The Postal Service submits a Request for an Advisory Opinion on POStPlan: How changing the rules changed everything
May 25, 2012
Today the Postal Service asked the Postal Regulatory Commission for an Advisory Opinion on POStPlan, the initiative to review about 13,000 post offices for discontinuance or reduced hours. The Request is here.
Along with the Request is testimony from Jeffrey C. Day, Manager, Retail Operations, in the Office of Delivery and Post Office Operations at the Postal Service. Day’s testimony is here.
The Postal Service has also submitted several Library References: Average Post Office Walk-In Revenue; Earned Hours Data – SOV/CVS; Summary Spreadsheet; the new PO-101 Handbook; and Market Research Materials.
The PRC docket — N2012-2 — has a lot of material about the plan, but aside from the data in the Library References, much of it has already been made public by the Postal Service and the postmasters’ associations, NAPUS and the League of Postmasters. Here's a summary of what's in the Request and testimony, plus a long story about how the Postal Service laid the groundwork for POStPlan — starting back in March 2011.
The basic outline of the plan is as follows:
Approximately 17,728 post offices — more than half the country’s 32,000 post offices — will be reviewed under the plan.
Approximately 4,561 will be upgraded (to EAS Level 18 or above). About 3,907 of these will be designated as an Administrative Post Office (APO).
The remaining 13,167 post offices will either proceed to a full discontinuance study or have their hours cut. That decision will be based largely on customer input, so the Postal Service expects that in most cases, the community will prefer to see the hours reduced rather than having the post office close completely.
STPO articles about the plan:
The plan will convert these 13,000 independent post offices into a subordinate class of post office called a RMPO — a Remotely Managed Post Office. A cluster of RMPOs will then be placed under the administrative oversight of one of the APOs.
If a post office is 25 or more driving miles from the nearest post office, it may be designated as a Part Time Post Office (PTPO). It would be staffed for six hours (not two or four), and it would report to a district office, not an APO.
The hours of operation at the RMPOs will be aligned with how much revenue the post office brings in and its proximity to another office. Most offices will have the hours reduced to four, but for some it will be two and others, six. Once the hours are set, they can be adjusted up or down, depending on how the annual financial review of the office goes.
The RMPO will be run not by a full-time postmaster but by part-time workers, managed by a postmaster at an APO in another town.
Implementation of the plan will begin in June. The Postal Service will begin by upgrading the 4,500 post offices to APOs and level 18s.
During the summer, the Postal Service will work with the PRC as it conducts the process for its Advisory Opinion. The Postal Service is obliged not to implement the plan for 90 days, but after that, it can go forward, even if the Advisory Opinion has not been completed.
Therefore, the Postal Service plans in September to begin notifying communities on the POStPlan list, sending out surveys, and scheduling community meetings. In October, the Postal Service will begin classifying post offices as RMPOs and PTPOs. It will begin with post offices that have a postmaster vacancy.
It's not clear how long the entire implementation process will take, but postmasters can remain in their current positions for the next two years, so it will take at least that long. Presumably the annual reviews and realignment of hours with revenues would go on for years and years.
Rural post offices granted a reprieve — kind of
POStPlan has been welcomed as a “reprieve” for rural post offices, but it’s just that. The death sentence hasn’t been commuted — it's just been postponed.
Yes, there were some 3,600 post offices on the Retail Access Optimization Initiative that were anxiously awaiting the verdict, and another 200 or more had already been issued a Final Determination notice. Those offices — and many more down the road — might have been closed if the Postal Service hadn’t come up with POStPlan. It's possible that postal reform legislation would have prevented all those closings. Now lawmakers are off the hook.
But POStPlan is not going to stop post offices from closing. Staffing 13,000 post offices with part-time workers earning $12 an hour will prove an impossible task. The Postal Service will have many opportunities for declaring an “emergency suspension” because there’s no one available to work in the office.
The plan also says that every year, the post office’s revenues will be reviewed, and the hours of the post office will be adjusted accordingly. Revenues are sure to decline with the office only open part of the day and no full-time postmaster around, so expect the hours to be cut further down the road.
When the hours have been reduced to two (nearly 2,000 will be cut to two hours from the get-go) and people have adjusted to the alternatives, it will be a short step to closing the post office completely. The Request for an Advisory Opinion makes it clear that post offices will continue to be discontinued using the new “improved” discontinuance process implemented last year.
[Press release, 5/24/2012]
Ten arrested in Occupy action at University Station post office
Portland, OR – Police arrested ten members of labor unions, faith groups, neighborhood organizations, and Occupy Portland who refused to leave the University Station post office at closing time this evening. Unfurling two ten foot banners, reading “Occupy the Post Office” and “No Closures! No Cuts!” the protesters blocked the closure of the retail window while a rally of over a hundred supporters chanted outside. Earlier a line of demonstrators had marched through the office, delivering postcards addressed to the Postmaster General.
