August 2012


Trouble ahead: The PRC gives POStPlan a green light

August 27, 2012

Last Thursday, the Postal Regulatory Commission issued its advisory opinion on POStPlan, the Post Office Structure Plan, and the Postal Service isn't wasting any time implementing its plan to reduce hours at 13,000 post offices.  

On the same day the PRC published its findings, the USPS Postal Bulletin published changes to three operational manuals, laying out the details on POStPlan.   According to a letter from the President of the League of Postmasters, implementation of POStPlan could begin this week, and some post offices could see their hours cut by mid-November.  

POStPlan will obviously have a significant impact on postal services nationwide, and that’s why the PRC was required to weigh in with an opinion about the advisability of the plan and the issue of whether or not it conformed to Title 39.  The Commission has examined the plan and found it good — better, anyway, than closing thousands of post offices.

The postmasters associations signed off on POStPlan months ago, and it was largely unopposed during the advisory opinion process, so it came as no surprise that the Commission would approve the plan.  The only question on the table was to what extent and in what ways the Commission might find fault with the plan or offer recommendations for improving it.  The advisory opinion does express a few concerns — like the fact that the plan will reduce access to postal services for many customers — but for the most part the Commissioners had little to offer in the way of serious criticisms or major recommendations. 

The opinion begins by describing POStPlan as a “significant improvement” over the Retail Access Optimization Initiative (RAOI), last year’s plan to close thousands of post offices.  But that's not saying much.  There wasn't anything good about the RAOI, and POStPlan isn't much better.  Instead of closing 3,650 post offices, it reduces hours at 13,000 and gets rid of all of their postmasters.  The damage will be more widespread, and it will also come much sooner.

We’ll never know if the Postal Service could have overcome all the obstacles to closing thousands of post offices.  Perhaps new legislation would have prevented it.  As for POStPlan, it’s a done deal, as it has been for some time.  

We'll soon see how the implementation plays out and what citizens across the country have to say about it.  Will we see a reprise of the frustration, anger, and protest provoked by last year's effort to close post offices, or will people just be happy their post office isn't closing?

 

The chairman's concerns

Most of the significant concerns about POStPlan are articulated not in the advisory opinion per se but in Chairman Ruth Goldway’s Concurring Opinion at the end.  This is about the only section of the advisory opinion that expresses any real skepticism about the plan.  Among the Chairman’s concerns are the following:

  • The Postal Service will “encounter difficulties recruiting qualified employees for these positions in many communities,” so staffing should be a priority and not provide an occasion for emergency suspensions.
  • Post offices more than 25 miles from the nearest post office are designated Part-Time Post Offices (PTPO), but that distance seems arbitrary and it’s not substantiated by the record.
  • The role of the Village Post Office as a supplement rather than a replacement for post offices needs to be clarified.
  • Given news reports saying that post offices not on the POStPlan list are having their hours reduced, the Postal Service should be consistent in its screening policies and other procedures it’s using for reducing hours. 
  • Aside from reducing hours at 13,000 post offices, there’s the possibility that the Postal Service will either close or reduce the hours at hundreds of other post offices.

There’s not much else in the advisory opinion that casts doubt on the wisdom of the plan.  Overall, the Commission seems content that the Postal Service will be keeping post offices open and saving some money too, and there’s no reason to get overly critical. 

 

The commission's recommendations

As for recommendations, the advisory opinion makes several suggestions for improving the plan, but they don’t seem very significant.

The Commission, for example, suggests that the Postal Service should clarify the options available to communities.  The Postal Service has been identifying four paths: (1) reduce the hours at your post office, or close the post office and (2) use another post office, (3) switch to carrier delivery, or (4) get a Village Post Office. 

That’s basically just two choices — reduce the hours or close the post office — and the rest is just logistics about delivery possibilities.  (A cluster box isn’t mentioned, but that’s likely to be a common alternative as well.)

The Commission suggests that the survey should provide customers with a clear choice between (1) keeping their post office open with reduced hours or (2) closing their post office and providing replacement delivery service.  That’s a helpful but not very significant recommendation.  It just says that putting things in terms of two options would be clearer than four.

