By Emily Stephenson
WASHINGTON (Reuters) - The Senate voted on Tuesday to begin debating legislation that would allow the cash-strapped Postal Service to end Saturday mail delivery after two years.
The bill from Republicans Susan Collins and Scott Brown, Democrat Thomas Carper and Independent Joe Lieberman would also allow the mail agency to use surplus funds in a federal retirement account to offer retirement incentives and to explore developing its own health care plan.
The Postal Service has struggled to staunch billions in annual losses as consumers increasingly send email and pay bills online.
The agency, which relies on sales of stamps and other products rather than taxpayer dollars, has laid out its own cost-cutting measures but says it needs congressional action for many of its more drastic proposals.
Lawmakers have spent months crafting an overhaul but have fought over whether to allow USPS to close post offices, what to do about a massive annual payment for future retiree health benefits and other issues.
"There are many different views on how to save the Postal Service, but there can be no doubt that the Postal Service is in crisis," Collins said before the vote.
"The Postal Service is vital to our economy. It is the linchpin of a trillion-dollar mailing industry."
The bill's co-authors agreed to include language in a manager's amendment temporarily blocking the Postal Service from ending overnight mail delivery, part of a USPS cost-cutting plan to close more than 200 mail processing facilities.
The amendment would require postal officials to maintain overnight mail, and keep open enough processing centers to sustain next-day delivery, for three years.
The bill also requires the Postal Service to consider community factors, such as Internet access, before closing a post office. The agency has proposed shuttering thousands of post offices, many in rural areas with no broadband access.
Postal officials previously agreed to postpone any closures until mid-May. It's unclear whether closures would go ahead while legislation is pending.
Lobbyists and a Senate aide said they expect lawmakers to offer several amendments on the bill. Rural-state senators have called for restricting the agency's ability to close post offices and other facilities.
A spokeswoman for Montana Democrat Jon Tester said he plans to offer an amendment capping compensation for postal executives and is working on additional amendments.
If the Senate votes to approve the bill after a 30-hour debate, it still could face a tough road and more changes in the House of Representatives. The leading House bill, which has not been considered by the full House, takes a different approach and would create oversight groups to cut costs and close post offices.
"I view this bill, a bipartisan compromise, as a middle way between two different approaches to the fiscal crisis at the Postal Service," Lieberman said of the Senate bill.
"One way is to do nothing. The other way is to impose what I would call immediate over-reaction."
LETTER CARRIERS' PLAN
Postal unions have been extremely critical of the Senate bill and of many USPS proposals, with one group sponsoring rallies around the country last week to oppose the legislation.
The National Association of Letter Carriers on Tuesday released its own overhaul plan, proposing USPS raise postage and parcel rates and expand the range of services offered.
"S. 1789 is a well-intentioned proposal that may allow the Postal Service to survive for a few more years but it does not address its fundamental challenges," a white paper by advisory firm Lazard Group, which the union hired to help craft the plan, said of the Senate bill.
(Read the plan here: http://r.reuters.com/nut67s)
A Postal Service spokesman said the agency is reviewing the NALC report but that the Postal Service's plan to achieve profitability "was developed as the result of an exhaustive process of evaluating every appropriate option to reduce costs and retain or grow revenue."
The Postal Service lost more than $3 billion during the last three months of 2011, a tenfold jump from the same period a year before, much of it due to the retiree health payment.
(Editing by Cynthia Osterman)