“The Postmaster General’s plan to close processing plants, delay mail delivery, and cut hours in the nation’s post offices will not fix the postal service’s financial crisis,” said Jamie Partridge, an arrestee from Occupy Portland. “Congress manufactured the crisis and Congress or the President will fix it. If the PMG can’t wait, he should step down and allow in someone who will protect the postal service.”
"People from across Portland are coming out to show that we value our public services and we will not allow those services to be sabatoged by corporate interests. Today we defend the Post Offices, but we know that these public services - our Post Offices, our libraries, our parks, and even our schools are all the target of corporate interests profit-driven machines, says Laurie King, organizer with Occupy the Post Office. "We are coming out to say that all communities deserve access to the mail service, and we will not have it handed over to the highest bidder."
The Postmaster General is poised to close half the nation's mail processing plants, including Portland's Main Office, while reducing hours from 25% to 75% at 13,900 post offices. Donahoe is also pushing for an end to door-to-door and Saturday delivery. Organizers say that the financial problems that USPS is experiencing is due to a funding mandate passed by Congress in 2006 that requires the USPS pre-fund retiree health benefits 75 years in advance. This law was a product of ALEC and its Congressional members who focus on shrinking and privatizing public services. Community members are pressuring Congress to pass bills HR 3591 and S 1853 which will repeal the pre-funding mandate and protect the Postal Service.
“USPS is financially sound, the Congressional mandate to pre-pay benefits for 75 years is shackling the Post Office. This is clearly a part of Wall Street's plan to privatize and destroy an honored institution of our community,” says Lataya Dailey, an organizer with Occupy St Johns. “The Postmaster is complicit in this plan to gut and cut our community Post Offices. We demand he resign immediately.”
This action was part of an on-going effort by a community coalition to support the Postal Service by Occupy St Johns, Occupy Portland, the Rural Organizing Project and Jobs with Justice.
Occupy St Johns and Occupy Portland are part of the international Occupy Movement fighting against the inequality of wealth and power in our existing economic and political systems. Jobs with Justice is coalition of labor organizations and community groups dedicated to protecting the rights of working people and supporting community struggles to build a more just society. JWJ has been an active supporter of public infrastructure like the Post Office since its founding in 1992.
May 22, 2012
In April of this year, as the moratorium on post office closings was coming to an end and thousands of communities were anxiously awaiting the verdict on their post office, the Postmaster General took some time out of his busy schedule to fly to Montana, just to talk with a few regular folks about the closings.
The motive for the trip seemed mysterious at the time. According to Newsweek, Donahoe went to Montana “to take his case for rural post office closures straight to the people it will hurt most, telling Montanans that up to 3,600 small post offices around the country need to be shuttered as part of cost-cutting moves.” That sounded more like a press release than an explanation.
News reports said the trip was “spurred” by Montana senator Max Baucus, who wanted Mr. Donahoe to visit his state and answer questions from residents personally. But did the Senator actually believe that a face-to-face meeting might turn the Postmaster General around and make him decide not to close those post offices after all? That seemed unlikely.
The Postal Service had put too much effort into its plan to close post offices for that to happen. It had worked through complex legal hurdles to change the discontinuance procedures, conducted over three thousand community meetings, participated in a lengthy Advisory Opinion process with the Postal Regulatory Commission, and produced numerous reports, press releases, and PowerPoint presentations explaining why the closures were necessary. A trip to Montana was not going to change the Postmaster General’s mind.
The visit had all the makings of a bad PR event. One could imagine the Postmaster General up on stage and everyone in the audience complaining, pleading, and maybe getting a little raucous too. Wasn’t the Postal Service worried that TV cameras would capture the Postmaster General getting booed by an angry crowd of rural Americans?
Last week, we learned why the Postmaster General went to Montana. It wasn’t to make his case for closing post offices — he’d already decided not to.
Go west, young PMG
The Postmaster General arrived in Helena, Montana, on April 12, for what the media described as a “listening session.” Apparently the PMG didn’t leave the airport. The Postal Service decided it would be more convenient to hold the meeting at the second floor conference room at the Helena Regional Airport. It must not have been very well publicized. Only a few dozen people were in attendance. But those who came were sure unhappy, and they gave the PMG an earful about why it would be better to close urban post offices rather than rural offices and how the post office should be a government service and "not a counter in a doughnut shop." (Video here.)
"We are in a heck of a financial situation,” the PMG explained to the audience. “That is why it is so important we move ahead with some of the changes we need to make. You have to do something. You can't sit back and wait."
From Helena, it was on to the tiny town of Ingomar (pop. 95). First stop? Why the post office, of course. The PMG and Senator Baucus couldn't leave Ingomar without spending some time admiring post office boxes.