The Commission also recommends that building modifications enabling customers to access their post office boxes should be made before reducing the hours.  That’s common sense, and one would hope the Postal Service did not need to be told something like that.

The Commission has plenty to say about other relatively minor matters, like providing adequate notice to people about the pending change in hours, using the Internet to explain what’s going on, and so on.  The Postal Service will probably be happy to incorporate most of them.

There is one important recommendation in the advisory opinion, and that relates to the role of the Village Post Office.  While the Postal Service has been presenting the VPO as one of the four options available to communities, Jeffrey Day, the man in charge of POStPlan, told the PRC that the VPO should be seen as an “enhancement” rather than a “replacement” for a post office.  Instead of replacing a post office, the VPO would supplement services in communities where the post office had its hours reduced.  That’s clearly two different views of the VPO, and the Commission recommends that the Postal Service get its policy straight and not present the VPO as a replacement for a post office.

One other point of interest in the advisory opinion.  The PRC ran some numbers and produced a list of ten post offices it considered misclassified as Level 2 and 4 because the Postal Service had not correctly calculated the distance to the nearest post office.  The Commission suggested that these post offices be reclassified as Part Time Post Offices (PTPO), open six hours a day.  The list is here.

The advisory opinion runs to over sixty pages (the RAOI opinion was almost twice that long).  It provides a summary of how POStPlan will work, most of which repeats what the Postal Service presented in its Request for an Opinion and Mr. Day’s testimony, and it goes over some of the issues that came up through the discovery process and the cross-examination of Mr. Day.  Because there was not much opposition to the plan, the Commission did not have to work through numerous detailed legal briefs and complex technical issues, as it’s doing with the Network Rationalization plan.

Overall, the advisory opinion does not shed much light on POStPlan, and in many respects, it’s more interesting for what it doesn’t say than for what it does say. 

On behalf of infrastructure: Rethinking the postal environment

August 21, 2012

BY MARK JAMISON

It's been four years since the Great Recession began to take its toll on postal revenues, and we appear no closer to a resolution to the crisis than when it first arose.  Of course, if one looks at it from an historical perspective, the Postal Service has faced an existential crisis since 1968, when the Kappel Commission issued its report on the future structure of the Post Office Department.

The Kappel Commission was made up of ten members, six of whom were Republican businessmen representing some of the largest corporations in the country.  A seventh member was George P. Baker, the conservative Dean of the Harvard Business School.  The remaining members were George Meany, President of the AFL-CIO; David Ginsburg, a liberal attorney who had been executive director of the Kerner Commission; and David Bell, vice-president of the Ford Foundation.  The commission took its name from the chairman, Fred Kappel, the retired Chairman of the Board of Directors of AT&T.

According to Murray Comarow, the executive director of the commission, the commissioners, while differing on many points, came together on the following fundamental principles:

  1. The Post Office is a business and should be run like a business.  It should have a board of nine directors, six appointed by the president and three appointed by the board.
  2. It should be a self-supporting government corporation.
  3. Appointments and promotions should be nonpolitical.
  4. The board should set rates after due process hearings, under statutory guidelines.
  5. Wages and benefits should be established by collective bargaining; the parties may agree to binding arbitration.  An impasse would be referred to the president.
  6. The board should establish industry-competitive levels of compensation for top management.

Given that this was a time when the corporation had become the most revered of institutions, it is not surprising that the commission came up with these basic principles for transforming the national post. 

The idea of running government as a business — and perhaps for the benefit of business — was not necessarily a new one.  But in an era of extraordinary confidence in the ability of corporate America to use business methods to find technocratic solutions, there was a certain intellectual fait accompli in the idea that the new Postal Service ought to look and act more like a corporate entity.  Shouldn't everything?

