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 would 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 on Wednesday unveiled its plan, which is expected to save $2 billion a year. It's a drop in the bucket, compared to the $16 billion loss the organization 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 would impact 22,500 jobs, Donahoe said, which he plans to achieve without resorting to layoffs. Rather, he would eliminate overtime, offer buy outs 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.
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.
At the same time, technological advances have led to a decline in first-class mail, which most consumers use to pay bills and stay in touch.
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, it 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.
Some 80% of the expected savings will come from eliminating overtime, Donahoe said. The rest of the savings will come from cutting part-time hours and retirements.
However, there are questions over whether the Postal Service has the authority to quit delivering letters on Saturdays. Previously, the agency had said it needs Congress to change current law to do so.
On Wednesday, however, Donahoe said he believes the U.S. Postal Service has the authority to cut Saturday service. "We think we're on good footing with this," he said.
Congress could stop the postal service from taking such a step and unions also could file a lawsuit to prevent it from happening, but neither group has suggested such action yet.
"I am disappointed by the Postal Service's announcement today regarding its plans to transition to a five-day mail delivery schedule in August," said Sen. Tom Carper, a Delaware Democrat, who has been working on a plan to save the postal service with Rep. Darrell Issa, a California Republican. Issa said he supports the move.
Saturday mail deliveries have been cut before. They were temporarily stopped in some cities in 1947, and again nationwide in 1957, both times because of a budget issues. Public protests prompted President Dwight D. Eisenhower in 1957 to sign a bill fully funding the Post Office department within three days leading to a resumption of Saturday services.
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.
The unions strongly oppose the postal service's decision and have been fighting such a move for years. The National Association of Letter Carriers' President Fredric Rolando called for the removal of Donahoe as postmaster general for such a "reckless plan."
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.
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