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:

1. The plan will downgrade 13,000 post offices into subsidiary offices called Remotely Managed Post Offices (RMPOs), which will be overseen by another post office called the Administrative Post Office (APO).   This is analogous to the relationship between a main post office in an urban area, and the all the stations and branches in outlying neighborhoods and suburbs, only now it will be employed for rural areas.

2. The plan will replace the postmaster position at these 13,000 post offices with part-time employees who earn less than a third of the hourly wage of a postmaster.  That has already happened at 4,000 of these offices, where a postmaster vacancy has gone unfilled and a Postmaster Relief has been filling in on a “temporary basis” (often years). 

That leaves about 9,000 to 9,500 career postmasters who are going to lose their post offices.  They will be encouraged to take voluntary early retirement (VER) with a $20,000 incentive, or they will be assisted in finding a new position elsewhere (Reduction in Force, or RIF).  About three-fourths of these postmasters are eligible for early retirement, but many of them will probably leave the service long before they planned and well before they are financially prepared.

3. The plan will reduce the number of hours of operation for these 13,000 post offices.  Depending on how much revenue the post offices has been taking in, the hours will be reduced to two, four, or six hours per day.

Apparently the plan will also ensure that any post office 25 miles or more from another office will not have its hours reduced below six.  On the RAOI list of 3,700 post offices, about 5% are more than 25 miles from another post office, so for 13,000, that would come to about 650 post offices.

The plan identifies a couple of other alternatives to closing a post office — rural delivery and setting up a contract postal unit or Village Post Office — but the Postal Service always throws out these options when it wants to close a post office, so they don’t represent a significant departure from what the Postal Service has been saying all along.  These are not adequate alternatives to a traditional post office, and it doesn’t help the Postal Service’s credibility when it brings them up as if they were great new ideas.

 

The history of the plan

Although postal workers and the public are first hearing about POStPlan this week, the Postal Service has been working on the plan for over a year.  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."  (More on these changes, here.)

Among the proposed changes were revising the definition of “consolidation” so that it would be easier to downgrade a post office into a secondary facility and eliminating the requirement that a post office be managed by a postmaster.

The postmasters' associations objected to those two changes, and in July 2011, when the Postal Service published the Final Rule on changes in the discontinuance process in the Federal Register, it postponed a decision about those two matters. 

Then, in October 2011, the Postal Service filed a second Final Rule that made the changes it had originally proposed.  In November, the League and NAPUS renewed their complaint about the changes with the PRC, but the PRC denied the complaint

Finally, on December 1, 2011, the Postal Service implemented the two changes, thus empowering itself to change a main post office into a secondary facility and to staff a post office without a postmaster.  That set the stage for POStPlan.

In January 2012, the Postal Service briefed executives at the League of Postmasters and NAPUS on the new plan.  The associations were faced with a choice — fight the plan in court and be cut out of the Postal Service’s planning process, or work with postal management and try to make the plan better.  They chose to cooperate, and in many ways they did succeed in improving the plan and mitigating its worse elements.  

In February, as the Postal Service was releasing a list of those post offices removed from the RAOI closing list, the Postmaster General told the Board of Governors, “We’ll soon be issuing a framework for a revised retail strategy that we hope will accommodate many of the concerns that we have heard, especially in rural communities where we have a lot of low-activity post offices” (Federal Times, Feb. 8, 2012).

Throughout the moratorium, then, from December 2011 to May 2012, while thousands of communities and hundreds of elected officials were trying to stop the Postal Service from closing post offices, the Postal Service was working on a new plan that didn't involve closures.  And it wasn’t telling the public about it. 

One of the more disturbing aspects of the secrecy is that during the moratorium, the Postal Regulatory Commission was working on about 150 appeals for post offices that had closed before the moratorium began.  Almost every one of those post offices now appears on the POStPlan list, meaning they won’t be closing.  That’s great news for these communities, especially since most of them lost the appeal.  But the Postal Service could have saved the appellants, the PRC, and its own attorneys a lot of trouble if it had informed the Commission that it was not planning to close these offices after all.  

