February 2013


January USPS Financials: $437 Million Loss or $261 Million Profit? Take Your Pick

February 27, 2013

The Postal Service has released its financial statement for January 2013.  Compared to January of last year, First Class revenues are down slightly less than 1%, while Standard Mail revenues are up 2.6%, Periodicals are up nearly 3%, and Packages are up over 4%.  Total revenues are up 4.4% for the month and up almost one percent for the year to date (YTD, October-January).

Considering how weak the economy is, those look like pretty decent numbers, but that’s probably not how the financials will be reported.  Instead, we’ll just hear the bottom line: A net loss of $436 million for the month, and a $1.7 billion loss for the first four months of the fiscal year. 

Those losses, however, include two key numbers that probably won't get much attention: the prepayments for the Retiree Healthcare Benefit Fund (RHBF) and the retirement incentives paid out to tens of thousands of postal workers.  The Postal Service shouldn't be paying into the RHBF at this point (at least not $5.5 billion a year), and the incentive buyouts were a one-time expense and not a regular operating cost.

If you put the RHBF payments and the incentive payments to the side, then, the bottom line looks a little different.  It shows that the Postal Service would have actually made a profit of $261 million for January and $482 million for the year to date. 

Here’s how the numbers break down.  Note that the Postal Service includes the retirement incentive expense in the "Personnel Compensation and Benefit" line, but if you look deeper into the financial statement, there's a line for “other personnel related expenses," which includes the incentive expense.  In the table, the incentive figures are approximate because in the financial statement they’re combined with other personnel expenses.  The numbers in the table were derived by comparing this year’s expenses to last year’s (which were minimal because there weren't any incentive buyouts).

Leveraging intellectual property: Where's Mr. ZIP when you need him?

February 26, 2013

Last week the Postal Service announced that it is partnering with Wahconah, a Cleveland-based clothing manufacturer, to develop a new line of "smart apparel" (also known as "wearable electronics") called “Rain Heat & Snow.” 

The USPS press release about the announcement can be found on the Wahconah site, but for some reason it has disappeared from the USPS website, leaving a trail of broken links in several news articles.  (Update: Dead Tree Edition has the explanation.)

The press release says the new line will “leverage the intellectual property” of the Postal Service.  That’s a fancy way of saying that postal management wants to exploit the USPS brand — and all the trust associated with it — to make a few bucks in the rag trade.

Many postal workers commenting on the postal news websites thought the idea was a joke, and Citizens Against Government Waste, a right-wing advocacy group, headlined its story: "CAGW on USPS Clothing Line: Could Be Ripped from the Headlines of 'The Onion.'"  CAWG proceeds to describe the idea as a "make-work" project for "hundreds of thousands of excess USPS employees."  

That's completely wrong, of course — the clothes will be manufactured by Wahconah, not postal workers (and there aren't "hundreds of thousands" of unnecessary postal workers) — but CAWG is right about one thing: "The project will certainly create jobs in the writers’ rooms of late night comedians who need material for their monologues."  

Save the Post Office had its fun with the idea in this slideshow, and the announcement was greeted with a considerable amount of derision elsewhere in the media as well:

  “Haute couture by the postman” (Washington Times)

  “Desperate U.S. Postal Service Tries to Find its 'Cool' Factor” (Reuters

  “USPS "Rain, Heat & Snow" clothing line but not on Saturday” (Breitbart Feed)

  "Forget Marc Jacobs: The Postal Service is Hot This Spring" (Corporate Intelligence)

  “USPS clothing line: Dress like the mailman?” (Christian Science Monitor)

While the Postal Service is to be commended for experimenting with new ways to make money, the clothing idea is pretty ridiculous.  There are enough companies selling clothes, and there’s no reason for the Postal Service to get into the fashion business. 

But in terms of “leveraging intellectual property,” there’s a lot to consider and many other possibilities worth exploring.

 

The potential financial value of USPS assets

The Postal Service owns vast amounts of intellectual property — its brand and logos, the New Deal murals and sculptures in post offices, photos and historic materials, trademarks and images, patents and copyrights, trade secrets, and so on.

There’s been some debate about whether or not the Postal Service is taking full advantage of the value of this intellectual property (IP).  Some argue that the Postal Service should be doing more to capitalize on its IP to bring in much-needed revenue.  This article, for example, explores "How recognizing the increasing importance of IP in the postal/parcel industry and harnessing the power of disruptive innovation can revivify the USPS."  It's all about the Postal Service could monetize the untapped potential of its intellectual property.

Others argue that the Postal Service, as a government agency, ought to be sharing its intellectual property as a public service.  Why should the Postal Service prevent someone (as it sometimes does) from taking photographs of the murals in a New Deal post office?  They belong to the public realm and shouldn't be seen as proprietary.  

On the other hand, many businesses capitalize on USPS intellectual property for their own profit, with the Postal Service basically giving away valuable assets just for the asking.  That may be problematic at a time when the Postal Service needs to find new sources of revenue.