The PMG and the Senator eventually pulled themselves away from the post office and headed over to the Jersey Lilly Saloon & Eatery, where the PMG rang a bell at the bar and bought everyone a round of drinks.
The Jersey Lilly sounds like a fantastic place, by the way. Famous for its Denver omelets and bean soup, it has an authentic Wild West interior, and the only bathrooms are outhouses. (No word on whether the PMG checked out the facilities.)
After happy hour, it was time for the PMG to go to the Ingomar Tri-Rec Gymnasium for another “listening session.” At the gym, the Postmaster General was greeted with a picnic table piled high with homemade baked goods. According to one news report, the PMG was treated like a "visiting dignitary."
May 20, 2012
On Monday the Postal Service will make the changes in service standards official by publishing the Final Rule in the Federal Register. As we’ve been told since September, delivery of First-Class mail and periodicals will be slowing down — but not as soon as initially planned. [UPDATE: The Final Rule was not published until later in the week. An Advance Copy is here.]
Rather than implementing the changes all at once, the Postal Service will give customers an opportunity to prepare and adapt by implementing an “interim version” of the plan for the next eighteen months. Here’s a quick look at the two phases of the plan:
Phase 1: Interim version
Phase 2: Final version
Implementation in July/Aug. 2012; resumes Jan. 2013
Implementation in Feb. 2014
Consolidates 140 facilities
Consolidates 89 additional facilities
Saves $1.2 billion
Saves nearly $1 billion more
Reduces workforce by 13,000
Reduces workforce by additional 15,000
Preserves overnight delivery for “turnaround” mail (80% of First-Class)
Discontinues overnight delivery for all First-Class mail, except for some business mail
This modification of the plan is apparently a response to concerns expressed by mailers and some members of Congress, and it may also anticipate what the Postal Regulatory Commission will have to say in its Advisory Opinion. In fact, one of the experts brought in by the Commission provided testimony that described how the Postal Service could realize significant savings by consolidating a large number of plants — though not as many as proposed — while still maintaining overnight delivery for a large portion of the mail. That’s basically what the Postal Service’s new “interim" phase 1 will do.
The evolution of the plan
When it first announced its plan and published an Advance Notice in the Federal Register last September, the Postal Service explained that while 40% of First-Class mail is currently delivered overnight, under the new system, virtually all of that mail would go to two-day delivery. In addition, about half the mail being delivered in two days would shift to three days. The Postal Service said that relaxing the service standards in this way would allow it to reduce its processing network from 500 locations to fewer than 200, and thereby save a considerable amount of money.
After receiving comments on the Advance Notice, the Postal Service made some revisions in the plan, and in December it published a Proposal in the Federal Register. The Proposal stated that the plan would “drastically” reduce the amount of First-Class Mail that qualifies for an overnight service standard. The only mail that would be accorded overnight delivery was “intra-SCF Presort First-Class Mail that is entered at the SCF prior to the CET.”
That refers to mail that is brought to a Sectional Center Facility (SCF) by a pre-sort company and that’s to be delivered within the area served by that facility. Sometimes referred to as “turnaround mail,” this is mail that originates from and destinates to the 3-digit ZIPs served by the plant. It’s essentially local mail that doesn’t need to be transported to another facility before it heads out to your local post office. In addition, to qualify for overnight delivery, the mail would need to arrive at the facility by a particular time, 8 a.m. — further limiting the opportunities for qualifying for overnight delivery.
Obviously, most retail customers would not be able to meet these criteria, so any of their mail previously delivered overnight would be delivered in two days. That’s why the plan is sure to drive away business. How much, though, is an open question.
May 19, 2012
[from a USPS Industry Alert]
Today the Postal Service sent the final rule to revise service standards for market-dominant mail products to the Federal Register. The final rule will be posted on our “Information for Mailers” webpage at http://about.usps.com/news/facility-studies/welcome.htm by COB Monday, May 21. Highlights excerpted from the final rule are provided below.
The Postal Service is adopting new rules for market-dominant service standards, with an interim version that will apply from July 1, 2012, through January 31, 2014, and a final version that will apply on February 1, 2014, and thereafter. Should subsequent events or changed circumstances so warrant, the Postal Service will be able to revisit the final version before February 1, 2014.
Under the interim version of the overnight business rule for First-Class Mail, the overnight service standard will be applied only to intra-Sectional Center Facility (SCF) mail. It will no longer apply to any inter-SCF mail. Under the final version of the overnight business rule for First-Class Mail, the overnight service standard will not apply to mail that is entered anywhere other than the designated SCF, nor will it apply to mail that does not meet all of the preparation requirements for Presort mail. On February 1, 2014, when the final version of the rule takes effect, the Critical Entry Time (CET) at the SCF will become 8 a.m., with a 12 p.m. exception that will be available only to intra-SCF Presort First-Class Mail that is sorted and containerized to the 5-digit ZIP Code or 5-digit scheme level.