 

A Cost-Savings Analysis

The Postal Service says the plan will save $500 million.  Not many details have yet been provided, but the following tables give us some idea of how the savings might be realized.  (Information about the source of the data appears at the end of this post.)  

The first table estimates how much it currently costs to operate the 13,000 post offices (it sticks to labor costs, since rent and maintenance won’t be impacted by the new plan).  

Table 1: Labor costs for 13,000 small post offices under current system
 
Number of employees
Annual salary & benefits
Total salaries, wages, & benefits
Postmaster (average for small p.o.)
9,000
$65,000
$585,000,000
Postmaster relief (PMR)
4,185
$24,000
$100,440,000
Totals
13,185
 
$685,440,000

The second table shows how many post offices will operate at two, four, and six hours per day, and how that adds up in terms of costs for labor.

Table 2: Labor costs for 13,000 small post offices under POStPlan
Current hours of operation
Proposed hours of operation
Number of post offices
Total work hours per year
Wages per hour
Total wages
2
2
64
34,944
$11.76
$410,941
4
2
464
253,344
$11.76
$2,979,325
6
2
561
306,306
$11.76
$3,602,159
8
2
762
416,052
$11.76
$4,892,772
2
4
1
1,092
$11.76
$12,842
4
4
47
51,324
$11.76
$603,570
6
4
185
202,020
$11.76
$2,375,755
8
4
6599
7,206,108
$11.76
$84,743,830
2
6
4
6,552
$12.30
$80,590
3
6
1
1,638
$12.30
$20,147
4
6
62
101,556
$12.30
$1,249,139
6
6
66
108,108
$12.30
$1,329,728
8
6
4167
6,825,546
$12.30
$83,954,216
 
 
12983
15,514,590
 
$186,255,014
 
 
 
 
Leaves
$9,312,751
 
 
 
 
Health care
$18,625,501
 
 
 
 
Total
$214,193,267

The tables show that the current system costs about $685 million, while the POStPlan will cost about $215 million.  The total savings thus comes to $470 million — in the ballpark of the Postal Service’s announcement that the plan would save $500 million. 

While the cost-savings are the result of both reducing the hours of operation and paying a part-time employee less than a postmaster, the real cost savings comes from using underpaid, part-time workers.  If the 13,000 post offices were operated at a full eight hours per day using part-time workers, the total cost of operations would be about $380 million.  The Postal Service would still save $300 million.  

Of course, telling everyone that POStPlan isn't about reducing hours to match revenues but about replacing career employees with $12-an-hour workers could be a public relations problem.  For the 4,300 post offices that are being reduced by two hours a day, however, that's pretty much the story. 

 

The post offices already studied for closure

Of the 3,652 post offices on the RAOI list, about three thousand were small rural post offices, and it looks like nearly every one of them appears on the POStPlan list.  Since they were included in the RAOI because they were low workload, low revenue post offices, most of them are in the category of being open for two or four hours per day, and a few of them, for six.

About 375 post offices were removed from the RAOI list during the study period, and it looks like most them are on the POStPlan list.  These communities had been breathing a sigh of relief that their post office would stay open, and now they are learning that the office will be open for just a few hours a day. 

Some 220 post offices received a Final Determination notice in 2011 but did not close due to the moratorium, and of these, about 130 appealed unsuccessfully to the PRC.  Most of these 220 post offices now appear on the POStPlan list, which means they have new life, and will remain open for a few hours a day. 

A small handful of those 220 post offices do not appear on the POStPlan list, so it’s not clear what will happen to them when the moratorium ends.  They include, for example, Bigelow, Arkansas (lost appeal) and Lakeville, Connecticut (didn’t appeal). 

There are other post offices about which questions remain. The post office in Evansdale (Waterloo), Iowa, for example, closed while the appeal was being considered, and then the PRC issued a remand decision.  That office remains closed, and it doesn’t appear on the POStPlan list, so presumably it won’t be reopening for part of the day.

