U.S. Postal Service executives won’t be getting any big bonuses this year unless they figure out how to avoid a looming multibillion-dollar deficit under a measure approved by a Senate committee Wednesday.
The move comes months after the House held hearings into why Postmaster General John E. Potter got a six-figure bonus last year even as the Postal Service racked up billions of dollars in losses.
Mr. Potter received about $135,000 in incentive bonuses last year as part of an $800,000 compensation plan, much of the money in the form of deferred compensation and retirement benefits, The Washington Times reported in February.
The Senate measure, introduced by Republican Sen. Tom Coburn of Oklahoma, says that from now on, bonuses “shall not be paid if the Postal Service had a year-end net loss for the fiscal year.” It was approved in a voice vote by the Senate Committee on Homeland Security and Governmental Affairs.
“Dr. Coburn believes it is inappropriate for the U.S. Postal Service to hand out bonuses, which have been lavish at times, when they have a year-end net loss,” said Coburn spokesman John Hart.
Postal Service officials declined to comment on Mr. Coburn’s measure Wednesday, but spokeswoman Joanne Veto confirmed that officials have enacted a salary freeze and have no plans to lift it. In prior congressional testimony, postal officials defended the compensation and benefits paid out to Mr. Potter and other executives.
Carolyn Gallagher, chairman of the Postal Service’s board of governors, called Mr. Potter “an outstanding leader” in testimony to a House subcommittee in March. She told lawmakers that Mr. Potter had reduced costs by more than $2 billion in recent years.
“His achievements in 2008 were both remarkable and unprecedented, given the magnitude of the challenges the Postal Service faced,” she said.
The National Taxpayers Union welcomed the move to curtail bonuses.
“There have been plenty of examples of purely private-sector executives being thrashed for getting bonuses, so a quasipublic institution like the Postal Service ought to be held to the same standard,” said Pete Sepp, a spokesman for the group.
Under federal rules, the postmaster’s pay is capped so he cannot earn more than 20 percent above the salary of the vice president of the United States. But the board of governors, which oversees the Postal Service, can pay additional money to Mr. Potter as long as it’s deferred until later years, according to the board.
Mr. Potter earned a salary of $263,575 last year, so he won’t be paid an additional $135,041 in incentive bonus money he was awarded last year until he leaves the Postal Service. Increases in the value of his retirement package and the costs of a security detail added to his overall compensation package.
Among other top postal officials, Deputy Postmaster Patrick Donahoe got $600,026 in total compensation, more than half of which was an increase to the value of his retirement annuities. His base salary was $238,654.
In the meantime, unions for more than a half-million mail workers nationwide recently have told the White House that they are worried that employees could starting getting IOUs instead of paychecks because of worsening financial troubles.
“We believe the Obama administration must intervene now to avoid both a political and economic train wreck,” the presidents of four major postal unions wrote in a letter to the White House earlier this month.
The letter also says Postal Service officials privately have warned congressional staff members that “the Postal Service may not be able to make payroll in October and will be forced to issue IOUs instead.”
However, the Postal Service discounted concerns about the payroll and said all employees can expect to get paid on time.
“Postmaster General John E. Potter testified before both the House and Senate earlier this year that the Postal Service would meet its payroll obligations to all employees,” Ms. Veto said. “That remains true. We will make payroll.”
Still, postal officials acknowledge serious financial problems and have pushed for changes in rules requiring the Postal Service to prefund retiree health benefits.
“We are aggressively working with Congress and the White House on ways to address this obligation in a financially sound and reasonable manner and will continue to do so,” she said.
On Tuesday, the Government Accountability Office (GAO) classified the Postal Service in its “high risk” category, citing projected $7 billion in losses for fiscal 2010. The GAO also noted declines in mail volume amid worsening economic troubles in the advertising, financial and housing sectors.