Save the Post Office

The USPS Board of Governors announced today that it has decided not to go forward with the plan to end Saturday delivery on August 5, 2013. The press release is here.

The Board acknowledged that the Continuing Resolution passed recently by Congress means that the Postal Service must continue delivering the mail six days a week.  Apparently a recent analysis from the GAO and pressure from some members of Congress trumped Darrell Issa's contention that the Postal Service could proceed with the new delivery schedule under current law. 

The BOG said it was “disappointed with this Congressional action,” but it will “follow the law” and delay implementation of the new schedule until Congress passes legislation permitting it.

Given the Postal Service’s “extreme circumstances and the worsening financial condition,” the Board is now looking for other ways to cut costs and increase revenues.  The BOG has therefore directed management “to seek a reopening of negotiations with the postal unions and consultations with management associations to lower total workforce costs.”  It’s not clear what kind of workforce reductions the BOG is envisioning, but we’ll undoubtedly hear more about that soon.

The BOG has also told the Postmaster General to consider requesting an exigent rate increase from the PRC.  That’s not going to make mailers happy.  

In case you’re not up on the subject of exigent rate increases, this refers to the fact that the Postal Accountability and Enhancement Act (PAEA) of 2006 capped postal rate increases at the rate of inflation (as measured by the Consumer Price Index).  If the Postal Service wants to raise rates beyond the CPI, it must ask the PRC to approve an exigent rate increase. 

In July 2010 the Postal Service submitted a request for an exigent rate increase of 5.6% percent, which would have brought in an extra $3.2 billion annually.  The request went back and forth between the Postal Service and the PRC (and even ended up in court).  One of the key questions was simple enough to understand but difficult to answer: How much of the Postal Service’s deficit was due to the recession (an “extraordinary circumstance” that justified a rate increase) and how much was due to electronic diversion (a systemic problem that should not be solved by a rate increase). 

The Postal Service determined that its losses due to the recession for 2008-2009 were somewhere between 67 percent and 97 percent, depending on how one did the calculations.  (The Internet, in other words, had much less to do with the Postal Service's financial condition than we're constantly led to believe.)

As a result of its exchanges with the PRC, the Postal Service reduced the rate increase request from 5.6 percent to 4 percent (about $2.3 billion a year).  Then in August 2011, due largely to pressure from big mailers, it looked as if the Postmaster General had decided not to pursue an increase at all.  But in November 2011, the Postal Service said it was proceeding with the request.  

Sometime after that, the Postmaster General changed his mind again and dropped the request.  As recently as last September, he was described as “standing by his guns" and saying he wouldn't pursue the increase. 

Now the increase it back on the table.  The big mailers will put up a huge fight to prevent it, just as they did the first time around.  They're probably calling their lobbyists right now, telling them to press Congress to pass legislation that allows the Postal Service to end Saturday delivery and take other cost-cutting steps that would make a rate increase unnecessary.  In fact, the Board of Governors may have raised the prospect of an exigent rate increase for precisely that reason.  

Speaking of threats, the USPS press release also quotes the BOG saying, "Delaying responsible changes to the Postal Service business model only increases the potential that the Postal Service may become a burden to the American taxpayer, which is avoidable."  

Now even the BOG is crying "bailout."

The Mid-Hudson Local of the APWU filed a Complaint today with the Postal Regulatory Commission requesting that the Commission order the Postal Service not to proceed with the consolidation of 55 mail processing plants that were previously scheduled for 2014.  The Mid-Hudson P&D in Newburgh, New York, is one of those plants.

The Complaint's full title summarizes its theme: "Complaint of Mid-Hudson Area Local and Consumers of USPS Regarding Failure to Revise and Update Information to the Unions & Consumers on the AMP Study for Mid-Hudson P. & D. Center, N.Y."

The Mid-Hudson Local makes a number of important points in its Complaint: 

• The AMP study done in 2011 on the Mid-Hudson facility is outdated and inaccurate.  For example, savings that were to be achieved by the consolidation have been achieved in other ways, such as using new low-wage postal support employees (PSEs). 

• The Postal Service failed to provide all evidence collected from the public in December of 2011 and did not accurately represent the public’s concerns and comments. 

• The Postal Service has refused to provide un-redacted copies of the completed AMP feasibility study with supporting data, as required by a recent NLRB Ruling. 

• The Postal Service did not conduct a “true study on the adverse affects of closings or consolidations of the plants on small and large businesses within the communities.”

• Management has hidden the costs of moving mail and equipment from one location to another, especially over the 50-mile radius.

