POSTED: Wednesday, February 6, 2013 - 1:45pm
UPDATED: Wednesday, February 6, 2013 - 1:49pm
WASHINGTON (CNNMoney) — The U.S. Postal Service plans to stop delivering and collecting letters and other first-class mail on Saturdays beginning August 5, although packages will continue to be delivered.
It will mark the end of an era for the agency, which started Saturday delivery in 1863.
Tired of waiting for Congress to help, the Postal Service unveiled its plan Wednesday, which is expected to save $2 billion a year. It's a drop in the bucket compared to the $16 billion loss the organization reported for 2012.
"It's a responsible decision. It makes common sense," said Patrick Donahoe, postmaster general and CEO of the postal service.
The move will impact 22,500 jobs, Donahoe said, which he plans to achieve without resorting to layoffs. Rather, he would offer buy outs, eliminate overtime, and rely more on the part-time workforce. There will be no changes to post offices that are currently open on Saturday and mail will continue to be delivered to PO boxes.
The key culprit for the Postal Service's woes has been a 2006 congressional mandate, under which it has to pre-fund healthcare benefits for future retirees. The USPS has been borrowing billions of dollars from taxpayers to make up for the shortfalls.
At the same time, technological advances have led to a decline in first-class mail, which most consumers use to pay bills and stay in touch.
The situation turned particularly dire last year -- the agency twice defaulted on payments totaling $11 billion, and it exhausted a $15 billion line of credit from the U.S. Treasury.
In the past year, the service has cut hours at thousands of post offices -- some are open for only two hours a day. It has also merged some of its plants, which led to a 28,000 drop in its workforce through retirements and departures by employees who couldn't relocate or take up other postal jobs.
Some 80 percent of the expected savings will come from eliminating overtime, Donahoe said. The rest of the savings will come from cutting part-time hours and retirements.
There are questions over whether the Postal Service has the authority to quit delivering letters on Saturdays. Previously, the agency had said it needs Congress to change current law to do so.
On Wednesday, however, Donahoe said he believes the U.S. Postal Service has the authority to cut Saturday service. "We think we're on good footing with this," he said.
Saturday mail deliveries have been cut before. They were temporarily stopped in some cities in 1947, and again nationwide in 1957, both times because of a budget issues. Public protests prompted President Dwight D. Eisenhower in 1957 to sign a bill fully funding the Post Office department within three days leading to a resumption of Saturday services.
Postal officials have been calling on Congress to pass legislation to ease their fiscal pain.
The U.S. Postal Service is, by law, an "independent establishment" of the executive branch. The agency doesn't normally use tax dollars for operations, except for its $15 billion loan from Treasury. In 2005, the Postal Service had no debt, officials said.
If Congress doesn't act soon, the Postal Service could come dangerously close to running out of cash next month. A report last year projected that by mid-March, the agency would have about $1 billion in cash -- barely enough to keep the agency running for four days.
That prompted Donahoe to announce he was going to accelerate cost-cutting measures.
In the meantime, Rep. Darrell Issa, a California Republican, and Sen. Tom Carper, a Delaware Democrat, have been assuring the agency that they are working together to come up with a resolution. But neither have shared specific details of when, or how, they plan to achieve that goal. Congressional aides say they're hopeful it'll get passed soon.
The unions strongly oppose the postal service's decision and have been fighting such a move for years. The American Postal Service Workers Union said the decision only deepens the financial crisis.
"USPS executives cannot save the Postal Service by tearing it apart," the union said in a statement. "The USPS has already begun slashing mail service by closing 13,000 post offices or drastically reducing hours of operation, shutting hundreds of mail processing facilities, and downgrading standards for mail delivery to America's homes and businesses. The effects are being felt in cities and towns across the country."