Postal Service backs down on cutting Saturday mail

Updated at 4:21 p.m. ET

WASHINGTON The financially beleaguered Postal Service backpedaled on its plan to end Saturday mail delivery, conceding Wednesday that its gamble to compel congressional approval had failed.

With limited options for saving money, the governing board said the agency should reopen negotiations with unions to lower labor costs and consider raising mail prices.

Yet the board also said it's not possible for the Postal Service to meet its goals for reduced spending without altering the delivery schedule. Delaying "responsible changes," the board said, only makes it more likely that the Postal Service "may become a burden" to taxpayers.

Congressional reaction was mixed, mirroring differences that have stalled a needed postal overhaul for some time. Some lawmakers had urged the agency to forge ahead with its plan, while others had said it lacked the legal authority to do so.

The Postal Service said in February that it planned to switch to five-day-a-week deliveries beginning in August for everything except packages as a way to hold down losses.

That announcement was risky. The agency was asking Congress to drop from spending legislation the longtime ban on five-day-only delivery.

Congress did not do that when it passed a spending measure last month.

"By including restrictive language ... Congress has prohibited implementation of a new national delivery schedule for mail and package," according to the board.

Disappointed but not wanting to disregard the law, the board directed the Postal Service to delay putting in place the new delivery schedule until Congress passes legislation that gives the agency "the authority to implement a financially appropriate and responsible delivery schedule."

The board made the decision in a closed meeting Tuesday.

"This is good news for rural communities, businesses, seniors, veterans and others who depend on consistent and timely delivery of the mail," said Sen. Bernie Sanders, I-Vt.

But GOP Rep. Darrell Issa of California, chairman of the House Oversight and Government Reform Committee, bemoaned the decision to back away from a "delivery schedule that polling indicates the American people understand and support."

Postal officials said that to restore the service to long-term financial stability, the agency must have the flexibility to reduce costs and come up with new revenues.

"It is not possible for the Postal Service to meet significant cost reduction goals without changing its delivery schedule — any rational analysis of our current financial condition and business options leads to this conclusion," the board statement said.

An independent agency, the service gets no tax dollars for its day-to-day operations but is subject to congressional control. It lost nearly $16 billion last year — $11.1 billion of that due to a 2006 law Congress passed forcing it to pay into future retiree health benefits, something no other agency does.

"Given these extreme circumstances and the worsening financial condition of the Postal Service, the board has directed management to seek a reopening of negotiations with the postal unions and consultations with management associations to lower total workforce costs, and to take administrative actions necessary to reduce costs," according to the statement. It offered no giving further details.

It said the board also asked management to look at further options to raise revenues, including a rate increase.

Fredric Rolando, president of the National Association of Letter Carriers, scoffed at the idea of renegotiating labor contracts, saying that suggestion "is yet another sign that the Postal Service needs new executive leadership."

He also contended that ending Saturday delivery would cut mail volume and revenue, and send the Postal Service "on a death spiral."

The Postal Service already is executing a major restructuring throughout its retail, delivery and mail processing operations. Since 2006, it has reduced annual costs by approximately $15 billion, cut its workforce by 193,000 or 28 percent, and consolidated more than 200 mail processing locations.

The idea to cut Saturday mail but keep six-day package delivery — a plan Postmaster General Patrick Donahoe estimated could save $2 billion — played up the agency's strong point.

Its package service is growing as more people buy things online, while the volume of letters sent has slumped with increased use of email and other internet services.

Over the past several years, the Postal Service also has advocated shifting to a five-day delivery schedule for mail and packages. It repeatedly but unsuccessfully appealed to Congress to approve the move and to free it from the advance health payments.

The Senate last year passed a bill that would have stopped the Postal Service from eliminating Saturday service for at least two years and required it to try two years of aggressive cost cutting instead. The House didn't pass a bill.

In dire straits, the agency acted on its own on the Saturday issue.

Issa said the reversal "significantly undercuts the credibility of postal officials who have told Congress that they were prepared defy political pressure and make difficult but necessary cuts."

Sen. Tom Carper, D-Del., a leader on postal issues, said he hoped Congress would pass new legislation to address the agency's problems.

President Obama's budget proposal Wednesday includes the same provision as last year on the Post Service — a plan to let the agency realign its business plan to better compete in the changing marketplace.

The spending blueprint from the budget year that begins Oct. 1 includes a proposal for short-term financial relief and long-term changes at the agency that, it says, will result in more than $20 billion in savings over 10 years.