GAO calls for more outsourcing, part-time employees at Postal Service

By Emily Long

April 12, 2010

The U.S. Postal Service's business model isn't viable going forward, but the agency has several options to reduce its workforce costs, according to an audit released on Monday.

The Government Accountability Office report found that aggressive action to increase workforce flexibility could improve the Postal Service's financial outlook. The agency is projecting a loss of $238 billion by 2020 unless it overhauls operations.

USPS saved $10 billion from fiscal 2007 through 2009, primarily through a workforce reduction of more than 84,000 full- and part-time employees. According to GAO, the Postal Service has several options to trim its workforce even further. Five percent of employees are eligible and expected to retire each year through 2020, and attrition could accelerate if the agency is able to fund retirement incentives. USPS also could outsource certain operations if they are cost-effective. Finally, the agency could implement layoffs, possibly as part of a shift from six- to five-day mail delivery.

In March, the Postal Service filed a proposal with the Postal Regulatory Commission to eliminate Saturday delivery. The plan would cut the equivalent of 40,000 full-time jobs, a move agency officials say would save $2.7 billion annually.

The GAO audit outlined how the Postal Service can create a more flexible workforce, through increasing the percentage of part-time workers and allowing personnel to work in different job assignments. Currently, the agency's ability to reduce or change its workforce is limited by collective bargaining agreements with its four employee unions. These contracts, which cover more than 550,000 employees or 85 percent of the workforce, limit the agency's capacity to hire part-time and contract workers and outsource city delivery routes. And nearly 500,000 employees are protected from layoffs.

Another problem, according to GAO: During collective bargaining negotiations, participants are not required to take into consideration the Postal Service's financial situation. Proposed 2009 Senate legislation, however, included such a provision, and GAO is recommending that any binding arbitration take those concerns into account. The Postal Service will begin negotiations with its unions in the next two years.

According to the report, wages amount to nearly half of Postal Service costs and will add $1 billion in expenses in fiscal 2010. About 78 percent of employees are full-time and receive salary increases and cost-of-living adjustments at predetermined levels. To address this requirement, GAO recommended a two-tier pay system that would pay new hires lower wages but keep current employees under the existing pay structure.

USPS also is required to prefund retiree health benefits at more than $5 billion annually, the only federal agency with that obligation. A pay-as-you-go system would increase cash flow by $5.6 billion each year through 2016, according to agency estimates. The GAO report suggested pay-as-you-go as one option for financial relief. The agency's total obligations and liabilities, including workers' compensation and retiree health benefits, amounted to 130 percent of revenues in fiscal 2009.

Lawmakers disagreed with GAO's assessment that certain workforce changes could improve the Postal Service's financial outlook.

"The new GAO report on the Postal Service's choices paints a bleak picture," said Rep. Jose Serrano, D-N.Y., a member of the appropriations subcommittee responsible for the Postal Service. "Like everyone, I know that tough choices lay ahead for the USPS, but I believe that solutions can be found that leave the USPS in a viable situation for future years. I believe that moving toward outsourcing or five-day delivery leaves the USPS in worse shape for the future, and I urge that these options be set aside."

GAO addressed the report to members of four committees: Senate Appropriations, Senate Homeland Security and Governmental Affairs, House Appropriations, and House Oversight and Government Reform.

By Emily Long

April 12, 2010