GovernmentExecutive.com

With the U.S. Postal Service headed for its third year with a multibillion-dollar deficit, Postmaster General John Potter will face tough questioning on Capitol Hill on Wednesday to explain the red ink as well as his compensation package.

As last week's outrage over the American International Group executive bonus fiasco remains fresh in members' minds, House Oversight and Government Reform Federal Workforce, Postal Service and the District of Columbia Subcommittee Chairman Stephen Lynch, D-Mass., promised to grill Potter, saying "the huge increase in pay for Mr. Potter is incongruent with the post office's recent performance."

The Postal Service, which is a semigovernment agency that has not received an operational subsidy from Congress since 1982, faces another massive deficit that Potter estimates will reach $6 billion in fiscal 2009.

This follows deficits of $2.8 billion in fiscal 2008 and $5.1 billion in fiscal 2007. The service last turned a profit of $900 million in fiscal 2006. Potter's $857,459 package in includes base compensation for fiscal 2008 listed at $263,575, according to Postal Regulatory Commission records with a $135,041 performance incentive bonus, deferred until he leaves office. His other compensation includes $77,347 in perks, including parking, life insurance premiums, airline clubs, spousal travel and security, plus his $381,496 pension.

Also deferred until he leaves office is accrued annual leave totaling more than $245,000, as of September 2008, which he will receive in a lump sum. He has been in office since June 2001.

The salary for Potter and four lower-level postal executives was approved by the U.S. Postal Service's Board of Governors in May 2007, retroactive to January 2007. It first came to light in January under a Freedom of Information Act request by a trade publication. The board boosted Potter's salary from $186,600 to $258,840 for fiscal 2007, but with deferred compensation and performance incentive pay his compensation came to more than $850,000 that year and remained the same for fiscal 2008. The pay increases for Potter and other top postal executives are a result of a 2006 Postal Reorganization Act approved by Congress that allowed increases in salary for top officers. Board of Governors Chairman Carolyn Gallagher and Postal Regulatory Commission Chairman Dan Blair are also scheduled to appear before the subcommittee on Wednesday to explain the pay structure.

Potter told the Senate Homeland Security and Governmental Affairs Federal Financial Management Subcommittee in January the financial situation of the mail service is "grave." To save money, he is proposing cutting back six-day mail delivery to five days -- which would require congressional approval to delete a rider on appropriations bills requiring six-day mail service. The price of a first-class stamp is due to go from 42 to 44 cents in May and commercial mail rates are also scheduled to rise. To help reduce the deficit Potter wants Congress to end a structural requirement that it pre-fund health benefits of future retirees that he says will save $2 billion in fiscal 2009. Although Potter and other top executives have received big pay boosts, he told the Senate panel he has frozen all their pay to 2008 levels.