 

The Holy Grail of corporatization

The Postal Reorganization Act that Congress passed met many of the conditions and recommendations of the Kappel Commission, but according to Mr. Comarow, it failed to completely embrace the vision of the commission.  Instead of leaving rate issues to the Board of Governors, Congress created a separate oversight body known as the Postal Rate Commission.  Instead of making the decision to move to arbitration up to the President, Congress mandated that labor disputes be subjected to binding arbitration.

In a paper titled “The Federalist Papers and Postal Reform” [pdf] sponsored by the EMA Foundation — an industry organization created by the Envelope Manufacturers Association to promote postal and communications related industries — Mr. Comarow discusses the history of postal reform.  

Mr. Comarow contends that had Congress followed the suggestion of the Kappel Commission and created a self-governing and self-sustaining corporate entity, many of the ensuing battles surrounding the Postal Service would have been avoided.  In fact, Mr. Comarow commends what has become the Holy Grail of postal reform — the creation of a corporate being, responsible to its Board of Governors and responsive to its industry patrons. 

Listen to the PMG today and you will hear echoes of Mr. Comarow’s corporate vision.  Listen to representatives of the mailing industry, like the 21ST Century Coalition of Mailers, and you will hear strident advocacy for a postal entity that competes in the marketplace.  Of course, if you listen a bit more closely, you’ll hear something a little different, a bit more nuanced.  They want the Postal Service to be an entity that competes, but not too much.  In any case, they are not content with seeing the Postal Service provide a sanguine and helpful environment to help them profit.  They want something more.

Mr. Comarow’s work and the intellectual framework it created for a corporatized Postal Service has been embraced by many, particular those in postal-related industries.  While there is much to disagree with in both this paper and Mr. Comarow’s work in general, he does provide an accounting of some of the ancillary budget battles that affected postal legislation, particularly accounting for prior retirement obligations.  He also provides an interesting discussion about the Revenue Forgone Act of 1993 and the issues surrounding mandated rates for non-profits.

The greatest value in Mr. Comarow’s paper is that it sets a clear, undistorted vision of what the mailing community sees as the preferential structure of postal services in the United States. In doing so, it also clearly and obviously leaves out the general interests of the American people and dismisses the idea of the postal network as infrastructure.

 

Dateline Danville VA: The VP visits, the USPS cuts hours at the PO

August 16, 2012

On Tuesday of this week, Vice President Biden told a largely African American audience in Danville, Virginia, that Mitt Romney wanted to put them "back in chains" by "unchaining Wall Street."  Republicans jumped on the VP for playing the race card, Romney called the remark "reckless," and the story was all over the national news.  

There's another story coming out of Danville this week, but it won't make any headlines.  This Friday marks the last day the historic Courthouse post office on Main Street will be open full-time.  Starting next week, the post office will be open four hours a day.  And the Courthouse post office is not even part of POStPlan.  

It looks like reducing hours at post offices won’t be restricted to the 13,000 on the POStPlan list.  According to a brief item on the GoDanRiver.com, as of August 18 the downtown Danville post office will be open Monday through Friday, 11 a.m. to 3 p.m.  Its current hours are 8:30 a.m. to 1:00 p.m. and 2:00 p.m. to 5:00 p.m.  That means it's going from 37.5 hours a week to twenty.

The news item says the Postal Service says the hours are being reduced “in an attempt to keep from closing down the branch.”  A letter displayed on the post office door says the reduction in hours is due to “recent economic changes within the postal service.”

There’s nothing very unusual about reducing hours at a post office.  According to a 2004 GAO report, the Postal Service has “adjusted hours at existing post offices from time to time to reflect customer demand.”  The Postal Service told the GAO that “postmasters are responsible for establishing window service hours based on the needs of the community within the funding resources.  Officials noted that they periodically assess the number of transactions and customer visits throughout the day to determine the appropriate hours, and that hours may be extended or shortened in response to customer demand.”

The Postal Service wouldn’t tell the GAO how many post offices had had their hours cut, but over the years, it has happened to a significant number of offices.  There are about 1,500 post offices on the POStPlan list that currently operate at part-time hours, and most if not all of them once operated full-time.  But unlike the post office in downtown Danville, nearly all of the 13,000 POStPlan offices are small rural post offices. 