May 18, 2012
When the plan was originally announced on December 5, there were 252 facilities on the list. After the AMP (Area Mail Processing) studies were completed, a new list was released on Feb. 27, with 223 facilities approved for consolidation.
The Postal Service has decided to implement the plan in two phases. The first phase consists of two stages. The first stage of phase 1 will take place this summer, when some 48 facilities will be consolidated. The Postal Service will then suspend consolidations during the busy mail period of the elections and holidays, and then resume again in January. The second stage of phase 1 will include about 92 additional facilities, and it will begin in January.
Phase 2 of the plan will be implemented in 2014, with 89 or more consolidations taking place, and bring the total number of consolidation to 229 (the Feb. 27 list had 223 facilities approved for consolidation, plus six studies still ongoing). When the Postal Service released the lists this week, they were in a format that’s not very user friendly, so we’ve re-done the list in more manageable form. There's a map too. Here’s a list of the lists:
USPS list of AMP studies (2/27/2012)
USPS list of facilities to be consolidated summer 2012 (Phase 1, stage 1)
Google Fusion Table (best for sorting, charting, mapping, downloading, etc.)
If you spot an error in the STPO version of the lists, please hit the contact link at the top and let us know.
And here's a list of just some of the news articles that have come out over the past 24 hours about the new plan.
May 15, 2012
BY MARK JAMISON
It’s likely that I will be the last postmaster to serve the town of Webster, North Carolina. The first postmaster, Allen Fisher, began his term in 1857, shortly after Jackson County was founded and Webster became the county seat. The names of the postmasters that follow read like a county census. In a rural mountain county that was fairly isolated well into the 20TH Century, the same family names filled many a civic obligation.
Miss Eugenia Allison was the longest serving postmaster, from 1914 until 1948. Mildred Cowan served from 1950 through 1976. When I became postmaster, I found letters Ms. Cowan had written to the old Post Office Department begging for a new building or at least better heat in the shack that served as a post office.
I will have been the third longest serving postmaster at Webster, although I don’t count that as much of a distinction. I took a downgrade in coming here fourteen years ago. Webster was on the same side of the mountain as my farm and that meant less of a drive. More important, Webster was a one-person office, and I had soured on the idea of supervising others in a postal system where autocracy and duplicity trumped common sense and basic decency. It’s been easy being here.
I live next door to the post office now, in a house that has stood since the town was founded. I rebuilt the house and my life after a divorce. Living next door to my office and being so accessible to my community has made the job of postmaster even more meaningful.
I had long planned to retire in July of this year. I had the age and years, and health issues and personal concerns made it seem like the right time. The changes wrought by the POSt Plan will take Webster to six hours a day whenever I leave, and while I have toyed with the idea of staying a couple of years to forestall that, it just doesn’t seem to make much sense. I suppose the incentive payment is entering into my thinking, but not much. It isn’t enough to make a difference.
No, if I am to be the last of the Webster postmasters, then I might as well get on with it.
THE POSTPLAN is little more than a cruel joke. It offers hope to those who thought they might lose their local post office. In reality it is little more than an interim step towards closing 13,000 post offices, maybe more. The fact is that the dramatic prescriptions originally offered by Mr. Donahoe could never have occurred at the rate initially announced. It would have been operationally infeasible to close offices at the rate Mr. Donahoe wanted — 15,000 in five years. But just by threatening those closures
, POStPlan looks like a reasonable alternative.
May 14, 2012
On May 9, the Postal Service released POStPlan, its new plan for small rural post offices. The plan will impact 13,000 post offices. Over the coming months, the Postal Service will begin holding community meetings to discuss the options: replace the post office with a "village post office" (a postal counter in a private business), close the post office and switch to rural delivery, or keep the post office open at reduced hours — two, four, or six hours per day, depending on the office's revenues. Full-time careeer postmasters will be replaced by part-time workers at these part-time offices. Details about the plan are here.
A much better version of the map and list can be found on Google Fusion Tables: List and Map. Google makes it possible to sort, filter, analyze, chart, and map the list in many ways. There are several options and features, so here's a guide to help you get started.
May 12, 2012
The Postal Service's POStPlan initiative announced on May 9, 2012, would reduce hours at 13,000 post offices from eight hours a day to six, four, and in some cases, two. Here's how the list provided by the Postal Service breaks down. (An overview of the plan is here.)
The plan would reduce the total number of operating hours per day at these 13,000 offices from about 100,000 hours to 57,000 — a reduction of 43,000 hours or 43%. Over the course of a year, hours of operation would be reduced by over 11 million hours (43,000 x 260 weekdays — the plan doesn't deal with Saturdays).
