The moratorium clock is ticking: Over 200 post offices set to close

May 2, 2012

Yesterday, leaders of postal reform in the Senate sent a letter to Postmaster General Donahoe asking him to extend the moratorium on closing post offices and processing plants while Congress works on postal reform legislation.  If the Postal Service says no, about 233 post offices could close almost immediately after the moratorium ends on May 15.  A list of the post offices in jeopardy is here

These post offices are not part of the Retail Access Optimization Initiative (RAOI), the list of 3,650 being studied for closure that was announced last July.  They were instead reviewed for discontinuance on an “ad-hoc” basis, i.e., independently of any plan coming out of postal headquarters.  Sometime during October to December 2011, these post offices received a Final Determination notice indicating they would close in 60 days.  But the post offices didn’t reach that stage because the Postal Service put a suspension on closing post office during the holiday season (beginning November 19), and then it declared a moratorium on closings from December 15 to May 15. 

Many of the communities that received one of these Final Determinations appealed the decision to the Postal Regulatory Commission (PRC), but nearly all of the appeals failed.  During the moratorium, almost every appeal ended in a split decision — two commissioners voting to affirm the decision to close, and two commissioners voting to remand the decision back to the Postal Service for further consideration.  

In all, about 127 post offices lost an appeal during the moratorium, and they, along with over a hundred others that didn’t file an appeal, make up the list of 233 now slated for closure. 

In their letter to the Postmaster General, the architects of the Senate bill on postal reform (S.1789) — Senators Carper, Collins, Lieberman, and Brown — ask the Postal Service to extend the moratorium.  That might give those 233 post offices a second chance.  In the letter, the senators write the following:

“You have announced your intent to close hundreds of post offices and processing facilities beginning May 15th.  However, as last week’s debate demonstrated, there is considerable concern in the Senate that this approach will unnecessarily degrade the infrastructure which is one of the Postal Service’s most important assets….  We believe an attempt to proceed with the planned closures — to ‘get in under the wire’ while legislation to the contrary is being considered — would be counterproductive and would violate the clear intent of the Senate.  We therefore urge you to extend the current moratorium to delay the closure or consolidation of post offices and mail processing facilities that would be kept open were S. 1789 to be enacted into law, while we work together with our House colleagues to enact comprehensive postal legislation as quickly as possible.”

While the senators are focused on the possibility that the Postal Service will make announcements about the RAOI post offices, those 233 post offices are in more imminent danger, and they would be the immediate beneficiaries if the Postal Service were to declare an extension of the moratorium.

There’s some indication that the Postmaster General may be inclined to do just that — or at least to slow down on post office closings.  In an interview on C-Span this week, the Postmaster General responded to a question about what was going to happen to the 3,700 post offices on the RAOI list.  Mr. Donahoe said the following:

“From a post office standpoint, the word ‘closure’ is a word we’ve never used.  We’ve said ‘evaluate’ — looking at consolidation, looking at serving them on a rural route, even changing the hours so that instead of having an eight-hour office, maybe you have a six-hour office.”  The Postmaster General proceeded to say that he would not be announcing thousands of closings in May.  Rather, the closings would be “incremental.”

The Postmaster General’s comment that the Postal Service has never used the word “closure” is obviously untrue.  As the postal news blog was quick to point out, the Postal Service has been using the word “closure” over and over again — in press releases, the Annual Report, and countless other places and occasions. 

The Case Against Consolidation: Rebuttal testimony challenges Network Rationalization

April 29, 2012

While the week’s postal news was dominated by the Senate vote on postal reform, something else important was going on.  Opponents of the Postal Service’s plan to consolidate the processing network submitted their rebuttal testimony to the Postal Regulatory Commission (PRC). 

This testimony — along with that of two independent experts brought in by the Commission — paints a vivid picture of what’s wrong with the Postal Service’s Network Rationalization plan.  The testimony presents a devastating indictment of the plan — its underlying assumptions, its modes of analysis, and its potentially disastrous effects.  The testimony is not just critical, however.  There are also many suggestions for how to improve the plan or how to replace it with alternatives that realize substantial cost savings without reducing the service standards for First Class mail and periodicals. 