The USPS OIG recently opened a discussion about intellectual property on its "Pushing the Envelope" blog.  The OIG notes that compared to other industries, such as information technology and wireless communications, “the Postal Service has not significantly leveraged its intellectual property or fully recognized the potential financial and strategic value of these assets.”

A 2011 OIG report focused specifically on USPS patents and found that “the Postal Service currently does not manage its portfolio of patents to maximize commercial significance.”  The report is heavily redacted with most of the interesting details blacked out, but the bottom line is significant. 

The OIG estimated that the USPS commercial patents could be worth about a half billion dollars annually.  That’s just about how much the Postal Service says it will save by reducing hours at 13,000 post offices under POStPlan.

 

The Magical Postal Publicity Tour: Over 7,000 POStPlan Meetings, and Counting

February 24, 2013

The Postal Service is plowing ahead with its community meetings on POStPlan.  As of Friday, it had held 6,741 meetings, and it has scheduled an additional 474 through March 15.

That’s a total of 7,215 meetings — well more than half the list of 13,000 post offices that are seeing their hours reduced.  Before last week, implementation was complete at about 2,800 post offices.  On Saturday, another 737 joined the list, bringing the total number of post offices that have seen their hours reduced to over 3,500.   (The weekly meeting lists are posted on the USPS website here; you can see the entire list as a table here and spreadsheet here.  The implementation dates can be found here and here.)

About 3,500 of the meetings were held at the local post office.  These are usually rural post offices with small lobbies, so many of the meetings have been held with patrons crowded together and standing up.

Not that the meetings have lasted very long.  There's not much to talk about.  The decision to reduce the hours was made almost a year ago, and what the new hours will be comes as an announcement, not a matter for discussion.  There’s no need for a lot of talk about the options because there aren’t any.  It’s either reduce the hours or close the post office.

[View larger map]

The meetings are really just an opportunity for the Postal Service spokesperson to drive home the point that the agency is losing $25 million a day and billions every year so it must make cuts in service like reducing the hours.  

The local newspaper dutifully repeats what the Postal Service has said.  In most articles, there’s also a quote or two from citizens saying they're concerned about how reducing the hours will hurt some members of the community but it's better than losing the post office altogether.  The headlines say that the post office has been “spared” or “saved" or "will stay open" — as if closing it were really a possibility, even though virtually none of the 13,000 POStPlan post offices will close.

When the Postal Service witness for POStPlan, Jeffrey Day, was questioned by the Postal Regulatory Commission for its advisory opinion on POStPlan, he testified that while post offices would be reviewed annually to see if they needed to be upgraded or downgraded based on their revenues and workload, the meetings would not be repeated because "community meetings are very expensive."  When asked how much the Postal Service had budgeted for the surveys and meetings, he said he "didn't have that number offhand," and he couldn't even say if it was in the millions of dollars.

One wonders how much money the Postal Service has spent on these seven thousand meetings (with another six thousand to go).  Whatever they cost, it was a waste of money, at least in terms of getting feedback from citizens.  The outcome never depended on surveys and meetings.  The decisions were made in postal headquarters long before an average American weighed in.

But that's not what the meetings are about.  They are a publicity strategy to make it seem that the Postal Service is “listening” to its customers.  (The page on the USPS website about the POStPlan meetings is titled "We're listening.")

Even more, the meetings serve as a staged public relations event designed to get a message out: The Postal Service is hemorrhaging  billions, and the public must endure cuts in service if the agency is to survive.  

The meetings go hand in hand with the Postmaster General's trip to Montana last May — a publicity tour to show he was "listening" to people in small towns who were concerned about their post office closing.  (At the time, the PMG had already decided not to close post offices and to do POStPlan instead.)

The Postal Service has been doing a great job controlling the message.  We hear constantly about how everyone is using the the Internet and email, how declining mail volumes are pushing the agency deeper and deeper in debt, and how management has no choice but to reduce costs by whatever means necessary — closing plants and slowing down the mail, ending Saturday delivery, shifting over to cluster boxes, cutting hours at the post office.  

We don't hear anything about the possibility that these service cutbacks are actually about keeping postal rates down for large business mailers and dismantling the country's postal system so that corporate interests can grab a bigger piece of the pie.  

When you consider how much it would have cost to place ads in thousands of community newspapers and on hundreds of local TV channels, the Postal Service has probably found a bargain.  Whatever they cost to hold, the POStPlan meetings have provided great free publicity.  They were a perfect way to control the message.  And that’s probably what postal management was thinking when it decided to hold them. 

(Photo credit: POStPlan meetings in Cambridge, Illinois and Bushland, Texas)

New survey shows over 80 percent oppose ending Saturday delivery

February 24, 2013

Last week, the Postal Service released a survey it had commissioned with IPSOS, a Paris-based market-research company, showing that 80 percent of Americans supported the Postal Service's decision to end Saturday delivery.  Save the Post Office conducted its own survey over the past week, and it shows something completely different: 84 percent were strongly opposed to moving to five-day delivery.  (Thanks to all of you who took the time to fill out the survey.)

