Set the Postal Service free

The U.S. Postal Service’s decision to cease mail deliveries on Saturdays beginning in August makes sense in some ways, but contrary to popular belief it’s not altogether necessary from a financial standpoint.

Yes, the agency is losing money, $1.3 billion in the first quarter of fiscal year 2012-13, according to The Washington Post. But it also paid $1.4 billion toward health benefits for future retirees during that same quarter. It did so because a 2006 law requires that it, alone among federal agencies, finance the early payment of 75 years’ worth of retirement benefits within 10 years.

As Frederic Rolando, president of the union representing postal carriers, told the Post, “The $1.4 billion in pre-funding charges this quarter accounts for all—and then some—of the overall red ink of $1.3 billion. Since pre-funding went into effect, it accounts for more than 80 percent of the agency’s red ink.”

Although first-class mail volume is decreasing because of email and online bill payment, the USPS’ shipping-and-packaging business is growing, thanks to increased online shopping and an aggressive marketing campaign. Absent the burden of putting $5.5 billion annually into future employees’ benefits funds, the Postal Service would be reasonably healthy financially.

Another factor hampering its ability to respond to challenges is Congress’ long-standing tendency to tell it what to do. Even though Postmaster General Patrick R. Donohoe has said ending Saturday service would save $2 billion annually, and a 2011 New York Times/CBS News poll showed 70 percent of Americans favor ending Saturday service if it would help the USPS survive, many members of Congress are hesitant to give the agency greater control over its finances. As Donohoe says, however, it should be allowed “the commercial flexibility needed to operate more like a business does.”