Although the PRC’s Advisory Opinion won’t be completed for several months, the rebuttal testimony provides a good preview of where things are headed.  While the PRC is likely to confirm the view that there's some excess capacity in the network, it's hard to imagine that the Commission will come out with a ringing endorsement of the plan.  There's just too much that's obviously wrong with it.


Midway in the Advisory Opinion process

The process officially began on December 5, 2011, when the Postal Service filed its Request for an Advisory Opinion on the Network Rationalization initiative — a plan to close or consolidate about 250 mail processing plants.  The Postal Service submitted testimony from a dozen witnesses (a summary is here).

Behind the scenes, the process actually had begun months before.  In August, the Postal Service was briefing industry insiders on the plan and saying it would submit a Request for an Advisory Opinion in September or October.  For reasons that have never been made public, the Request was delayed for two months.  There’s circumstantial evidence that the postponement was caused by a market research survey — conducted in August and completed in September — showing that the plan would cause significant volume and revenue losses.  It took a few weeks to re-do the survey and come up with less damaging market research, and that may explain the delay.

Once the Request and USPS testimony were submitted, it was time for the discovery phase (which ended Feb. 24), during which intervenors in the process posed interrogatories to the Postal Service witnesses.  These intervenors included the postal worker unions, newspaper and magazine associations, industry stakeholders like Valpak, Time Inc, Pitney Bowes, and the Greeting Card Association, as well as several other interested parties, including David Popkin, Douglas Carlson, and the cities of New Orleans and Pocatello, Idaho. 

The questions sought clarifications and information, and they produced a mountain of additional testimony.  Some of the interrogatories looked for evidence that would help justify the plan for those who favor it, but mostly they picked apart the Postal Service’s testimony and began to reveal the flaws in the plan.

Next came a period for oral cross-examination of the Postal Service witnesses (March 20-23).  More questions were posed, and more weaknesses in the case for consolidations were exposed.  But the Q&A format of the interrogatories and cross-examinations did not always make it clear what the questioners were driving at and how the opponents to Network Rationalization were building their cases.

Things got much clearer this week.  April 23 was the deadline for filing rebuttal testimony challenging the Postal Service’s case, and some seventeen witnesses submitted testimony.  Most of it is very critical of the plan, and the Postal Service has its work cut out if it wants to undermine, discredit, or otherwise challenge the evidence presented by these witnesses.

The PRC’s procedural schedule indicates that the Postal Service has until Tuesday of this week to submit supplemental testimony that revises earlier testimony by taking into consideration that not all 252 consolidations were approved. 

Over the coming weeks, the Postal Service will have a chance to submit interrogatories to the rebuttal witnesses, and then in mid-June, these witnesses will be cross-examined in person as well.  The process is expected to continue through most of July, and then the Commissioners will need some time to digest everything and prepare their Advisory Opinion.  It might be done in August, but September is more likely.  

The PRC is basically halfway through the process, and we can now see both the case for and the case against Network Rationalization.  Here's a summary of the rebuttal testimony.


The Nine Towns Study: The economic impact of post office closings on small places

April 27, 2012

How do post office closings affect the economic life of small towns?  The Postal Service has not done any studies about the question, but a consulting firm has just released a report analyzing how closing the post offices in nine towns in Iowa would affect residents and small businesses.  Like a similar study done about the economic impacts of closing a mail processing plant in Illinois, the Iowa report shows that closing postal facilities can have seriously adverse economic consequences for customers, residents, and small businesses.

The study could not be more timely.  Among the amendments added to the Senate bill on postal reform passed this week was one proposed by Senator Mary Landrieu (D-LA), which, if it makes into the final legislation that's sent to the President, will require the Postal Service to determine the impact of postal facility closures or consolidations on small businesses (section 205 of the bill).

Entitled “Impact of the Closure of Post Offices 
in Northwest Iowa,” the new study concludes that the money the Postal Service would save by closing small rural post offices “will be far less than the additional costs that will be placed on the businesses and residents in those communities.”  In fact, the report estimates that these communities will suffer economic losses that are five times greater than what the Postal Service will save.