We conducted this survey because the Postal Service’s survey seemed biased.  The first question informed respondents of last year's $16 billion deficit without providing any context for why the deficit exists (over $11 billion of it was due to the retiree health care prefunding).  Plus, some of the questions suggested that if the Postal Service did not move to five-day, it might need to raise postage rates, seek a taxpayer bailout, or even suspend services.  Such questions seemed intentionally designed to elicit a favorable response toward ending Saturday delivery as a better alternative to other options, none of which is likely to occur.

The Save the Post Office also used loaded questions, but they were loaded with facts, like the fact that 80 percent of the $40 billion deficit is due to the healthcare prefunding mandate (as this table shows), the fact that ending Saturday delivery could drive away over $1 billion in business (as the PRC advisory opinion concluded), the fact that ending Saturday delivery will not save taxpayers a dime (because the Postal Service is entirely self-supporting), and so on. 

Over 6,000 people responded to the STPO survey.  Here are the results on the two key questions about Saturday delivery.

Those results are a lot different from what the Postal Service’s survey showed.  According to its survey, 80 percent support ending Saturday delivery, while 20 percent oppose it.  In the USPS survey, 8 percent said they would be personally impacted a great deal, 24 said somewhat, 46 said not very much, and 22 percent said not at all.  

It looks as though survey results like these all depend on how you pose the questions and to whom you pose them.

Both surveys were conducted online, so they excluded the people who most depend on the mail and Saturday delivery — seniors and people in rural areas where there’s no decent Internet.  The USPS survey used a panel of selected participants, and we don’t know anything about how the panel was composed.

One hopes that the Postal Service’s market research company did a good job making sure the respondents were a representative sample of the entire country.  The STPO survey was obviously not representative. 

If you’re reading Save the Post Office and the postal news websites that linked to the survey, you’re probably a postal worker, or you have a postal worker in the family, or you’re in the mailing industry, or you're focused on postal issues for other reasons.  You’re not an average American when it comes to the Postal Service.

Another problem with the STPO survey is that it was conducted using Google Forms, and there was no way to prevent someone from submitting multiple responses.  One individual could fill out the survey several times, and a few people did just that.

One person, in fact, was so passionate in his support for ending Saturday delivery that he responded to the survey over 5,000 times.  To make his work easier, he skipped all the questions but # 9 and #10 and didn’t write any comments, but it still took him many, many hours last Sunday to make his contribution.  Hopefully, he figured out a way to get his computer to enter the responses automatically and didn't do all that work manually.

Once we discovered that some people were doing multiple responses in the extreme like that, we changed the survey to require a comment, but that didn't stop some people, like the guy who copied and pasted the same comment (“FIRE THE POSTMASTER GENERAL”) a hundred times in a row. 

Of the 13,000 responses, half were clearly duplicates, so we deleted all of them, and ended up with a sample of about 6,200 — not a scientifically representative sample of the country, but probably a good measure of where postal workers and others with an above-average interest in the fate of the Postal Service are at.  

Here’s a summary of the responses to all ten questions on the survey.  The comments are here.  You can see all 13,000 survey results (including those that weren't counted) here, and you can see a table with the 6,200 that were included in the results, here.

It's Presidents' Day: The good, the bad, and the BOG

February 18, 2013

BY MARK JAMISON

On Wednesday, February 7, Postmaster General Patrick Donahoe stood before members of the press and the American people to announce that the Postal Service would end Saturday mail delivery and collections in August.  An announcement like this was inevitable.  No one who has followed the travails of the Postal Service over the past few years could have been surprised that at some point the agency would take a step so contrary to law and procedure that it would be the very epitome of hubris.

Over the past six years the Board of Governors and senior management of the Postal Service have conducted themselves with unabashed arrogance.  They have manipulated what is essentially a crisis of bad accounting policy to pursue a long-held desire to shrink the breadth and meaning of universal service while eviscerating and degrading the postal network. 

The actions of postal leadership over the past six years have headed the agency, probably irrevocably, on a path that will either lead directly to privatization or to at least de facto control of this national infrastructure by a few large corporations.  The ideologues who have targeted the Postal Service for privatization will soon have their day.

 

A license to kill jobs

In leading us down this path, Donahoe and the BOG have demonstrated an unrestrained contempt for Congress, the rule of law, and most importantly, the American people. The senior leadership of the Postal Service has championed an attitude that views average Americans — and especially working Americans — with complete and utter disdain.

Over the years the Postal Service has been an entry into the middle class for millions of Americans, particularly minorities and veterans.  In his press conference, Mr. Donahoe bragged — and there is no other suitable word for it — that there are 193,000 fewer workers than six years ago.  Based on reported percentages of the work force, that means there are about 50,000 fewer veterans employed by the Postal Service, of which nearly 17,000 were disabled.  Mr. Donahoe considers that progress.