The country has 32,000 post offices. Figuring they operate eight hours a day (not all do), five days a week, the total operating hours for the USPS retail network comes to about 66 million hours. POStPlan would thus reduce that by 11 million hours, or 16%.
The Postal Service brings in about $12 billion at retail windows (most of its $65 billion in revenue enters the system at processing plants and bulk mail entry units). The post offices on the POStPlan list bring in a smaller portion of that $12 billion than their numbers might suggest (they're on the list because they're low revenue), but if the 16% decrease in total network operating hours translated into just a 2% decrease in revenues, the Postal Service would lose $240 million.
Just to look at it a slightly different way: Say the 13,000 post offices on the POStPlan list bring in $800 million in revenues (a rought estimate based on various sources), and let's say that when they're closed almost half the day, 25% of that revenue goes elsewhere. That would come to $200 million in lost revenue.
In other words, figured either way, the revenue losses could be significant, and they could wipe out a large part of the estimated cost savings of $500 million.
Ralph Nader Calls New Postal Service Plan a “Bait and Switch” Tactic, Not Good News for Rural Post Offices
May 11, 2012
Consumer advocate Ralph Nader said today, “The Postmaster General’s Post Office Structure Plan (“POSt Plan”) is a bait and switch tactic, and it is not good news for rural Post Offices or their customers.”
The Postmaster General claims that his new strategy, released on Wednesday, is designed to benefit rural Americans and keep open the 3,652 postal facilities it was considering for closure. Though it is unclear how many of these offices are included in the “POSt Plan”, it seems that many of them have been incorporated in the new plan as well. The new direction that the Postmaster General proposed is to cut hours at nearly 13,000 Post Offices and offer early retirement incentives for more than 21,000 non-executive postmasters.
“As more details about the plan emerge, the picture grows increasingly dire for rural customers of the U.S. Postal Service,” Nader observed. “I expressed deep concern about the preliminary details of the Postmaster General’s on Wednesday. Unfortunately, those fears were confirmed as we have analyzed the details of the Postmaster General’s new strategy.”
Just when you thought it couldn't get any worse: The Postal Service has a new plan for the post office
May 10, 2012
After a year and a half spent threatening to close thousands of rural post offices, the Postal Service has suddenly changed course. Instead of closing small post offices, the Postal Service has come up with a way to make them irrelevant.
The Postal Service’s new plan — awkwardly named "Post Office Structure Plan," or POStPlan — will reduce the hours of operation at 13,000 small post offices from eight hours a day to six, four, even two. And instead of staffing the post office with a career postmaster, these offices will be run by a part-time worker with little or no experience. It’s a deadly combination, and it will do more harm than good.
The headlines are all about the “good news” that thousands of post offices have been “spared" and given a "reprieve." And the politicians seem happy to pat themselves on the back for their good work. But the new plan demonstrates that the leaders of the Postal Service have not really had a change of heart. They remain determined to dismantle the Postal Service — they’ve just adopted a new strategy.
The Postal Service gets nostalgic
A few months ago, when it presented its Request for an Advisory Opinion on the Network Rationalization plan to consolidate mail processing plants, the Postal Service stated that “the statutory scheme” governing its operations did not require it to preserve “a tangible link to an iconic past, or to perpetuate a nostalgic image of the agency.” That was a pretty clear knock at those fighting to preserve the institution of the small town post office and postmaster.
Now, on the Postal Service website, there’s a nostalgic image of an iconic small town post office (the one at the top of this post). It’s being used in the same cynical way the Postal Service presented the “Village Post Office” — a stripped down version of the contract postal unit — as the great new “concept” that would replace the real village post offices.
The Postmaster General would have us believe that the Postal Service has listened to its customers and that’s why they decided not to close post offices. More likely, the prospect of postal reform legislation putting new restrictions on closing post offices led the Postal Service to seek an alternative.
While many communities will be relieved to learn their post office isn’t closing, the new plan is in many ways much worse than the Retail Access Optimization Initiative (RAOI) — the plan to close 3,650 post offices — that was on the table until just a few days ago. That plan could have shuttered three thousand post offices. The new plan will half-shutter 13,000.
As we’ve seen over the past few months, closing post offices runs into many barriers, and it would have probably taken years to close 15,000 post offices, as the Postmaster General says he plans to do. Now, in one fell swoop, POStPlan will downsize 13,000 post offices in a way that’s almost as bad as closing them.
It’s not just reducing the hours that’s so wrong. Over nine thousand postmasters will see their careers ruined, and the communities they serve will be the worse for it. These are people who have devoted themselves to their work, their customers, and the enterprise of the Postal Service, often for decades. They play a significant role in the life of their communities, and that's why in small towns across America, being the postmaster is an honor. It’s truly tragic that the Postmaster General would do this to his postmasters.