Section 126.4 of the Postal Operations Manual (POM) reads as follows:

“Postmasters provide all retail services for 8 1/2 or more hours on nonholiday weekdays, unless otherwise authorized by the district manager, Customer Service and Sales.  Retail service hours are scheduled to meet the needs of local postal customers.  When the postmaster determines that additional service hours are necessary to meet community needs, employee work schedules are adjusted to provide such service.  Postmasters must obtain approval of the next higher management level for increasing workhour usage if additional costs are involved.”

“Main Post Offices and other postal units in business areas are usually open during the hours kept by that business community.  Stations and branches are not required to be open at the same scheduled hours as main offices.  Stations and branches can adjust retail service hours to meet the needs of the local community.”

The POM doesn’t say anything about reducing hours at a post office because of “funding resources” or to save money “in an attempt to keep from closing down the branch.”  The POM is more about expanding hours or adjusting them to fill the needs of the local community. 

[Correction: The passage quoted from the POM was from the 2002 version; the 2012 version is here, and it omits the reference to 8 1/2 hours.]

The Main Street post office is in the middle of downtown Danville, so according to the POM, its hours are supposed to be aligned with “the hours kept by that business community.”  As you might imagine, there aren’t many businesses or anything else in downtown Danville open 11 to 3.

The Courthouse post office is located in a building, owned by the Postal Service, that also houses the US District Court, open 8:30 to 4:30, and the US Marshal’s Office, open 8:30 to 5:00. 

There are dozens of other businesses, offices, stores, and government agencies within a few blocks of the post office.  To name just a few:

What can Brown do for you? Congressman Ryan's UPS Express

August 14, 2012

Congressman Paul Ryan, who may be our next Vice President, hasn’t had much to say about the U.S. Postal Service. 

He has a statement on his website about the agency’s financial problems, but it basically just nutshells the bills put forward by Darrell Issa and Stephen Lynch.  The only thing of substance in the statement is Ryan’s rejection of the claim that the Postal Service has overpaid $50 to $75 billion into the CSRS pension fund.

Ryan has come out in favor of selling government property, which would presumably include the sale of post offices, and he advocates including government entities like the Postal Service in the federal budget.  Ryan also sponsored a bill naming a post office for Congressman Les Aspin (1938-1995), who represented Ryan’s district in Wisconsin from 1971 to 1993. 

 

Getting by with a little help from UPS

That would seem to be about all there is to the story, but today the Huffington Post reveals another interesting Ryan-USPS connection.  It involves the lobbying career of Ryan’s wife, Janna (Little) Ryan, who worked as a tax attorney and lobbyist for Pricewaterhouse Coopers and Williams & Jensen from 1998 to 2000 — the period just before she married Ryan, in late 2000.

Among Janna’s clients were the Cigar Association of America (which didn’t want cigars regulated like cigarettes), Vermont Yankee (a nuclear power plant that wanted more favorable tax treatment), and several big pharma and insurance companies. 

One of Janna’s biggest clients was the United Parcel Service, which basically didn't want the Postal Service's competition.

According to OpenSecrets.org, during the period that Janna lobbied for UPS (1998 – 2000), UPS spent over $5 million in lobbying efforts.  The Huffington Post article says that in 1998, Janna was part of a team that received $220,000 in fees for lobbying on behalf of UPS.

Not only was Janna lobbying for UPS, but in February 1999 (the HuffPost piece mistakenly says 2000), at just about the time Paul and Janna met, Congressman Ryan took a corporate-funded trip to Atlanta, where UPS is headquartered.  According to the Congressman’s financial disclosure report, the trip was paid for by UPS.

In addition to visiting UPS headquarters on UPS’ dime, Ryan has received significant campaign contributions from the shipper.  According to OpenSecrets, in 2000, UPS gave him $10,000, making it his fourth-largest contributor for the election cycle.  Over the course of his career, Ryan has received over $48,000 from UPS, which puts the company in his top 20 contributors (Koch Industries is sixth, with $63,000). 