 

The problems with the plan

In late May or early June, the PRC will begin an Advisory Opinion on the POStPlan. The Commission, which is in the middle of reviewing the Network Rationalization plan to consolidate processing plants, will thus have two Advisory Opinions going at once.  Why the Postal Service felt it necessary to do so much at once — it also has several cases going concerning pricing and classifications — is anyone’s guess. 

Going overnight from a plan to close post offices to a new plan to keep them open, albeit in problematic way, has got to have customers wondering: Who’s in charge here, and do they know what they’re doing?  That kind of uncertainty is not good for business.

The Advisory Opinion will provide communities, the postmasters’ associations, and other stakeholders an opportunity to analyze the plan, identify its problems, and perhaps come up with ways to improve it, if that’s even possible.  Some of the problems are manifest already.

One obvious defect of the plan is that it treats small-town postmasters in the shabbiest way imaginable.  After serving their communities and the country for many years, they will be forced to take a new job far from home or enter prematurely into retirement — just like the 35,000 mail handlers who will suffer the consequences of the Network Rationalization plan, and the hundred thousand other postal workers whose turn is coming.

The communities formerly served by these postmasters will also come out at the losing end.  Instead of being served by an experienced postmaster who knows everyone in town, communities will need to cope with an inexperienced part-time worker who will have a tough time learning the ropes when the office is only open a few hours a day.

While the plan may save $500 million in operating costs, it will also drive away business and cause further damage to the reputation of the Postal Service.  Keeping thousands of post offices open only two or four hours a day will become a running joke.  Small businesses will seek out alternatives — private carriers, electronic communications, anything but the Postal Service. 

Earlier this year, the Postal Service commissioned a market research study that showed a majority of people preferred reduced hours to alternatives like a Village Post Office or rural delivery.  But did the Postal Service do a market survey about how reduced hours would impact revenues?  (Maybe they’re keeping it secret, the way they kept the phase-1 market research on the change in service standards under wraps.)  It would be interesting to learn how much of that $500 million in savings will disappear due to lost business.

Ultimately, POStPlan paves the way for more post office closings down the road. Revenues at these post office will naturally drop because they’re open fewer hours, and the Postal Service will cite the decline when it makes a case for closing the office, just as it’s used declining revenues (caused primarily by the recession) to justify 670 Final Determinations

With the post office closed for much of the day, people will need to look to alternatives, like doing retail postal business at a Walgreens or supermarket, even though these businesses do not offer the full range of postal products and services.  The Postal Service will then say — as it’s been saying for the past two years — that customers prefer the convenience of these alternatives.  That will provide another argument for closing post offices.

With the post office staffed by a part-time worker and open for just a few hours a day, its role in the social and economic life of the community will gradually diminish.  The historic tradition of the small-town post office and postmaster will go out not with a bang but a whimper.


(Photo credits: Iconic small-town post office, now featured on the Postal Service website; Village post office, also from the USPS website)

Notes on the tables:

In Table 1, the estimate for a postmaster salary comes from the presentation materials on the League website, where President Strong notes that the average salary, with benefits, of a postmaster at a small post office is $60,000 to $70,000.  The estimate for a PMR is based on a 40-hour week at $12/hour (the base pay is $9/hour, with adjustments for locality).

In Table 2, the number of positions in each category (2 hours, 4 hours, etc.) comes from the excel spreadsheet on how each post office would be affected.  The salary information comes from Strong’s presentation: Employees at two- and four-hour offices will be Postmaster Replacements and earn $11.76 an hour as a starting salary. Employees at a six-hour office will be Part-Time Postmasters and earn $12.30 an hour.  The calculations use the actual work hours — 2.1, 4.2, and 6.3 — as explained in the League’s presentation.  The cost of leaves uses 5% of the cost of labor, based on the fact that part-time employees will be give one day of leave for every 20 days worked.  The estimate for health care is just a guess, using 10% of labor wages paid.

The estimates in both tables do not include Saturdays, since the day is typically staffed by part-time workers, and the cost of labor would not change unless a significant number of post offices were closed on Saturdays under POStPlan.

(Photo credit: Sharpsburg, Iowa, post office (Iowa Backroads)

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