NEW YORK ( — Snail mail might soon get even slower.

The U.S. Postal Service plans to propose Tuesday an adjusted mail service schedule, which will likely cut Saturday delivery. The agency will also suggest closing some branches and expanding its use of self-service kiosks in grocery stores and other popular retail spots, as part of its effort to work its way out of a mountain of debt.

USPS posted a $3.8 billion loss in its 2009 fiscal year, the latest in a multiyear string of whopping losses. Mail volume was down 12.7% for the year, a trend the agency expects to continue over the next decade as more consumers opt for online bill payments and message delivery.

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The Post Office was $10 billion in debt as of Sept. 30 — not far off from its $15 billion debt limit, which the agency expects to hit in its 2011 fiscal year.

The challenges hurting USPS’s bottom line are reflective of a “macro change in society,” Postmaster General Jack Potter said at a press conference Monday previewing the proposed changes. “All posts around the world are challenged, just as we are, by the diversion of hard copy to electronic medium.”

The Post Office, an independent government agency, does not receive taxpayer dollars and is funded entirely by its own revenue. However, the Postal Reorganization Act of 1970 constrains the agency’s operations. It prohibits USPS from closing small branches based soled on economic factors, and prevents the agency from expanding its services beyond postal delivery.

Post offices in some countries, including Italy and Japan, have boosted their sales by offering ancillary services, like banking. But unless Congress steps in, USPS cannot expand beyond the postal-mail realm.

USPS has already begun taking the axe to its budget. The agency made $6 billion in cuts last year, reducing its workforce by about 40,000 employees and chopping overtime hours, transportation costs and other expenses. Congress passed legislation allowing the organization to cut retiree health benefit payments by $4 billion.

Despite those measures, the agency still expects a net loss of $7.8 billion in fiscal 2010.

USPS employs about 600,000 workers, about half of whom will be eligible to retire in the next 10 years. Potter said the agency has historically overpaid into its pension fund, and would reap significant savings if it stopped prefunding its retiree health benefits.

The Post Office plans to announce the specifics of its proposed new business model on Tuesday. Its plans will then go before Congress for review. A significant postal price hike is also under consideration, although the price most consumers care about — the rate for a first-class stamp — is locked in at 44 cents for 2010.

“At the end of the day, I’m convinced that if we make the changes that are necessary, we can continue to provide universal service for America for decades to come,” Potter said. “We can turn back from the red to the black, but there are some very significant changes that are going to have to be made.”

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