Got Mail? Go get it — the Postal Service has other plans

August 13, 2012

In its never ending search for ways to cut costs and reduce the deficit, the Postal Service may have come up with a real money-saver: stop delivering the mail.

One of the biggest expenses incurred by the Postal Service is delivering the mail to your door or your curb.  It would be a lot cheaper if they just put the mail in a centralized location, like a neighborhood cluster box, and had you go fetch it yourself.

This great new idea for saving money came up in a debate last week on the Laura Ingraham show.  Congressman Dennis Ross (R-FL) and NALC president Fred Rolando were on the show to talk about plight of the Postal Service.  Ross made the usual argument that labor costs are too high and the Internet and email are driving down volumes, while Rolando explained that it was all a manufactured crisis caused by the $5.6 billion a year that Congress requires the Postal Service to pay into its retiree health care fund.

In the course of the debate, Congressman Ross explained that he and his co-sponsor on the House bill, Darrell Issa, did not want to dismantle or privatize the Postal Service.  “We want to save this institution,” said Ross.  “There are many ways we can do this.  We don’t have to cut rural post offices.  We don’t have to reduce the service delivery.”  

Ross even seemed to back off of the plan to eliminate Saturday delivery, although, he noted, “moving from six-to-five day is overwhelmingly favored by the public,” as indicated by a recent NY Times survey.  (12 minutes into the tape)

“But before we go to six-to-five,” suggested Ross, “let’s go from door-to-door to curb.  That will save anywhere from $3.5 to $5 billion a year.  Only 25% of postal recipients receive their mail door-to-door.  The rest of them receive it either in cluster boxes, PO boxes, or at the curb.  That right there is a tremendous savings that I think is a good way to go about it.”

Ross thus put closing post offices and five-day delivery on the back burner and moved the delivery point issue right to the front.  The days of having your mail delivered to your door or even your curb may be coming to an end.  The future is in cluster boxes.

It’s a different version of “the last mile” strategy — that’s when FedEx and UPS don’t want to incur the expense of delivering right to your home, so they hand off the parcel to the Postal Service.  The difference is, with this new “last mile” strategy, it’s the Postal Service who’s doing the hand-off, and guess who’s going to be covering the last stretch of getting the mail to your house? 

 

Postal Service posts a $5.2 gazillion loss, begs to be put out of its misery

August 10, 2012

Yesterday the Postal Service released its Form Q3, the financial report for the third quarter of the fiscal year.  The headlines wax poetic:

 “No more mail? US Postal Service begs Congress for help; warns it could go insolvent by next year” (NY Daily News)

"Postal Service unstoppable in rain, snow. But red ink?" (Christian Science Monitor)

“Postal Service reports $5.2 billion in 3rd quarter, poised to default again” (Fox)

“'Crisis of confidence' as USPS posts $5.2B quarterly loss” (FedNewsRadio).

The LA Times had the winner, though: “US Postal Service loses $2.4 million an hour in third quarter.”

Over the coming days, there will be more hyperbolic headlines about the losses and last week’s default on the health care payment, more hyperventilating about the House’s failure to pass a postal reform bill, and more lame editorials about why the Postal Service should be privatized.  No wonder it's impossible to have a thoughtful conversation about the plight of the Postal Service.

After you get past the headlines, most of the articles do acknowledge that a significant portion of the losses are the result of the retiree health care payments mandated by the 2006 Postal Accountability and Enhancement Act (PAEA).  They account for $3.1 billion of the third quarter’s 5.2 billion losses and over $9 billion of the $11.5 billion loss for the year-to-date. 

What the articles fail to mention, however, is that those payments actually represent two year’s worth of contributions to the retiree health care fund.  Since the Postal Service couldn’t make its $5.5 billion payment last year, the financial report is showing an ongoing obligation to make double payments this year. 

Excluding those payments, the Postal Service is heading for a $3 billion loss for the year.  But the double payments will make it look like the Postal Service lost over $14 billion in fiscal year 2012.  Thankfully, the headlines on that debacle won’t appear until the year-end financial report is released in mid-November — after the election.