While it is true that Congress has utterly and completely failed in its responsibilities to the American people with respect to many issues, including the direction of the Postal Service, that does not give Mr. Donahoe or the BOG the authority or license to co-opt a great institution.  Congress may deserve our contempt, but this does not excuse Mr. Donahoe’s arrogance or his willingness to manipulate the law, the facts, and the American public in pursuit of unaccountable goals.

While Mr. Donahoe would probably like to see himself as a captain of industry, maybe even an inspirational visionary, he’s basically a plodder following orders.  Behind him are some very practiced and practical schemers who see an asset held in common by the American people and believe that it should be theirs.  They are determined to take this asset from what they view as an undeserving public and to put it to their private and profitable use. Pat Donahoe is simply following an irrevocable course set by others, “an errand boy sent by grocery clerks to collect a bill.”

 

The BOG: Who’s who and what are they up to?

At the quarterly meeting of the Postal Board of Governors, two days following the announcement eliminating Saturday delivery, Mickey Barnett, the current chair of the BOG, reiterated the Board’s strong support for the current policy.  Mr. Barnett referred to the Board’s instruction to postal management in January to accelerate cost cutting, citing Saturday delivery as the first step in an aggressive series of steps.  “We must run the Postal Service as a business,” insisted Mr. Barnett, and Congress, he said, must provide comprehensive legislation allowing the BOG to do that.  Last year the Board indicated that it felt that the legislation passed by the Senate was too weak and insufficient in giving the BOG proper control and authority.

The Postal Board of Governors consists of nine members selected by the President and confirmed by the Senate.  The appointed members then select the final two members of the Board — the Postmaster General and the Deputy Postmaster General. At any time no more than five of the Presidential appointees may be from a particular political party.

The BOG currently has five sitting members plus the PMG and the DPMG.  There are thus four vacancies.  Two of the members are politically connected attorneys; the third is the former chair of the Kentucky Republican Party; the fourth is the former chair of a large defense contractor; and the fifth was a senior aide to Vice President Biden.  The President has selected three candidates to fill the four vacancies; two are academics, and the other is James Miller, a former BOG member who has advocated vociferously in his writings and testimony before Congress for privatization of the Postal Service. Confirmation for these appointees has languished in the Senate for at least six months.

Looking at the current members of the BOG, the appointees awaiting confirmation, and those who have served on the board in the past, it is striking how insular a board this has been, filled primarily with political operatives and insiders, folks who seem detached from everyday America. 

It is also curious that there does not ever seem to have been a board member who comes from labor.  We are often reminded that 80% of the costs of the Postal Service are related to labor and that the labor agreements are a large part of the current problems.  Never mind that both of those claims are misguided.  It does seem that an organization that is the second largest employer in the United States would benefit from a Board member who had a background in labor.

 

The Postal Service has a survey on ending Saturday delivery: So do we

February 15, 2013

The Postal Service has just released the results of a survey it commissioned on its plan to end Saturday delivery.  The Postal Service press release says the survey shows that 80 percent of Americans support the new delivery schedule.  

Before you take that conclusion very seriously, there are a few things you should know about the new survey.  

First, the survey was “fielded online.”  That means that the people who most depend on the Postal Service and Saturday delivery — those who aren’t online all the time, like seniors and people in rural areas without good broadband — were excluded from participating in the survey. 

Second, the Postal Service says that the survey used “a blended sample of panel and non-panel.”  That means some of the people surveyed were recruited to participate.  The Postal Service doesn’t provide any information about how the recruitment was done or who was selected to participate or what portion of the thousand people surveyed was pre-selected.  One can only imagine how the selection process might have skewed the results.

Third, and perhaps most importantly, the survey includes questions that are framed in ways that inevitably affect how people responded.  The first question on the survey, for example, is: “Before today, do you recall hearing anything about the financial losses that the Postal Service experienced last year, of approximately $15.9 billion?”

The survey thus begins by presenting the participants with a huge deficit number, which undoubtedly inclines the average person to favor cost-cutting measures like ending Saturday delivery.  

Subsequent questions on the survey are even more likely to bias the results.  One question says: “After learning that this change will ensure that the Postal Service does not experience an interruption in service, to what extent do you support the decision of the Postal Service to begin delivering mail five days per week and packages six days per week, including continuing package delivery on Saturdays?”

Another question says: “After learning that this change will ensure that the Postal Service does NOT have to raise the prices of mail service or package delivery in the near future, to what extent do you support the decision of the Postal Service to begin delivering mail five days per week?”

The next question says: “After learning that this change will ensure that the Postal Service does NOT become a burden on U.S. taxpayers, to what extent do you support the decision of the Postal Service to begin delivering mail five days per week?" 

The Postal Service thus basically tells survey participants, "If we don’t end Saturday delivery, we may need to raise postage raises, or we might have to look for a bailout from the taxpayer, or we may not be able to deliver the mail at all."  These are obviously scare tactics designed to elicit the responses the Postal Service wants from the survey.  They are not unbiased questions intended to get useful survey results.