• Communities potentially affected were not provided with adequate public notice of the new accelerated plan announced just a few weeks ago.

• The PRC was not given the opportunity to comment on the latest consolidation plan, which essentially nullified the plan that the Commission did review last year.

The Complaint argues that because of these problems in the process, the Postal Service should hold a new meeting about the Mid-Hudson plant, provide a new cost-savings analysis based on updated data, and share un-redacted reports with the union.  Until these things are done, argues the Complaint, the PRC should “direct the Postal Service to stop any further AMP implementations.”

Postmaster General Donahoe gave one of his State of the Postal Service talks earlier this week.  The PMG wanted clear up what he characterized as “mixed messages."  Apparently there are folks out there — the media, the unions, postal workers, someone — saying things that are incorrect and misinformed.  Fortunately, the PMG was ready and willing to straighten out his employees on these mixed messages. 

On Saturday delivery

One thing that the PMG said “just amazes me” is when people say, “Well, first it's five-day, then it's going to be four [days of delivery, then] three, two, one.”  The PMG went on to say, “Unless their routes have no mail in them, I don't know how in the world you would deliver less than five days a week.  Five-day delivery is going to be critical for business mail, for commercial first-class, and it's very critical to keep our costs down overall when you deliver packages. That's a big advantage that we have….  So the idea that there's plans on moving from six to five and then four, three, two — there's nothing to that.”

It’s hard to imagine where anyone would have gotten the idea that the Postal Service might go beyond eliminating Saturday delivery to something like three-day delivery.  

On July 19, 2011, USA Today ran an article reporting on an interview with the Postmaster General.  One of the topics was the likelihood of ending Saturday delivery.  It has "a much better chance today than a year ago,” said the PMG, but “I don't know if I'd say 'likely' yet."  

Asked about the long term, the PMG told USA Today, "At some point, we'll have to move to three days a week of mail delivery, possibly in 15 years.” 

On the legality issue

When the PMG announced his plan to move to five-day delivery in August, he suggested that current law permits the Postal Service to make the change, so he didn't need to wait for new legislation.  “We think we’re on good footing with this,” he said. “We think right now the opportunity exists to make the changes on our own.”

That came as a surprise to many.  For years, the Postal Service has been saying that it wanted to eliminate Saturday delivery but needed Congressional approval first.  In fact, the Postal Service's five-year business plan presented in February 2012 describes five-day delivery as "requiring legislative changes to achieve," and the USPS FAQ page on five-day still says, “Congress must elect not to renew the legislation requiring the Postal Service to deliver six days a week.”

A couple of weeks ago, the GAO confirmed that view in a letter to Congressman Gerald Connoly saying that the Postal Service continues to be bound by legislation requiring delivery six days a week.  

In his talk last week, the PMG might have cleared things up by saying where he stood on the issue now that the GAO and several members of Congress have weighed in.  Instead, he simply said, “There's a lot of discussion about whether we are prohibited from moving in that direction.  I will tell you this.  We have a board meeting coming up in a couple weeks.  The board of governors will discuss the next moves that we've got to make and we'll go from there.”

In order to clarify matters, then, the PMG suggested that maybe the BOG will stick by its new position that the Postal Service can act on its own, or maybe it will shift back to its original position that Congressional approval is required, or maybe the Board will come up with a completely new move.  

Francitas is a small town in south Texas.  It’s had a post office since 1911, but no longer.  The Postal Service isn’t interested in providing Francitas with a post office anymore, nor with much else either.

Since 2011, the town has been hit with two final determinations to close the post office, had the hours reduced to two a day under POStPlan, seen window services stopped by emergency suspension, and then watched the post office close completely, with no replacement services in place.  Since Thanksgiving, the people in Francitas have had to drive almost 20 miles round-trip to La Ward to do postal business.  Now they have to make that drive just to get their mail.

This is what passes these days for “a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining.” 

Closing, round one

The first time the Postal Service tried to close Francitas was in 2011.  Even though the law says a post office can’t be closed solely for operating at a deficit, the proposal to study the office for closure states that the workload had declined to the point that “the maintenance of an independent office at Francitas may not be warranted.” 

After holding a community meeting and reviewing written comments that expressed a variety of concerns — loss of community identity, the dependence of senior citizens on the post office, the long driving distance to other post offices — the Postal Service issued a final determination to close Francitas.  Like all of the final determination notices issued back in 2011, this one states that the closing “will not adversely affect the community," even though everyone in town said otherwise.