 

Looking at the numbers

Here’s a summary of the current Form Q3 report, compared to the same time period for the previous two years (gathered from previous forms):

The Road to POStPlan: Breaking down the postmaster retirement numbers

August 6, 2012

Yesterday the Postal Service provided an update on how many postmasters have chosen to retire thanks to the $20,000 incentive offer.  Nearly 3,800 retired as of July 31, and about 300 will be retiring at the end of August and September, bringing the total to 4,100.  (The numbers are here.)

The Postal Service did not provide a list of the retiring postmasters or the impacted post offices, nor did it break down the numbers with respect to POStPlan.  

Over the past week, however, there have been dozens of news articles about retiring postmasters, and with their help, we can do some estimating.  The articles, by the way, are worth reading.  They show how much the postmaster is valued in a small town and how sorry people are to bid farewell.  They provide a glimpse into a world that’s being stamped out by POStPlan.

We reviewed the news articles for 50 postmasters who retired on July 31.  It’s a small random sample, so take the following with a grain of salt.  (The list is here, and some of the postmasters are represented in the slideshow.)

Of these 50 post offices, 22 were set to be downgraded to part-time hours under POStPlan, 7 will be upgraded to level 18, and 21 were not part of the plan.  

Based on those percentages, about 1,800 of the 4,100 retiring postmasters worked at a post office due to be downgraded, while the remaining 2,300 worked at offices that will remain full-time.

Some 3,100 of the 13,167 POStPlan post offices already had a postmaster vacancy, so there were about 10,000 impacted postmasters.  If about 1,800 chose retirement, there are about 8,200 postmasters who could be looking for a new full-time position.

On May 25, the Postal Service posted about 1,600 openings for postmasters. There should be about 2,300 more positions opening up soon thanks to the retirements.  (NAPUS says there will be a second round posting postmaster vacancies on August 21.  No word on how many positions will be available.)  The retirements and transfers to these new positions thus take care of about 5,700 of the 10,000 POStPlan postmasters.  That leaves 4,300 postmasters looking for a job.  If they don’t find one by 2014, they’ll be out of luck.

The Postal Service said it wouldn’t implement POStPlan until after the Postal Regulatory Commission issued its Advisory Opinion later this month.  But the retirements and the ensuing game of musical chairs are already well underway.

Another POStPlan post office hit with suspension, gets the fifth option

August 5, 2012

 

The Postal Service has closed another POStPlan post office by emergency suspension.  The Postal Service's reassurances to the Postal Regulatory Commission that it wouldn't be doing that don't seem to count for much.

A few days ago, we noted the emergency suspension of the post office in Helen, Maryland.  It’s on the POStPlan list, set to be downgraded to two hours a day.  The postmaster took the incentive offer and retired on July 31.  The next day the local news reported that the office would be closed by emergency suspension on August 17.

Now the herald-mail.com is reporting that the post office in Brownsville, Maryland, has also been closed by emergency suspension.  As with Helen, which is about 120 miles away, the postmaster was looking at seeing her office reduced to two hours, and she took the incentive offer and retired on July 31.  The post office closed the same day. 

The Brownsville office was a Level 11 that had been studied for closure under the Retail Access Optimization Initiative (RAOI).  The post office has been located in the home of its retiring postmaster, Mary Ellen Younkins, since 1979.  She told the Postal Service that she wanted to end the lease on her last day, July 31, and the lease termination is now being cited as the cause for the emergency suspension.

Brownsville is a very small place, and there may not be many spaces available that could serve as a post office.  And there may not be anyone in town who wants to share part of their home with a post office, especially if the postmaster job is for just two hours a day at $11 an hour.

But the Postal Service created this situation, so it shouldn’t be an excuse for an emergency suspension.  The Postal Service has known for at least a month that it would be closing the Brownsville post office, but it didn’t bother with a meeting or a survey, and there’s no indication that it looked for someone to replace the postmaster or to find a new location. 

