WASHINGTON (CNNMoney) — The U.S. Postal Service plans to stop delivering and collecting letters and other first-class mail on Saturdays beginning Aug. 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 cost-saving plan Wednesday, which is expected to save $2 billion a year. It’s a drop in the bucket compared to a loss of $16 billion the Postal Service 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.
Technological advances have led to a decline in first-class mail, which most consumers use to stay in touch and pay bills. But 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.
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.
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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 U.S. Postmaster General Patrick Donahoe to announce he was going to his board 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 Issa and Carper have not 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 this move and have been fighting it 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.”
— CNN’s Dana Bash contributed to this article.