The report focuses on nine very small towns — average population, 180 — so one can only imagine how much more severe the impacts would be on larger towns.  As for the country as a whole, if closing small post offices can have this kind of effect on small towns, what will happen when the downsizing is writ large?

The nine-towns study is a microcosm of how the Postal Service's plans will affect the country.  If closing one post office has indirect effects on the rest of the town's economy at a ratio of one-to-five and anything like that happens nation-wide, the Postal Service's plan to save itself $2 billion a year by downsizing the retail network could cost the country $10 billion.  You don't dismantle something as big as the U.S. Postal Service without suffering some serious side effects.

The report identifies several areas where communities would lose out economically:

Why Postal Reform Will Fail

April 25, 2012


By any meaningful measure, whatever postal reform bill emerges from the current legislative process, it will be insufficient to staunch the flow of blood draining from the Postal Service.  More likely than not, the bill will facilitate the destruction of a national treasure by strangling the principles that support its existence.  Postal reform is going to fail because Congress cannot understand the fundamental role of a national post as essential infrastructure.  

Congress will do nothing to stem the slow evisceration of the network.  It will do nothing to prevent the wholesale destruction of the value of First Class mail.  It will do nothing to imbue a real spirit of innovation and service that restores and reinvigorates the positive role of government in ensuring the health and progress of society through promotion of the general welfare.

Congress will do nothing to hold the current management of the Postal Service accountable for the destructive and dysfunctional culture it has fostered and promoted.  It will do nothing to prevent the further perversion of the national trust embodied in the social and aspirational values that led to the provision of a means to bind the nation together in our founding documents.  It will do nothing to hold itself accountable for its desultory and self-interested approach to governing, for abandoning basic democratic values in constructing legislation.

The current administration will do nothing to stand for our basic principles either.  The legislation the President is likely to sign will result in the destruction of least 100,000 — perhaps as many as 200,000 — good, solid, middle-class jobs.  The legislation will ultimately result in large sections of the American public being abandoned in order to better serve very narrow interests.  It will transfer billions of dollars of revenue into the hands of a corporate elite, cause the deterioration of the security of our communications, and undermine one of the basic strengths of our democracy, the free flow of information and opinion.

Yes, postal reform is going to fail, and it will be as a result of our continuing self-immolation by the partisan bickering that masquerades as political dialog.  Both of our political parties have become captured by an almost mystical worship of free markets as some sort of sacrosanct natural phenomenon.  With few exceptions, our political class has succumbed to the proposition that every transaction, even basic discourse, is simply a matter of economic exchange.  

This belief has led to arcane and destructive budgeting procedures like those that created this fictional postal crisis.  It has also produced a complicated, obtuse, and impenetrable tax system that transfers the wealth, promise, and progress of the nation into the hands of an elite few.  At its most basic level, the system refuses to pay for the basic services a society must have to be deemed civilized.


THE CURRENT POSTAL CRISIS can be most directly attributed to the 2006 Postal Accountability and Enhancement Act (PAEA), which placed imponderable burdens on a basic piece of our national infrastructure.  Financially the greatest of those burdens was the massive transfer of postal revenues to the Treasury, ostensibly for the purpose of funding long-term liabilities to the retiree health care fund (RHBF).  In reality, this was simply a means of masking the continuing and ongoing profligacy of Congress.

More damaging, though, was the philosophical underpinnings of the law.  The PAEA abandoned the notion that the Postal Service is an essential service provider.  In its place, the PAEA has contributed to transforming a national institution into little more than a corporate behemoth whose primary focus is promoting “stakeholder” values.  It gave imprimatur to a long simmering agenda to abandon the promise of universal service, the utility of a broad wide ranging neutral network, and a commitment to employment in favor of a model that curried favor with a relatively narrow segment of the postal market — advertisers and marketers.

The financial crisis of 2008 and the Great Recession that followed was, at its cold black heart, the result of our increasing enthrallment with the idea of “something for nothing.” The crisis was created when the sector of the economy known as Finance, which is supposed to facilitate flows of capital in order to enhance meaningful economic activity, ascended to primacy based on the idea that the simple manipulation of money — rather than basic hard work and traditional economic activity — could produce endless profits and capital accumulation.

On Privatization

Good Reading on Postal Privatization

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

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