Postal Service defends new labor contract

Agreement offers best cost savings possible without legislative change, officials tell Congress.

A new union contract that would save the U.S. Postal Service $3.8 billion over four years might not be enough to return the agency to profitability, officials and lawmakers agreed on Tuesday.

During a House Oversight and Government Reform Committee hearing, postal officials told lawmakers that a tentative contract with the American Postal Workers Union negotiated last month includes the most responsible provisions allowed under current law. The deal provides savings but does not go far enough to address all the agency's financial concerns.

According to Postmaster General Patrick Donahoe, the agreement provides both short-term cost reduction and long-term structural change needed to set the Postal Service on the path to fiscal sustainability. If ratified, the contract would freeze pay for two years, reduce USPS' contribution to employee health benefits and create a new category of noncareer flexible jobs to match the agency's changing workforce needs. It also would create a two-tier pay schedule that would start new employees at a salary 10.2 percent lower than the existing system.

Committee Chairman Rep. Darrell Issa, R-Calif., expressed concern that the contract "falls short" of allowing the Postal Service to break even and meet all of its obligations.

"If you want a better deal, you have to change the law,"said James Miller, member of the USPS Board of Governors, describing the current contract as "the best deal we could get without going to arbitration."

The contract won't drastically change the Postal Service's spending on its workforce. Labor costs account for nearly 80 percent of USPS' expenses, and the agency pays an average of more than $80,000 per employee annually in total compensation. Several lawmakers questioned whether postal workers receive pay in excess of their private sector counterparts.

Under the new agreement, labor costs will hover around 80 percent, though the agency aims to shrink its total spending from $73 billion to $60 billion going forward, Donahoe told reporters on Monday.

Dennis Ross, R-Fla., chairman of the subcommittee that oversees postal issues, questioned whether the pay-for-performance system currently in place for 65,000 managers, including postmasters, supervisors and administrative employees, could apply to workers covered by collective bargaining agreements. According to Donahoe, USPS has discussed the possibility with APWU, but no additional action has been taken on the issue.

Witnesses said the new contract is a step in the right direction, but noted legislative change still is needed to address excess contributions to the agency's pension funds and adjust its obligation to prefund retiree health benefits at $5.5 billion annually.

Rep. Stephen Lynch, D-Mass., on Monday introduced legislation that would reduce the agency's burden to fund its Civil Service Retirement System account and reverse years of overpayment. The bill would require OPM to recalculate the Postal Service's CSRS obligations and transfer any surplus from both CSRS and Federal Employees Retirement System back to the agency to pay for retiree health benefits and workers' compensation liabilities.

"What we need is your help on these big issues that are beyond our control," said Donahoe. "We have excellent relations with our employees unions and management associations … take care of those things and you'll never see us again."