The Postal Service’s witness for POStPlan, Jeffrey Day, testified to the PRC that it wouldn’t be suspending POStPlan post offices because of lease issues or postmaster vacancies.  The briefs filed by the Postal Service repeat the same promise.  Yet that’s exactly what’s happened in both Helen and Brownsville.

Mr. Day and the Postal Service also said on numerous occasions that communities would be given four options — (1) reduced hours or close the post office and (2) use the post office in another town, (3) switch to rural delivery, or (4) open a Village Post Office (a postal counter in a private business like a general store).  

The Postal Service said it would decide what to do only after the community expressed its wishes in a survey and town meeting.  The Postal Service said it expected that in almost every case, the community would choose to have the hours reduced, and that’s what the Postal Service intended to do.

The folks in Brownsville were never given an opportunity to comment on the four options.  They just got a notice in the mail and found a sign on the door of the post office saying it was suspended due to a lease termination.  

A few houses down the block, workers contracted by the Postal Service could be seen pouring a cement footer for a cluster box unit.  

So there's a fifth option the Postal Service didn't mention — close the post office and replace it with a cluster box.

By Default or Design: The Demise of the Postal Service

August 3, 2012

BY MARK JAMISON, FORMER U.S. POSTMASTER

Default.  It’s an ugly and dangerous word.  It gives the impression that the individual or enterprise attached to it has utterly failed.  It implies defeat and irresponsibility.  

The news media use the word with relish.  Like a car crash, a hurricane, or a murder, it sells newspapers.  Combined with the word “bailout,” it’s also a surefire way to advance a particular political agenda.

On August 1, 2012, the United States Postal Service did not make a payment of $5.5 billion to the United States Treasury.  On September 1st the United States Postal Service will fail to make a second payment to the Treasury of $5.6 billion.  The Postal Service, blare the headlines, is thus guilty of an “historic default.”  But it’s all hot air.  The Postal Service is simply not making payments it should never have been required to make in the first place.

 

Whose fault is the default?

The two payments behind all the headlines were prescribed by the 2006 Postal Accountability and Enhancement Act (PAEA).  The payments were ostensibly designed to pre-fund the health benefits of future retirees from the Postal Service, but they were actually nothing more than an accounting place holder used by Congress to mask federal budget deficits and to satisfy an arcane accounting system that exists primarily to deceive and dissemble. 

In 2002, an examination of the postal pension liabilities revealed that the Postal Service was actually overpaying into one of its pension fund by tens of billions of dollars.  But lowering the payments would have added to the federal deficit, so Congress had the Postal Service put the money it was saving from reduced pension payments into an escrow account. 

A few years later, when PAEA was being crafted, Congress created a retiree health care fund, and shifted the money from the escrow account to the new fund.  It also mandated that the Postal Service pay off the balance of its retiree health care liability in ten years.  A forty-year payment schedule would have been totally adequate, since the fund was intended to cover retirees for the next seventy-five years, but the payments would have been too small to balance out what the federal government was losing with the reduced pension payments.

The retiree health care fund now has in excess of $44 billion.  As it grows with interest, the fund will have more than enough to cover the costs of retiree health care for decades to come.  The fund, it’s important to note, isn’t even being used for current retirees.  As with most businesses, that expense is paid for out of current revenues, on a pay-as-you-go basis.   The $5 billion payments to the fund were excessive to begin with.  They are now totally unnecessary.

Yet in spite of all this, the word DEFAULT issues from the lips of Congressmen as a foul epithet.  It reverberates through the media as an example of the failure and profligacy of government.  It is worn as a talisman of triumph by those who insist that government cannot, will not, and must not succeed in a utopian world of free unfettered markets.

The Postal Service has over $320 billion dollars in its pension and health care plans.  These plans are widely recognized to be significantly overfunded.  Claiming that the Postal Service has failed to meet an obligation and has therefore defaulted is a little like saying that a man who fails to add a monthly payment to his multi-million dollar 401K ought to file for bankruptcy. 

Claiming that the Postal Service has defaulted is merely an excuse to further the notion that the Postal Service is an anachronistic dinosaur that ought to be broken up or privatized.  It’s also a means for Congress to avoid and evade its responsibilities to govern effectively.