The survey was conducted by IPSOS, a global market research company headquartered in Paris.  The survey describes IPSOS as “a leading independent, publicly-listed market research company.”  The survey is so patently biased, one has to wonder how IPSOS could have agreed to conduct it.

Perhaps it would be useful if the Postal Service conducted another survey that provided some actual facts about the context for its plan to end Saturday delivery — something that explains the causes for the deficit, the problems with the plan, and so on.  Since the Postal Service is unlikely to commission such a study, Save the Post Office is conducting its own. 

Like the IPSOS survey, ours is online, so the results are skewed toward Internet users, but we've tried to set up the questions in a more informative and objective way than the Postal Service did. 

If you have a moment, please take the survey, and then click on the link to see the results so far.  We'll be sure to share them with the Postal Service.

If you want to share the survey, email a link to this page (here) or go directly to the survey on Google docs here and forward that.  (If the survey isn't appearing below, try refreshing your browser.)

Image source: Chicago Tribune

The Postal Service Q1 2013 financials — not bad, but Saturday delivery still must go

February 8, 2013

The Postal Service has just released its 10-Q financial statement on the first quarter of the 2013 Fiscal Year (i.e., the last three months of 2012).  Despite all the doom-and-gloom talk about its humongous deficit, the Postal Service had a decent first quarter.  While First-Class mail dropped off again (compared to last year's first quarter), Standard Mail and parcels were up.  Total revenues were virtually the same as last year, down 0.1 percent.  Were it not for the prepayments to the retiree health fund and some workers' comp adjustments, the Postal Service would have shown a first-quarter profit of $144 million.

That's not how the story is being told, however.  The Postal Service's press release acknowledges that package growth and "record efficiency" helped "mitigate" the losses, but it still cites a $1.3 billion deficit and says the "accelerated cost-cutting actions" remain necessary.  For their part, the news media continue to play the role of court stenographer, and the headlines are predictable: 

 

For their part, the news media continue to play the role of court stenographer, and the headlines are predictable: "Postal Service Posts Loss of $1.3 billion in First Quarter" (New York Times).  "Postal Service Reports $1.3 billion loss" (Wall Street Journal).  "U.S. Post Office Loses $1.3 Billion in First Quarter" (Bloomberg Businessweek).  (Update: At least the Washington Post got it right: "Mandate pushed Postal Service into red for first quarter.")

Here's how revenues look for the first quarter compared with last year:

Overall, the main hit on the Postal Service's bottom line continues to be the $5.5 billion annual payments to the Retiree Health Benefits Fund (RHBF).  If one excludes the accrued amount for the payment ($1.4 billion), as well as adjustments to long-term workers' comp, the Postal Service would have actually shown a profit of $144 million for the first quarter.  On page 24, the 10-Q report shows exactly that.

Just to put the report in perspective, here's a table showing revenues and expenses for the first quarter of the past few years.  (The numbers come from the USPS financial statements, available here.)

Despite a relatively decent financial report, the media will no doubt continue to report that the Postal Service ran up a $16 billion loss last year and say that's why it needs to end Saturday delivery and shed tens of thousands of jobs.  Those reports typically fail to acknowledge that over $11 billion was due to a double payment to the RHBF.  

While the RHBF payments were never made, they show up on the books, and 2012 includes two years' worth of payments (for 2011 and 2012), as well as over $2 billion associated with adjustments to long-term workers' comp that have nothing to do with the actual bottom line.  As the USPS Form 10-K shows (page 23), during the 2012 fiscal year, the Postal Service actually lost $2.45 billion.  

That's not a great year, but considering that the economy remains in the doldrums, it wasn't so bad — certainly not as bad as the misleading $16 billion figure makes it seem.

Just to show how carelessly the numbers are thrown around, consider this.  A few days ago, David M. Walker penned an editorial entitled “Time to Save the Postal Service.”  It’s about how “the Postal Service is in trouble” and “bleeding red ink.”  According to Mr. Walker, “Something has to give — and must this year.”

Mr. Walker reminds his readers that he used to be the Comptroller General of the United States, i.e., the director of the Government Accountability Office, the legislative agency responsible for watching over the fiscal health of the government.  Back in 2001, as Mr. Walker explains, the GAO put the Postal Service on its "High Risk" list because of its outdated business model (as usual, the Internet was to blame).

Mr. Walker's editorial fails to mention that in May 2002, he told Congress that the Postal Service had incurred $32 billion in pension liabilities — a figure that turned out to be wildly wrong.  As the Office of Personnel Management would soon determine, the pension was actually on course to be overfunded by $71 billion (later revised to $78 billion).

In his editorial, Mr. Walker has this to say about last year's losses: “In fiscal 2012, the USPS experienced an operating deficit of almost $16 billion on revenue of about $65 billion. Granted, this deficit was exacerbated by the fact that the USPS was supposed to make two larger-than-usual retiree health benefits payments last year.  But it didn’t pay either.  Even if you subtract these additional scheduled payments, the Postal Service would have still run a deficit of more than $10 billion.”

