Postmaster General Patrick Donahoe may soon be forced to choose which laws to flout to keep the barely solvent U.S. Postal Service running.
A five-year restructuring plan delivered with the help of advisers at Evercore Partners Inc., Boston Consulting Group Inc. and Accenture Plc has gathered dust for 15 months in the absence of action from Congress, which must approve changes in the service’s business model.
With the service on pace to almost run out of operating cash in October, Donahoe may have to decide whether to make unilateral changes without congressional consent, said Evercore’s George Ackert, lead adviser to the agency on its turnaround plan.
“It will reach a crisis point and then the Postal Service will have to choose from various illegal alternatives,” Ackert said. “They’ll say it’s illegal to go from six delivery days to five, well it’s also illegal to not deliver the mail, so you’re talking about choosing amongst various bad outcomes.”
Those potential changes include ending Saturday mail delivery and closing post offices and sorting centers. Donahoe has already shown he’s willing to ignore a law. He hasn’t paid the cost of pre-funding future retirees’ health care for the past two years, something required by federal law only of the Postal Service.
A Postal Service spokesman, David Partenheimer, declined comment while referring to comments Donahoe made in a speech in Washington on April 19.
“Congress faces a simple choice,” the postmaster said at the time. “It can decide to start appropriating a lot of money to prop up a broken Postal Service. Or, it can give the organization the flexibility to operate more effectively.
“We don’t have to resort to layoffs, or contracting out large parts of our work force,” he said. “We don’t have to make radical changes to our products and services, nor our pricing. We don’t have to be bailed out by the American taxpayer.”
Tasked by Congress 40 years ago with becoming self-sufficient while overseen by lawmakers, a government-appointed board and a regulator, the Postal Service lost $15.9 billion last year and has exhausted its $15 billion borrowing limit. It lost another $3 billion this fiscal year’s first half. Last month Donahoe warned that if the agency isn’t permitted to restructure this year, a taxpayer bailout through 2017 would cost $58 billion.
The mothballed restructuring plan calls for ending Saturday mail delivery, raising stamp prices to 50 cents, closing unprofitable post offices and processing facilities, cutting 155,000 jobs by 2016 and leaving the U.S. government health plan to create its own.
While lawmakers have pushed the service to return to profitability, they have stood in the way of each of those steps, worried about the political consequences of cuts that affect their constituents.
Donahoe tried this year to end six-day-a-week delivery to save about $2 billion a year — until the Government Accountability Office said in March that the move was illegal. Lawmakers including Senate Majority Leader Harry Reid, a Nevada Democrat, complained, and the Postal Service’s own board quashed Donahoe’s plan April 10.
The Postal Service couldn’t evade congressional oversight by refusing its annual government appropriation, which was $78 million last year, or less than 1 percent of its budget. That would also be illegal, according to Jeffrey Bucholtz, an external Postal Service lawyer who works at Washington firm King & Spalding LLP. His opinion was in a confidential memo obtained by the Federal Times, a publication for U.S. government workers.
The nine-member Postal Service board has four vacancies. Most of its directors have political rather than business experience.
“This is a $70 billion company, let’s give it a board that looks like it’s a $70 billion company,” said Ron Bloom, Lazard Ltd.’s vice chairman of U.S. investment banking, who represents the National Association of Letter Carriers union.
The Postal Service is exaggerating the crisis to justify radical cuts, Bloom said.
The consultants retained more than two years ago by the service and the letter carriers can’t begin negotiating changes until Congress allows them to take action.