Washington — The Postmaster General told a congressional subcommittee Wednesday that despite taking aggressive steps to reduce costs, the U.S. Postal Service will not survive as a self-financing entity without significant changes to current law.

Testifying before the Subcommittee on Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy on Oversight and Government Reform, Postmaster General Patrick R. Donahoe pointed out that during the last two fiscal years, the Postal Service has reduced costs by some $9 billion and the plan is to take out another $2 billion in 2011. But the Postal Service still lost a “staggering” $8.5 billion in 2010 and is projecting to be in the red this year by $6.4 billion.

Conceding that some of these losses can be attributed to Americans’ changing modes of communication, Donahoe said, but mainly “our losses are the result of an inflexible business model due to the laws that govern the Postal Service.”

He cited specifically a statutory requirement that since 2007 has required the Postal Service to prefund retiree health benefits (RHB) in amounts of approximately $5.5 billion per year. Noting that no other entity, public or private, is burdened with this responsibility, Donahoe said that the Postal Service showed a positive net income in each of the four years before RHB was imposed. But, in each of the four years since, “we have seen billion dollar losses.”

Donahoe added, “Even during two of the worst years of the recession, 2007 and 2008, had it not been for the prefunding requirement, the Postal Service would have realized a profit of $3.3 and $2.8 billion respectively. The effect of RHB prefunding is profound.”

In addition to asking for corrective legislation on the RHB prefunding, Donahoe also asked the subcommittee to look favorably on the agency’s proposal to transition to a five-day delivery schedule and to provide the Postal Service with more latitude on the products and services it can offer its customers.

He also told the subcommittee that he is in the process of aligning every aspect of the Postal Service around four key strategies: strengthening the business-to-consumer channel by innovating to enhance the value of mail; improving the customer experience by making every transaction a positive one; competing for the package business; and becoming leaner, faster and smarter by simplifying rules and streamlining its network.

The path forward for the Postal Service will require that all stakeholders embrace fundamental change “and that our employees, the labor unions and management associations, mailing industry customers and business partners (all) play a constructive role shaping our future,” Donahoe said.