levels for on-time delivery. He said the problems were caused, in part, by a weakening economy, billions of dollars in required payments to prefund retiree health care benefits and more people using electronic mail to communicate.

Speaking about an executive salary freeze, Mr. Potter told Congress, “Executive leadership in the Postal Service has an obligation to help send a message of change throughout the organization, demonstrating that they, too, have a personal take in working to overcome the challenges we are facing.”

After passage of the Postal Accountability and Enhancement Act of 2006, Mr. Potter’s salary rose more than 35 percent, from $186,600 to $258,840, according to a report last year by the trade publication Linn’s Stamp News, which cited information obtained through a Freedom of Information Act request.

The January 2008 report said the raises, approved in May 2007 and retroactive to Jan. 5, 2007, also included a 26 percent from $186,000 to $235,000.

Mr. McKiernan said the Postal Service is competing against large private delivery companies whose executives earn millions of dollars a year. He also said outsider reviews recommended increasing compensation for top Postal Service executives based on a review of, among other things, how much executives at private delivery companies were earning.

“What members of Congress were looking at was the president of FedEx making $10 million,” Mr. McKiernan said. “Given the responsibility, the feeling was to retain and attract [executives] some modest increase was warranted.”

Charles Guy, an adjunct fellow at the Lexington Institute who has studied postal finances for decades, said of the executive pay freeze, “They’re already getting about all they can get and now that they’re put in a corner; they really had no choice.”

But Mr. McKiernan said the pay raises came at a time when the postal system wasn’t in such a bad financial state. He also said Mr. Potter didn’t ask for the pay raise. Ultimately, he said, Congress authorized and the Postal Service’s board of governors approved the raises.

“We ended the year 2007 in the black,” Mr. McKiernan said. “There has been a feeling in Congress, especially in the committees of jurisdiction, that … senior officials should be compensated as adequately as possible,” he said.

The Postal Service is an independent government agency subject to congressional oversight, but it doesn’t get its funding from taxpayers. It’s also subject to a host of government rules, including mandates that it pay billions of dollars to fund health care benefits for retirees and deliver mail six days per week.

Based on Mr. Potter’s employment agreement, the Postal Service paid him a performance incentive award of $116,741 for fiscal 2008, as well another award of $18,300, according to filings. In a report, the board of governors cited Mr. Potter’s “effective leadership during the difficult economic challenges of 2008.”

The report on executive salaries by Linn’s last year noted that in releasing the base salaries, postal officials noted that the President’s Commission on the U.S. Postal Service in 2003 called for increasing pay for top executives so they’re more competitive with the private sector.

In addition, the pay for postal chiefs in several other foreign countries ranged from a quarter-million dollars to as much as $4 million per year, the report stated. The report also noted Mr. Potter’s salary lagged behind the compensation for executives at three other government-created organizations: Fannie Mae, Freddie Mac and the Tennessee Valley Authority.

Postal analyst Murray B. Comarow, executive director for President Johnson’s Commission on Postal Organization in 1968 and 1969, said reviews for years have shown that postal executive salaries lagged far behind private-sector compensation.

“There is a general shortage of top managers, and it’s very difficult to get people to come into the Postal Service who are compensated well compared to people even at much smaller companies,” he said.

“It’s a lot of money, but you have to ask yourself the question, compared to what?” he said. “If you want to compare it to the head of AT&T, it’s peanuts; if you want to compare it to the head of a small government agency, it’s a lot of money.”

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