WASHINGTON -- The U.S. Postal Service is facing financial disaster, and resolving it could require an emergency rate increase, Postmaster General Patrick R. Donahoe told a Senate panel Thursday.
"The Postal Service, as it exists today, is financially unstable," he told the Senate Homeland Security and Government Affairs Committee. "The Postal Service is quickly moving down a path that leads to becoming a massive, long-term burden."
Sens. Tom Carper, D-Del., and Tom Coburn, R-Okla., want to help by allowing the Postal Service to eliminate Saturday delivery, to ship alcoholic beverages, to move retirees from an employer-sponsored health program to Medicare, and to lift a rule preventing arbitrators from considering the agency's fiscal health when hearing labor disputes.
Mr. Donahoe, who started his postal career as a clerk in Pittsburgh, said he would welcome those changes but added that prospects for congressional approval are uncertain -- and help is needed now.
The Postal Service's board of governors could decide next week whether to request an emergency rate increase. In an interview after the hearing, Mr. Donahoe declined to say how much of an increase his board might seek.
For postage increases exceeding the rate of inflation, federal law requires approval from the independent Postal Regulatory Commission. To receive that approval, the Postal Service must justify that circumstances are "extraordinary and exceptional."
The Carper-Coburn USPS overhaul would change that by removing the rate cap and allowing the Postal Service to significantly increase rates on its own.
"The market ought to determine what the price ought to be," Mr. Coburn said. "It's going to have to be more than inflation because we can't meet the commitments we have."
Direct mailers, greeting card manufacturers and others want Congress to maintain the rate cap, saying its removal would harm their businesses.
It would lead to price uncertainty, which would decrease mail volume and harm the Postal Service, too, testified Direct Marketing Association lobbyist Jerry Cerasale.
Postal Regulatory Commission chairwoman Ruth Y. Goldway said the rate cap has protected customers from large, unpredictable rate increases and has motivated the Postal Service to be efficient.
But Post Office inspector general David C. Williams said removing the cap would be a big help.
"We are not saying that all postal customers have a high tolerance for post increases, [but that] current fears of a postal collapse are likely a greater risk than small price increases," he said.
The American Postal Workers Union also supports removing the cap, although it opposes most other provisions of the Carper-Coburn bill.
The bill "would penalize the working men and women of the United States Postal Service," said union president Cliff Guffey. "It would slash service to the American people, and instead of protecting the Postal Service from financial disaster, it would result in the dismantling of our nation's postal service."
The last rate increase occurred Jan. 27. The price of a first-class stamp increased from 45 cents to 46 cents.
Postal officials blamed the financial crisis on an outdated and inflexible business model that hasn't kept up with changing technology. Efforts to modernize have been hampered by congressional rules preventing such things as market-based pricing and the shipping of beer, wine and spirits.
Mr. Carper and Mr. Coburn want Congress to provide the flexibility to change that.
Their bill also would reduce workers' compensation spending, strengthen programs to help injured employees return to their jobs and impose a two-year moratorium on closing mail processing plants.
The aim is to help bridge a growing budget gap.
The Postal Service lost nearly $16 billion last year and is on track to lose $6 billion this year, according to testimony Thursday. The agency already has defaulted on $11 billion in payments to a retiree health benefits fund and is poised to default on another $5.6 billion payment due at the end of the month.
Without action, "the Postal Service will likely limp along for a few months unable to invest for the future, and with its employees and customers uncertain of what the future holds. It can only limp along this way for so long," Mr. Carper said.
"Whether it happens today, next month, or next year, it's likely that postal customers will need to sacrifice at least some of the conveniences they enjoy today," he said.
A fix will require more than cuts, Mr. Carper said. It also will require innovation and introduction of new services, he said.
Mr. Williams, the Post Office inspector general, called for modernizing operations by using global positioning systems to manage the fleet and track packages, and by adding new products such as secure electronic messaging, package warehousing, cash redemption of digital currency and a system to validate digital identities in order to protect against the risks of customers dealing with unknown businesses.
"The Postal Service already has a physical network underlying the emergent wired digital infrastructure. By further enabling that network, the Postal Service can assure that e-commerce is seamlessly supported by powerful fulfillment services for physical goods," Mr. Williams testified.
Bureau Chief Tracie Mauriello: email@example.com, 1-703-996-9292 or on Twitter @pgPoliTweets.