If nothing else, this abrupt change in plans makes the Postal Service look ridiculous. This is clearly an organization that has lost its way. There’s no sense of a grand mission, no recognition that the infrastructure has an intrinsic value, and no respect for hundreds of thousands of employees and millions of average customers and small businesses.
Once the hoopla about not closing post offices quiets down, people will start to realize that POStPlan is just another harebrained scheme, secretly cooked up in postal headquarters. The plan sounds the death knell for the rural post office and for the Postal Service itself. It comes not to save the post office but to bury it.
What the plan will do
Over the coming weeks, POStPlan will come under scrutiny by members of Congress and the Postal Regulatory Commission, which will be weighing in with yet another Advisory Opinion. The League of Postmasters provides an excellent review of the plan (the slides are very helpful), and a complete list of the impacted offices is available here (you can download an Excel version here).
The POStPlan will make several significant changes to the retail network:
May 9, 2012
The Postal Service has decided not to announce mass post office closures on May 16, when the moratorium ends, and it will instead proceed with the closings in a more gradual way. How many, how slowly, remains to be seen.
In the meantime, the Postal Service has a new plan. Some of the details were revealed to postmasters in a webinar yesterday afternoon, and the Postal Service will tell the rest of us about it at a press conference today. Here's the USPS press release with some more details.
If you can’t close them, reduce them
Rather than closing thousands of post offices, the Postal Service has decided to take a different approach. In yesterday's webinar with postmasters, the Postal Service revealed its new strategy. It’s going to review its network of small post offices (level 16 and below), with an eye toward consolidating (reclassifying) them as stations. In other words, instead of being the main post office for a town, the office would be downgraded into a sort of secondary facility, under the supervision of a main post office located in another town.
The change in status would make it easier for the Postal Service to staff the post office (now the "station") with someone other than a career postmaster, such as a part-time postmaster relief (PMR), who gets paid far less. It might also make it easier to further consolidate the office into a contract postal unit or “village post office” sometime down the road.
The more immediate result of the new strategy is that it will allow the Postal Service to reduce the window service hours at the office (there are rules about the hours for a main post office). Depending on how much business the post office does, its hours could be reduced to six, four, even just two hours a day. The Postal Service is also apparently saying that if a post office is not within 25 miles of another office (an unusual circumstance), the hours would not be reduced below six.
These measures have been in the works for a long time (that story is here). In March 2011, the Postal Service proposed a number of changes to 39 CFR Part 241 designed "to improve the administration of the Post Office closing and consolidation process." In July 2011, it approved the changes and published the Final Rule in the Federal Register. Judging by the scope of the new strategy, however, it may be significant enough in its impacts to require a new Advisory Opinion from the Postal Regulatory Commission, and apparently the Postal Service will request a new Opinion in May.
Reducing the hours at post offices and replacing experienced career postmasters with part-time workers with less experience will save some money, but it will naturally drive away business and encourage people to use alternatives. Declining revenues will later be cited as a reason to close a post office, and the Postal Service will use the data on the shift to alternatives as more evidence that customers aren’t using post offices.
May 7, 2012
As the debate over postal reform shifts to the House and the rhetoric heats up a few more degrees, this might be a good time to take a step back and look at a little history. In many ways, history is repeating itself, and a look back may give us some sense of where things are headed (or not).
In 1975, the country was just coming out of a recession caused by the 1973-74 stock market crash and OPEC’s decision to quadruple oil prices. As a result of the recession, mail volumes plummeted, and in 1974, the Postal Service incurred a $2.3 billion deficit (almost $10 billion in today’s dollars). There were concerns that the volume might never return.
To address the deficit problem, the Government Accountability Office (GAO) issued a report in June of 1975 entitled “$100 Million Could Be Saved Annually In Postal Operations in Rural America Without Affecting the Quality of Service.” The controversial report recommended closing 12,000 small post offices that were operating at a loss. (Adjusted for inflation, $100 million would come to about $400 million today.)
It wasn’t the first time rural post offices had come under assault. A few years earlier, when the Department of the Post Office was transformed into a corporate-type entity called the Postal Service, rural residents feared what would happen, and they persuaded the authors of the 1970 Postal Reorganization Act to include language in the bill that protected rural post offices. Hence this oft-quoted passage in Title 39 [section 101 (b)]:
“The Postal Service shall provide a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining. No small post office shall be closed solely for operating at a deficit, it being the specific intent of the Congress that effective postal services shall be insured to residents of both urban and rural communities.”
After the GAO issued its 1975 report, Congress began holding hearings about post office closings, and lawmakers on both sides of the aisle spoke up for the value of rural post offices. At the hearings, Republican House member Keith Sebelius of Kansas stated, “When a community loses its post office, it also loses its identity.” And Democrat Joe Evans of Tennessee told the House committee, “It is unconscionable to even consider the closing of these post offices.”