Mr. Walker is apparently unaware that those two payments add up to $11.1 billion, so if you subtract them, the Postal Service would have run a deficit of less than $5 billion (even less if you subtract the workers’ comp payment).

The error may seem minor (just $5 billion off), but it's rather disturbing when you consider what Mr. Walker is up to these days.  As he notes in his editorial, Mr. Walker has been asked to serve as chairman of a special panel on the Postal Service for the National Academy for Public Administration (NAPA).  His main charge is to review a proposal that would privatize over half the Postal Service and turn it into a "hybrid Public-Private Partnership."  Post offices would be replaced by postal counters in private businesses, and private corporations would take over the processing work, leaving only the delivery component to the government. 

It’s a disastrous proposal, and it shouldn’t be taken seriously, but it will be.  There are some very influential people behind it.  Mr. Walker is the chief executive officer of the Peter G. Peterson Foundation, which uses its $1 billion endowment "to cast Social Security, Medicare, Medicaid and government spending as in a state of crisis, in desperate need of dramatic cuts" (HuffPost).  Plus, the director of NAPA is Dan Blair, former deputy director of the Office of Personnel Management and former chairman of the Postal Regulatory Commission.  

Given how much credence people are likely to put in the results of his study on privatizing the Postal Service, it would help if the former Comptroller General could get his numbers right.

The Postal Service Q1 2013 financials — not bad, but Saturday delivery still must go

February 8, 2013

The Postal Service has just released its 10-Q financial statement on the first quarter of the 2013 Fiscal Year (i.e., the last three months of 2012).  Despite all the doom-and-gloom talk about its humongous deficit, the Postal Service had a decent first quarter.  While First-Class mail dropped off again (compared to last year's first quarter), Standard Mail and parcels were up.  Total revenues were virtually the same as last year, down 0.1 percent.  Were it not for the prepayments to the retiree health fund and some workers' comp adjustments, the Postal Service would have shown a first-quarter profit of $144 million.

That's not how the story is being told, however.  The Postal Service's press release acknowledges that package growth and "record efficiency" helped "mitigate" the losses, but it still cites a $1.3 billion deficit and says the "accelerated cost-cutting actions" remain necessary.  

For their part, the news media continue to play the role of court stenographer, and the headlines are predictable: "Postal Service Posts Loss of $1.3 billion in First Quarter" (New York Times).  "Postal Service Reports $1.3 billion loss" (Wall Street Journal).  "U.S. Post Office Loses $1.3 Billion in First Quarter" (Bloomberg Businessweek).  (Update: At least the Washington Post got it right: "Mandate pushed Postal Service into red for first quarter.")

Here's how revenues look for the first quarter compared with last year:

Overall, the main hit on the Postal Service's bottom line continues to be the $5.5 billion annual payments to the Retiree Health Benefits Fund (RHBF).  If one excludes the accrued amount for the payment ($1.4 billion), as well as adjustments to long-term workers' comp, the Postal Service would have actually shown a profit of $144 million for the first quarter.  On page 24, the 10-Q report shows exactly that.

Just to put the report in perspective, here's a table showing revenues and expenses for the first quarter of the past few years.  (The numbers come from the USPS financial statements, available here.)

Despite a relatively decent financial report, the media will no doubt continue to report that the Postal Service ran up a $16 billion loss last year and say that's why it needs to end Saturday delivery and shed tens of thousands of jobs.  Those reports typically fail to acknowledge that over $11 billion was due to a double payment to the RHBF.  

While the RHBF payments were never made, they show up on the books, and 2012 includes two years' worth of payments (for 2011 and 2012), as well as over $2 billion associated with adjustments to long-term workers' comp that have nothing to do with the actual bottom line.  As the USPS Form 10-K shows (page 23), during the 2012 fiscal year, the Postal Service actually lost $2.45 billion.  

That's not a great year, but considering that the economy remains in the doldrums, it wasn't so bad — certainly not as bad as the misleading $16 billion figure makes it seem.

Just to show how carelessly the numbers are thrown around, consider this.  A few days ago, David M. Walker penned an editorial entitled “Time to Save the Postal Service.”  It’s about how “the Postal Service is in trouble” and “bleeding red ink.”  According to Mr. Walker, “Something has to give — and must this year.”

Mr. Walker reminds his readers that he used to be the Comptroller General of the United States, i.e., the director of the Government Accountability Office, the legislative agency responsible for watching over the fiscal health of the government.  Back in 2001, as Mr. Walker explains, the GAO put the Postal Service on its "High Risk" list because of its outdated business model (as usual, the Internet was to blame).

Mr. Walker's editorial fails to mention that in May 2002, he told Congress that the Postal Service had incurred $32 billion in unpaid pension liabilities — a figure that turned out to be wildly wrong.  As the Office of Personnel Management would soon determine, the pension was actually on course to be overfunded by $71 billion (later revised to $78 billion).

