No mail on Saturdays: The first step

NEW YORK (CNNMoney.com) -- Saturday mail could be one step closer to cancellation when the United States Postal Service submits an official proposal to a government regulatory board on Tuesday to eliminate six-day delivery.

A new five-day delivery schedule could save the cash-strapped Post Office $3 billion annually, the agency said. Earlier this month, USPS said it plans to incur about $238 billion in losses in the next 10 years if it doesn't revamp its outdated business model.

"Every day, every month, every year this gets delayed, we end up further in the hole," said USPS Deputy Postmaster Patrick Donahoe at a Monday briefing in New York.

Donahoe said a service cut would result in the loss of about 40,000 full-time jobs. About 600,000 workers currently work for the Post Office.

The Post Office hopes to drop Saturday mail in its next fiscal year, which starts Oct. 1. But first, it has to jump through a series of regulatory hoops that could take much longer.

Although it's an independent government agency and does not receive taxpayer dollars, USPS is overseen by the Postal Regulatory Commission, a separate government agency with five commissioners appointed by the president.

Ruth Goldway, chairwoman of the commission, said that once the board receives the proposal, it will open the issue to public comments and hold hearings throughout the country.

Those reviews take time -- usually between six and nine months -- and it won't be an easy road for the Post Office to make the change, she added.

Along the way, the Post Office will face questions about job cuts and opposition from unions. Finally, Congress would have to approve the 5-day schedule, since the current schedule is mandated by federal law.

Postmaster General John Potter warned of possible service cuts in testimony before a Senate subcommitee last year. Just weeks later, Rep. Sam Graves, R-Mo., proposed a bill that urges USPS to continue its 6-day delivery schedule. The bill garnered the support of 49 co-sponsors and was referred to the House Committee on Oversight and Government Reform in February 2009, but hasn't moved since.

Earlier this month, Sen. Susan Collins, R-Maine, expressed skepticism over the proposal to cut Saturday mail. Collins is the ranking member on the Senate Homeland Security and Governmental Affairs committee, which has oversight of the U.S. Postal Service.

Opposition from the four major postal unions will also pose challenges for USPS. In a release earlier this month, the American Postal Workers Union warned that 5-day delivery would begin a "death spiral" for the agency.

"In addition to thousands of jobs lost, there will undoubtedly be an erosion of confidence in the Postal Service's ability to provide the services the public relies on," said Myke Reid, the union's legislative and political director.

In an effort to shrink its massive deficits, USPS has slashed more than 100,000 jobs in the last five years. Earlier this month, the agency said it expects another 30,000 employees to retire this year.

The proposed 5-day delivery schedule is only one part of a larger plan announced by USPS on March 2.

The plan also calls for restructuring USPS's timeline for prepaying retiree health benefits -- a cost-saving measure which would also require congressional approval. A federal law passed in 2006 requires the Post Office to pay $5.5 billion into its prepaid retiree health benefits each year.

Changing to a "pay-as-you-go" system instead could save the agency as much as $3 billion each year, said Donahoe.

USPS posted a $3.8 billion loss in its 2009 fiscal year and 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 alternatives to "snail mail."