The protest against closing post offices fell on deaf ears at the Postal Service, however, and just a few weeks after the hearings, postal headquarters announced new guidelines making it easier to close small post offices. Claiming that rural carriers would provide better service than a post office, Postmaster General Benjamin Bailar (on the right) shut down 200 post offices in three months and put another 600 “under scrutiny.”
On February 28, 1976, 44 members of Congress sued the Postal Service. Three senators and 41 House members charged that the post office closings were illegal “and a massive assault on the country’s small post offices.”
A few hours after the suit was filed, U.S. District Court Judge John Lewis Smith issued a retraining order barring further rural shutdowns. In March, Smith ruled that communities needed at least 90 days notice of a closing.
The ruling gave Congress time to act, and in September it passed the Postal Reorganization Act Amendments of 1976 (H.R.8603; P.L. 94-421) by an overwhelming majority, 267 to 113. While Democrats voted 213 to 45 in favor and Republicans opposed it, 68 to 52, those 52 Republicans made the bill a bipartisan success and showed that it wasn’t just Democrats who cared about protecting post offices. In his official statement on signing the bill into law, President Gerald Ford said, “I am pleased by the responsible and effective bipartisan cooperation that was evident in the drafting and passage of this legislation.”
The bill put a moratorium on closing rural post offices until the following April, while a “blue ribbon commission” studied the broad range of problems confronting the Postal Service. The bill also put new restrictions on closing post offices, and it’s thanks to this legislation that the Postal Service must consider the effect of a closing on the community and employees as well as “whether the closing is consistent with the policy of the government that the Postal Service provide a maximum degree of effective postal service to rural areas.”
The PRA Amendments also gave communities the right to appeal a post office closing, a right that was quickly exercised. From September 1976 to the end of 1979, the Postal Service tried to close 90 post offices, and 24 communities filed an appeal with the Postal Rate Commission. In every case, the PRC ruled in favor of the community and remanded the closing decision back to the Postal Service for further consideration. Only 33 of the post offices eventually closed.
The parallels with current events are almost too obvious to mention. The GAO continues to push for post office closings, and just a couple of weeks ago, it issued another report to Congress advocating closures to help deal with the deficit. As in 1975, closing thousands of small post offices would yield only very minimal savings. Closing the 3,650 post offices in the Retail Access Optimization Initiative (RAOI), for example, would save $100 or $200 million (according to the PRC and Postal Service, respectively).
In 1975, the GAO said the closings would be justified “if the alternative mail service would be at least as good.” The new GAO report similarly endorses the Postal Service’s view that post offices can be replaced by “alternative access” to postal services — contract postal units, rural delivery, kiosks, and so on — even though the people served by post offices are not satisfied with these other options.
May 3, 2012
The Network Rationalization plan to consolidate some 260 mail processing plants may be running into problems. Not all the plants were approved for consolidation, so this week the Postal Service submitted revised estimates to the Postal Regulatory Commission (PRC).
The total cost saving estimate has dropped from about $2.1 billion to $1.6 billion. That’s about half of what the Postal Service originally told the media, and even that lower estimate is being challenged by the postal worker unions and other intervenors in the PRC’s Advisory Opinion process.
Also this week, the leaders of postal reform in the Senate sent a letter to Postmaster General Donahoe asking him to extend the moratorium on post office closings and plant consolidations, scheduled to end May 15, for as long as it takes for Congress to complete the legislative process. That could be weeks, even months. The Postal Service has already said that there would be no consolidations during the election and holidays, so if it doesn’t get started this summer, the consolidation plan might have to wait until the new year.
There’s also a new OIG report out this week that’s based on a focus-group study of users of First-Class mail. The report concludes that the volume of First-Class mail will continue to drop over the coming years, but most mailers believe the declines will be slow and steady — unless something dramatic happens — like reducing service standards. The report could fuel the argument that the Network Rationalization’s basic premise — relaxing service standards will make it possible to realize significant savings in operating costs — is fatally flawed because the potential for lost revenue is so great.
The revised cost savings
When the Postal Service initially presented its case for Network Rationalization, the list of potential consolidations included 264 facilities. In the end, 35 consolidations were not approved, and six studies are ongoing, leaving a total of 223 approved consolidations. (The updated list is here.)
Because the entire list wasn’t approved, the net savings of about two billion dollars turned out to be an overestimate. So the intervenors in the PRC’s Advisory Opinion process asked the Postal Service to provide revised testimony reflecting the lower numbers. This week the Postal Service did just that, and it looks like the net savings from consolidating the 223 facilities will be about $500 million less than initially projected.
