Senate seeks to salvage U.S. Postal Service

(AP) WASHINGTON - With big postal cuts looming, the Senate is deciding whether to stabilize the ailing U.S. Postal Service with a short-term cash infusion while delaying most decisions on closing post offices and ending Saturday mail delivery by requiring further review.

The mail agency, teetering on the brink of bankruptcy, says it needs to begin closing thousands of low-revenue post offices and mail processing centers this year as part of a billion-dollar cost-cutting effort to become profitable again by 2015. But local communities are fretting about the economic impact and tens of thousands of layoffs, drawing the concerns of lawmakers in an election year.

Late last year, Postmaster General Patrick Donahoe agreed to delay closings until May 15 so that Congress would have time to pass legislation to shore up the agency's finances.

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The bill being debated on the Senate floor this week was recently modified to take into account the concerns of mostly rural states. For instance, it would:

-Cut in half the number of mail processing centers the Postal Services currently wants to close — from 252 to 125 — allowing more U.S. areas to maintain overnight first-class mail delivery for at least three more years. Currently there are roughly 500 mail processing centers.

-Slow if not stop many post office closings by forcing the agency to consider the special needs of rural communities and undergo additional layers of regulatory approval. For instance, the Postal Service might have to downsize rather than close facilities, or factor in whether rural residents might have poor Internet service or have to travel longer road distances should a post office close.

-Require the Postal Service to wait at least two years before it could reduce mail delivery to five days a week, a cut that is being urged by the Obama administration and that could save between $2 billion and $3 billion a year.

In the meantime, the Postal Service would get a cash infusion of roughly $11 billion, basically a refund of overpayments it made in previous years to a federal retirement fund; the agency could use the money to pay down debt and offer buyouts to 100,000 postal employees. It would be allowed to make smaller annual payments into a future retiree health benefits account, which currently amounts to more than $5 billion a year; get more flexibility to cut worker compensation benefits; and be required to establish a chief innovation officer to find new ways to bring in postal revenue.

Left out of the bill was a proposal to raise the price of a first-class postage stamp by 5 cents, to 50 cents, to help pay for the added cost of keeping low-performing post offices and mail processing centers open. Estimated to bring in $1 billion, the rate increase was omitted due to concerns that a price increase would be counterproductive by pushing more consumers to cheaper alternatives of delivery, such as the Internet.

The Senate measure "does not rule out some cutbacks in services or post offices, but it would require USPS to exhaust all other options beforehand and ensure that its decisions are based on sound planning," said Sen. Joe Lieberman, I-Conn., a bill co-sponsor.

"We believe this approach offers the best hope for stabilizing the Postal Service and putting it on solid footing long-term, without dramatic and perhaps self-defeating cutbacks in service," he said.

The Senate planned to debate the measure for the next several days. The House has yet to begin consideration of a different version of a postal bill, which seeks in part to create a national commission that would make major decisions on postal cuts.

The measure comes as the mail agency has been rocked by steadily declining mail volume as people and businesses switch to the Internet in place of letters and paper bills.

Already $12 billion in debt, the mail agency says it could run out of money for day-to-day operations as soon as this fall, forcing it to shut down some of its services. The mail agency forecasts a record $14.1 billion loss by the end of this year; without changes, it says annual losses will rise to over $21 billion by 2016.

At stake are more than 100,000 jobs, part of a postal cost-cutting plan to save some $6.5 billion a year by closing up to 252 mail-processing centers and 3,700 post offices. In a report released last week, federal auditors stressed that "dramatic changes" were needed to stem the Postal Service's mounting debt and that the agency's proposal to close mail processing centers was an important part of accomplishing that goal.

The report by the Government Accountability Office also noted the challenges of making postal cuts due to community opposition. Hundreds of postal employees in cities around the nation in recent weeks have rallied to draw attention to the proposed cuts and urge lawmakers to oppose them.

Donahoe has said communities on the final closure list will be notified in July.

"The Postal Service is at a crossroads. Our business model is broken," Donahoe recently told a House hearing. He has previously criticized the Senate measure as offering only a short-term revenue fix. "We have insufficient revenue to cover our costs ... If the Postal Service were a private company, we would be engaged in Chapter 11 bankruptcy proceedings."

The Postal Service, an independent agency of government, is subject to congressional control on major aspects of its operations.