In his editorial, Mr. Walker has this to say about last year's losses: “In fiscal 2012, the USPS experienced an operating deficit of almost $16 billion on revenue of about $65 billion. Granted, this deficit was exacerbated by the fact that the USPS was supposed to make two larger-than-usual retiree health benefits payments last year.  But it didn’t pay either.  Even if you subtract these additional scheduled payments, the Postal Service would have still run a deficit of more than $10 billion.”

Mr. Walker is apparently unaware that those two payments add up to $11.1 billion, so if you subtract them, the Postal Service would have run a deficit of less than $5 billion (even less if you subtract the workers’ comp payment).

The error may seem minor (just $5 billion off), but it's rather disturbing when you consider what Mr. Walker is up to these days.  As he notes in his editorial, Mr. Walker has been asked to serve as chairman of a special panel on the Postal Service for the National Academy for Public Administration (NAPA).  His main charge is to review a proposal that would privatize over half the Postal Service and turn it into a "hybrid Public-Private Partnership."  Post offices would be replaced by postal counters in private businesses, and private corporations would take over the processing work, leaving only the delivery component to the government. 

It’s a disastrous proposal, and it shouldn’t be taken seriously, but it will be.  There are some very influential people behind it.  Mr. Walker is the chief executive officer of the Peter G. Peterson Foundation, which uses its $1 billion endowment "to cast Social Security, Medicare, Medicaid and government spending as in a state of crisis, in desperate need of dramatic cuts" (HuffPost).  Plus, the director of NAPA is Dan Blair, former deputy director of the Office of Personnel Management and former chairman of the Postal Regulatory Commission.  

Given how much credence people are likely to put in the results of his study on privatizing the Postal Service, it would help if the former Comptroller General could get his numbers right.

Nothing stays these couriers (except on Saturdays): The Postal Service moves to five-day delivery

February 6, 2013

The Postal Service is going to stop delivering mail on Saturdays. The change will take place in August.  The Postal Service will continue to deliver parcels and to PO boxes on Saturdays, but that's about it.  The Postmaster General says the move is expected to save $2 billion a year once the plan is fully implemented.  

 

What about Congressional approval?

The first big question is how the Postal Service can do this without Congressional approval.  Today’s press release says simply, “The Postal Service continues to seek legislation to provide it with greater flexibility to control costs and generate new revenue and encourages the 113th Congress to make postal reform legislation an urgent priority.”

The press release doesn’t make it clear that, as the Postal Service’s own five-year plan noted, moving to five-day delivery requires new legislation.  In a statement released earlier today, Senator Susan Collins said quite clearly, "The Postal Service’s decision to eliminate Saturday delivery is inconsistent with current law and threatens to further jeopardize its customer base."

According to this morning’s New York Times report, “The agency has long sought Congressional approval to end mail delivery on Saturdays.  But Congress, which continues to work on legislation to reform the agency, has resisted.  It is unclear how the agency will be able to end the six-day delivery of mail without Congressional approval.” 

Postmaster General Donahoe says that he can make the change without new legislation.  The ban on five-day delivery is included in Congress's annual appropriations bill (not that the Postal Service gets any appropriation).  The Postmaster General says that because the government is operating under a temporary spending measure rather than an appropriations bill, he can make the change in delivery on his own.  He will also be asking Congress not to reimpose the ban when the spending measure expires at the end of March.  (More on the legal angle, here and here.)

With postal legislation at an impasse, it’s certainly not a given that Congress would even approve a move to five-day delivery.  The Obama administration has expressed its approval, and the House bill under consideration last year would have permitted the Postal Service to cut Saturdays as soon as six months after passage of new legislation.  That bill never got passed, however, and one reason may be that 222 members of the House signed on to a resolution maintaining Saturday delivery.

The Senate bill would have preserved six-day delivery for two more years, and it would have permitted elimination of Saturday delivery only if other cost cutting measures were inadequate.  Perhaps the Senate, under the leadership of Tom Carper, will back off this issue and allow legislation to move forward permitting the shift to five-day delivery.  Or perhaps public pressure on elected officials will put a stop to the plan before it’s ever implemented.

This, by the way, is not the first time the post office has discontinued Saturday delivery.  Back in April 1957, lack of funding caused the Department of the Post Office (before it was the Postal Service) to stop delivering the mail on Saturday.  That lasted exactly one day.  The chair of the House’s postal subcommittee summoned the Postmaster General and scolded him for the “reprehensible scare tactics” he was using to get more appropriations.  Saturday delivery resumed the following week.

 

The questionable cost savings estimates

The next question that should be on anyone’s mind is how the Postal Service came up with the figure of $2 billion in savings.  That estimate should come under serious scrutiny, as did the Postal Service’s earlier estimates when it presented the original plan to eliminate Saturday delivery back in 2010.

That plan was reviewed by the Postal Regulatory Commission in an advisory opinion issued in March of 2011.  It called for eliminating all Saturday delivery except for Express Mail and delivery to those Post Office Boxes currently receiving Saturday delivery.  It would have also eliminated Saturday outgoing mail processing (except for Express Mail and some destination entry bulk mail).  The collection of mail from street collection boxes would have also been eliminated on Saturday.  It's not clear yet how the new plan addresses those issues.

