WASHINGTON (USA TODAY/AP) -- The Postal Service will end Saturday delivery for first class mail starting Aug. 1, Postmaster General Patrick Donahue said Wednesday.
Package delivery, which has seen growth in recent years as online purchasing booms, will continue under the plan, Donahue said. Donahue said the plan will save $2 billion annually.
"It's an important part of our strategy to return to financial stability," he said.
The volume of First Class mail has declined sharply since 2008 as more people pay their bills on line, Donahoe said. Last year the postal service had a $15.9 billion loss and defaulted on its pension plan contributions. USPS has also reached its borrowing limit, he said.
"It's put a tremendous financial pressure on the postal service," he said.
The postal service previously had cut costs be eliminating 193,000 jobs and consolidating 200 mail processing centers.
Under the new schedule, post office hours will not change and post office boxes will continue to receive Saturday delivery, Donahoe said. The postal service expects growth in package delivery as e-commerce expands, he said.
"America's mailing habits are changing," Donahoe said. "This makes common sense."
The service cutback will enable the postal service to cut more jobs, which Donahoe says can be done through retirements, buyouts and routine attrition.
The six-month lead time will allow businesses to adjust their production and delivery schedules, he said
Donahoe said surveys indicate the public supports five-day delivery. The plan should have little impact on speed of delivery except for items that would have been delivered on Saturday, Donahue said.
Last year, Under pressure from Congress and local communities, the cash-strapped agency dropped plans to close thousands of post offices across the nation, instead deciding to trim operations at 13,000 offices.
Saturday has the week's lowest daily volume and and more than a third of U.S. businesses are closed Saturday, USPS reports. Most businesses and households surveyed in a national Gallup Poll indicated Saturday would be the least disruptive day to eliminate mail delivery.
The American Postal Workers Union has previously decried the plan.
"People don't want to find out who won the Friday night football game on Monday they want to find out on Saturday," said Sally Davidow, the unions communications director.
USPS has faced billion-dollar deficits since 2007 attributed to a combination of the bad economy, the Internet and mandatory pre-funding of retiree health benefits.
USPS doesn't use a dollar of tax money.
The agency in November reported an annual loss of a record $15.9 billion for the last budget year. The financial losses for the year, which ended Sept. 30, were more than triple the $5.1 billion loss in the previous year. Last year the agency was forced to default on billions in retiree health benefit prepayments to avert bankruptcy.
The agency's biggest problem - and the majority of the red ink in 2012 - was not due to reduced mail flow but rather to mounting mandatory costs for future retiree health benefits, which made up $11.1 billion of the losses. Without that and other related labor expenses, the mail agency sustained an operating loss of $2.4 billion, lower than the previous year.
The health payments are a requirement imposed by Congress in 2006 that the post office set aside $55 billion in an account to cover future medical costs for retirees. The idea was to put $5.5 billion a year into the account for 10 years. That's $5.5 billion the post office doesn't have.
No other government agency is required to make such a payment for future medical benefits. Postal authorities wanted Congress to address the issue last year, but lawmakers finished their session without getting it done. So officials are moving ahead to accelerate their own plan for cost-cutting.
The Postal Service is in the midst of a major restructuring throughout its retail, delivery and mail processing operations. Since 2006, it has cut annual costs by about $15 billion, reduced the size of its career workforce by 193,000 or by 28 percent, and has consolidated more than 200 mail processing locations, officials say.
They say that while the change in the delivery schedule announced Wednesday is one of the actions needed to restore the financial health of the service, they still urgently need lawmakers to act. Officials say they continue to press for legislation that will give them greater flexibility to control costs and make new revenues.