The reality of the situation is that several groups and forces have combined, through ignorance and cupidity, to dismantle a significant piece of our national infrastructure and to eliminate 500,000 good, solid middle-class jobs. The truth, at this point, is that the fate of the Postal Service is the result of a bad dream, a dream that has us on a runaway train heading for a cliff.  Solving the problem is less a matter of saving the train than simply waking up.

Fork in the Road for POStPlan

August 2, 2012

The Postal Service has assured the Postal Regulatory Commission on several occasions that it would not use lease problems or staffing issues to close POStPlan post offices by emergency suspension.  Yet even before the implementation of POStPlan has officially begun, that seems to be exactly what’s happening.

In Helen, Maryland, the post office is set to be reduced to two hours a day under POStPlan.  In June, the postmaster decided to take the retirement incentive, and her last day on the job was July 31.  The next day an article appeared in the South Maryland News saying that the Postal Service is declaring an emergency suspension and closing the post office on August 17th.  The Postal Service has also informed the landlord that it won’t be renewing the lease. 

The Postal Service’s Discontinuance Handbook says the circumstances that may justify an emergency suspension include “lack of qualified personnel to operate the office” and “termination of a lease or rental agreement when suitable alternate quarters are not available in the community, especially when the termination is sudden or unexpected.”

There’s no indication that the Postal Service even tried to find someone to staff the Helen post office after it learned that the postmaster was retiring, and the position is not currently listed on the Postal Service’s Job Search website.  As for the lease, it appears that the Postal Service simply decided not to renew the lease, so this is not a situation where the lease negotiations broke down and the Postal Service couldn’t find another location.

The Postal Service is simply using the postmaster vacancy to terminate the lease and declare an emergency suspension of the Helen post office.  This, despite the fact that the Postal Service has explicitly reassured the PRC that it would not be doing anything such thing.

 

The Postal Service’s assurances

The lease issue and staffing problem have come up repeatedly in the POStPlan Advisory Opinion process.

When the Postal Service’s witness for POStPlan, Jeffrey Day, was cross-examined a few weeks ago, emergency suspensions over lease problems came up several times, and Mr. Day assured the Commission that POStPlan post offices were not heading toward a lot of suspensions.

In the Reply Brief filed just a few days ago with the PRC, the Postal Service addressed concerns about lease issues leading to emergency suspensions as follows: “While it is possible that a POStPlan Office may, at some point in the future, undergo a suspension because of lease negotiations, the Postal Service has no plan for using the lease negotiation process as a pretext to close Post Offices.”

The staffing issue is even more important because the Postal Service is looking at filling several thousand postmaster vacancies post offices over the coming months.  A couple of thousand positions probably became vacant on July 31.  Another two thousand will open up at the end of August and September.

Under questioning by PRC Chairman Ruth Goldway, Mr. Day testified that the Postal Service didn’t have a special plan for filling thousands of part-time positions because they have been “hiring this type of noncareer employee for years and years and years” (Transcript, p. 206). 

Later in the hearing, Chairman Goldway was quite clear about what worried her: “I am still concerned about the ability to hire people who work just two hours a day and whether, as has happened with suspensions in the past, if you can’t find somebody we’ll wind up with a suspension” (Transcript, p. 299).

That concern was reiterated several times by the PRC’s Public Representative.  In his Initial Brief, the PR argued that “there is no basis for witness Day’s assertions that the Postal Service will be able to staff virtually all RMPOs. And an unstaffable Post Office is destined for closure, just as in Kirksey, KY.” 

That was a reference to the case of Kirksey, Kentucky, where the post office was suspended in April 2012 after the Postmaster Relief running the office was assigned to a different location and the Postal Service said it couldn't find anyone to fill the vacancy.  After an appeal to the PRC and an order from the Commission reminding the Postal Service of its obligation to either restore services or conduct a formal discontinuance process, the Postal Service said last month it would discontinue Kirksey and open a Village Post Office instead. 

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