The Postal Service estimated that the closure would save $19,896 annually — the cost of a postmaster salary and benefits (around $30,000), minus the cost (around $10,000) of replacement services for a rural carrier to deliver the mail to homes and a cluster box unit (whichever individuals preferred).  There was no savings on the rent because the Postal Service owns the module unit and just pays a modest fee to lease the land.

Carolina Jalufka and Raymond Salinas, two residents of Francitas, appealed the decision to close Francitas to the Postal Regulatory Commission.  In December of 2011, the Commission issued an order affirming the final determination.  The Commissioners actually split on the ruling, two to two, as they did many times during 2011 and 2012, but according to PRC’s rules, that meant the Postal Service’s decision was affirmed.  (The legitimacy of that PRC policy is now being questioned in a lawsuit working it was through DC circuit court.)

In their dissenting opinions on the case, Commissioners Ruth Goldway and Nanci Langley noted that there were inaccuracies in the cost savings analysis because the Postal Service used the salary of a career postmaster even though the office had been managed by a postmaster relief since 2008. 

With the final determination affirmed, the post office should have closed almost immediately, but there was a moratorium on post office closings in effect from December 2011 to May 2012, so Francitas got a reprieve. 

About three weeks from now, postal insiders and innovative outsiders will convene in Washington DC for the PostalVision 2020/3.0 conference to discuss the future of the Postal Service.  Called "Positioning America for the New Millennium,” the event will focus on "a constructive approach to re-inventing today’s broken Postal Service model for future generations."

Among the headliners speaking at the event will be David M. Walker, a former Comptroller General, the first President and CEO of the libertarian Peter G. Peterson Foundation, and currently Founder and CEO of the Comeback America Initiative, which promotes fiscal responsibility (by cutting social programs).

Mr. Walker will probably devote much of his talk to discussing the privatization of the Postal Service.  That’s because he is the chair of a five-member panel that the National Academy of Public Administration (NAPA) asked to review a recent proposal on privatization. 

The proposal is called “Restructuring the U.S. Postal Service: The Case for a Hybrid Public-Private Partnership.”  It describes a postal system in which the private sector would take care of the “upstream” — the retail and mail processing work — while the public sector would remain responsible for the “downstream” — delivering the mail through its network of “trusted letter carriers," the “feet on the street,” as the proposal puts it.

NAPA has a long-standing interest in postal matters, and its President and CEO is Dan Blair, a former member of the Postal Regulatory Commission, so it’s not surprising that NAPA would focus on the Postal Service right now.  With funding support from Pitney Bowes, NAPA assembled a panel to subject the proposal to what it describes as a “rigorous evaluation.” 

Despite the apparent conflict of interest involved with taking money from a key player in the mail industry, a company that would profit significantly from privatization (as discussed in this earlier post), the NAPA report is officially titled “An Independent Review of a Thought-Leader Concept to Reform the U.S. Postal Service.” 

When the panel was first announced, the NAPA website provided brief biographies for the participants, and in the bio for one member of the study team, the review was referred to as “the Pitney Bowes study.”  That bio was subsequently revised and the reference to Pitney Bowes purged.  In the discussion that follows, we’ll refer to the original proposal as the Thought-Leader Concept, and we’ll refer to Mr. Walker’s review of the proposal as the NAPA/Pitney Bowes study.

The retail end of the upstream

The NAPA/Pitney Bowes report runs to over 50 pages, but very little of it examines one of the key parts of the Thought-Leader Concept — the privatization of the retail end of the Postal Service’s operations.  All told, there are maybe two pages’ worth of discussion on this topic. 

The Thought-Leader Concept says that “the new postal system” being envisioned “will reinvent the concept of retail access for consumers.”  Under the new system, “there will be an explosion of options for the public to conduct postal business.”  You’ll be able to do postal business at retail stores, gas stations, schools, coffee shops, movie theaters, or any other location that is interested and meets USPS requirements. 

The proposal also suggests that the Postal Service would continue to operate a small number of retail centers, for locations where no other postal options are available or where it is more beneficial to maintain the USPS offices.

In its review of the proposal, the NAPA/Pitney Bowes study has little more to say about this reinvention of the retail system.  It explains that Contract Postal Units (CPUs) and Village Post Offices (VPOs) are postal operations housed in private businesses, and it provides a few numbers (drawn from a recent GAO report) about how many there are right now.  There's also reference to the fact that some people have recommended creating a BRAC-like commission to help close facilities (it adds, in bold, “Congressional action would help”).

But that’s about it.  There’s no discussion of how much money privatization of the retail network might save, nothing about how postal services might decline and push away revenues, nothing about how small businesses might suffer, and so on.  We're just supposed to imagine an "explosion of options" that will make it much easier for people to do postal business.