The original estimate was determined by adding up the cost savings in various categories — maintenance, transportation, processing work hours, etc. — which came to $2.6 billion. Since relaxing service standards will drive away business, the Postal Service contracted a market research to help estimate how much, and the research showed a revenue loss of $1.3 billion, which translates into a net “contribution” loss of $500 million (losses adjusted to reflect the cost of processing lower volumes). So the total savings for the plan came to about $2.1 billion.
With the gross savings reduced by $500 million, the new gross savings number is $2.1 billion. Subtract the $500 million for the revenue losses, and we’re left with $1.6 billion in total savings.
That’s about half of what the Postal Service originally told the news media when it began talking about Network Consolidation last fall, and what it is still saying on the USPS website, which says, “Faced with a massive nationwide infrastructure that is no longer financially sustainable, the U.S. Postal Service has proposed sweeping changes designed to save the organization up to $3 billion a year by cutting its network of processing facilities by over half and adjusting service standards.”
Even the new lower savings estimate of $1.6 billion is sure to be contested by the participants in the Advisory Opinion process. As noted in an earlier blog post on the subject, the issue is not simply that fewer facilities were approved for consolidation but also that there are many other problems in how the cost savings and lost revenue were calculated. As we learned from the phase-1 market research that the Postal Service wanted to keep secret, it’s very possible the contribution losses could hit $2 billion, which means the plan might not save anything at all.
Here’s a table summarizing the new data. It shows a breakdown of how the Postal Service revised the cost savings estimate based on the lower number of approved consolidations, along with the impacts of potential revenue losses. The numbers come from witness Bradley’s original testimony and his revised testimony. A discussion of the two phases of the market research is here.
May 2, 2012
Yesterday, leaders of postal reform in the Senate sent a letter to Postmaster General Donahoe asking him to extend the moratorium on closing post offices and processing plants while Congress works on postal reform legislation. If the Postal Service says no, about 233 post offices could close almost immediately after the moratorium ends on May 15. A list of the post offices in jeopardy is here.
These post offices are not part of the Retail Access Optimization Initiative (RAOI), the list of 3,650 being studied for closure that was announced last July. They were instead reviewed for discontinuance on an “ad-hoc” basis, i.e., independently of any plan coming out of postal headquarters. Sometime during October to December 2011, these post offices received a Final Determination notice indicating they would close in 60 days. But the post offices didn’t reach that stage because the Postal Service put a suspension on closing post office during the holiday season (beginning November 19), and then it declared a moratorium on closings from December 15 to May 15.
Many of the communities that received one of these Final Determinations appealed the decision to the Postal Regulatory Commission (PRC), but nearly all of the appeals failed. During the moratorium, almost every appeal ended in a split decision — two commissioners voting to affirm the decision to close, and two commissioners voting to remand the decision back to the Postal Service for further consideration.
In all, about 127 post offices lost an appeal during the moratorium, and they, along with over a hundred others that didn’t file an appeal, make up the list of 233 now slated for closure.
In their letter to the Postmaster General, the architects of the Senate bill on postal reform (S.1789) — Senators Carper, Collins, Lieberman, and Brown — ask the Postal Service to extend the moratorium. That might give those 233 post offices a second chance. In the letter, the senators write the following:
“You have announced your intent to close hundreds of post offices and processing facilities beginning May 15th. However, as last week’s debate demonstrated, there is considerable concern in the Senate that this approach will unnecessarily degrade the infrastructure which is one of the Postal Service’s most important assets…. We believe an attempt to proceed with the planned closures — to ‘get in under the wire’ while legislation to the contrary is being considered — would be counterproductive and would violate the clear intent of the Senate. We therefore urge you to extend the current moratorium to delay the closure or consolidation of post offices and mail processing facilities that would be kept open were S. 1789 to be enacted into law, while we work together with our House colleagues to enact comprehensive postal legislation as quickly as possible.”
While the senators are focused on the possibility that the Postal Service will make announcements about the RAOI post offices, those 233 post offices are in more imminent danger, and they would be the immediate beneficiaries if the Postal Service were to declare an extension of the moratorium.
There’s some indication that the Postmaster General may be inclined to do just that — or at least to slow down on post office closings. In an interview on C-Span this week, the Postmaster General responded to a question about what was going to happen to the 3,700 post offices on the RAOI list. Mr. Donahoe said the following:
“From a post office standpoint, the word ‘closure’ is a word we’ve never used. We’ve said ‘evaluate’ — looking at consolidation, looking at serving them on a rural route, even changing the hours so that instead of having an eight-hour office, maybe you have a six-hour office.” The Postmaster General proceeded to say that he would not be announcing thousands of closings in May. Rather, the closings would be “incremental.”
The Postmaster General’s comment that the Postal Service has never used the word “closure” is obviously untrue. As the postal news blog was quick to point out, the Postal Service has been using the word “closure” over and over again — in press releases, the Annual Report, and countless other places and occasions.