In presenting the 2010 plan to the PRC, the Postal Service said it would save $3.3 billion in operating costs and cause $0.2 billion in net revenue losses, for a net savings of $3.1 billion.  

After reviewing the plan for a year, the PRC determined that the Postal Service had overstated the gross savings by $1 billion and underestimated the net revenue loss by $0.4 billion.  According to its calculations, the net savings would be $1.7 billion — $1.4 billion less than the Postal Service had estimated.

The Postal Service disputed the PRC’s calculations, but their difference of opinion was never resolved.  However, in its five-year business plan, presented in February 2012, the Postal Service did downsize its original estimate from $3.1 billion to $2.7 billion, but that was still considerably more than the PRC’s estimate.

The new figure of $2 billion cited by the Postmaster General in today’s announcement reflects the fact that the new proposal maintains Saturday delivery for parcels.  But given that the Postal Service overstated the savings the first time around, it’s very likely that the figure of $2 billion represents a considerable overestimate of what the plan will actually save. 

Unfortunately, the new estimate will not be reviewed by the PRC in a second advisory opinion, so there will be no independent analysis of the Postal Service’s calculations.  You can be sure the news media will uncritically repeat the $2 billion figure ad nauseam.  (Update: According to this internal USPS memo, the Postal Service will ask the PRC to "update" its earlier advisory opinion.)

A short but useful summary of the differences between the Postal Service’s calculations and the PRC’s can be found in the PRC’s 2011 Annual Report (pp. 29-30).  There’s also a March 2011 GAO report on five-day delivery.  Like almost all GAO reports, it recommends the cost-cutting move.  Because it came out shortly before the PRC advisory opinion, it does not examine the Commission’s alternate cost savings analysis or question the Postal Service’s numbers.

 

A Bronx Cheer for the Postal Service: The Fire Sale of Historic Post Offices Continues

Feb. 3, 2013

Earlier this week the Postal Service announced that it planned to sell the historic post office on the Grand Concourse in the Bronx, New York.  There's an excellent article about the post office by David W. Dunlap in Friday's New York Times.

The Bronx General Post Office is the largest of twenty-nine Depression-era post offices in New York City.  Built in 1935, it is one of over a thousand post offices constructed by FDR’s New Deal.  It is also the latest addition to a growing list of historic post offices that are being marked for sale by the Postal Service.

According to the Postal Service's annual report to Congress, filed with the Postal Regulatory Commission a few weeks ago, the Postal Service has reviewed over 4,000 facilities for potential sale, and it has identified over 600 buildings “earmarked for disposal.”  Many of these will undoubtedly be historic properties.  The Postal Service has sold at least a dozen historic post offices over the past year, and there are dozens more for sale or under review.

Here are a map and list of those that have been sold recently or that are known to be for sale or under study for sale.  Some of these post offices are listed on the USPS properties for sale website set up by the Postal Service’s real estate agent, CBRE, but most of them are listed on local real estate sites or not listed at all.  The Postal Service likes to work behind the scenes on some sales, and the community often learns about the deal after it's done. (For more data about each post office and a larger map, go to the Google docs table here.) 


POST OFFICES SOLD AND FOR SALE


 

Symbols of pride and permanence

Building post offices put people to work during the Depression, but it did something more.  It showed that even in the midst of a terrible economic crisis, the federal government was capable of doing grand things.  The post offices linked individuals and communities, even in the most remote areas, to the federal government back in Washington, and they served as a symbol of government permanence, service, and culture.

As Dunlap writes, the Bronx GPO is "an official city landmark, a centerpiece of life in the borough for more than 75 years, and a monumental gallery of the work of Ben Shahn, one of America’s leading Social Realist artists."  The lobby features thirteen murals painted in the late 1930s by Mr. Shahn and Bernarda Bryson, his companion and later wife.  Mr. Shahn also worked with Diego Rivera on the controversial mural that was removed from Rockefeller Center because it depicted Lenin.  

Like most New Deal murals, Shahn's Bronx murals celebrate workers and local history.  One depicts New Yorker Walt Whitman reading a poem to a group of citizens.  The post office also has two sculptures, one depicting a mother and daughter looking at a letter; it's by Henry Kreiss and entitled "The Letter" (1936).

The Postal Service owns about 2,500 buildings that, like the Bronx GPO, are on or eligible for the National Register of Historic Places.  About 440 of them are already on the National Register.  (Here are a list and a map of the 440; a list of the 2,500 is here, and a map, here.)

Historic preservationists have recognized the threat to these buildings posed by the Postal Service's fire sale, and last year the National Trust named the Historic Post Office building to its list of Eleven Endangered Places for 2012.  The Advisory Council on Historic Preservation (ACHP) is also working on the case.  But nothing seems able to stop the Postal Service's plan to dismantle itself.

 

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Also: Sarah Ryan's "Understanding Postal Privatization: Corporations, Unions, and the "Public Interest"

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