Contract post offices, closing faster than they open

January 29, 2012

Contract post offices look like a cheap and easy way for the Postal Service to outsource its retail postal business.  Just put the post office in a private business or community center, and don't worry about paying rent or postal employees.  There's still a post office in town, the Postal Service has met its universal service obligation, and a lot of money has been saved.  

But contract post offices are not the panacea that postal management, big mailers, and advocates of privatization would like to think they are.  They have many problems, and their numbers just keep declining.  During fiscal year 2011, the Postal Service opened 144 contract postal units, but it closed 259 of them.

News of these additional openings and closings was revealed in materials submitted by the Postal Service to the Postal Regulatory Commission (PRC) for its annual compliance report.  The document can be found on the PRC website (download the pdf here), and a list of the offices that have opened and closed is here.

A contract post office is an “approved postal provider” that’s operated by a private business or community and not staffed by USPS workers.  There are basically two types — a contract postal unit (CPU) and a community post office (CPO) — and then there's the closely related “village post office” (VPO). 

According to the 2009 Postal Employees Guide to Contract Postal Units, a CPU is “a supplier-owned or supplier-leased site operated by the supplier under contract to the Postal Service to provide postal services to the public at postal prices.”  A CPO is similar — it's a contract postal unit in which a small rural community, rather than a local business, assumes the responsibilities of providing postal services. 

Neither type of contract unit offers the full range of products and services available at a regular post office, but for many communities, it’s better to have a CPU or CPO than no post office at all.  You can get a sense of just how much people can value a CPO in this great story on Going Postal about one that closed earlier this month in Alplaus, New York, and here's another about a closing announced just a couple of days ago.

The Village Post Office was the “concept” unveiled last summer along with plans to closing 3,652 post offices under the Retail Access Optimization Initiative (RAOI).  Though the VPO just sells stamps and flat-rate boxes, it was supposed to mitigate the loss of a post office for thousands of small towns across America.  However, at this point, only about eight VPOs have been opened, and the Postmaster General, having discovered that many small towns don’t have a suitable place to locate a VPO, has backed off the new concept.

News of so many contracted units closing in 2011 is somewhat surprising, given that the Postal Service has been so intent on shifting from government post offices to "alternative retail outlets" like CPUs.  After all, they cost very little to operate — basically just the wages for the USPS personnel responsible for overseeing the contract unit from an official USPS "host" post office.  

Contract units also appeal to the big mailers, which see them as a money-saving alternative to post offices, and money saved means lower postal rates.  In its brief to the PRC on the RAOI Advisory Opinion, the direct mail company Val-Pak argued that contract units were a valuable “method of outsourcing the provision of retail services” because they reduce costs and “improve service to customers.”   

But contract units have a number of problems, and their number has been steadily declining for a long time.  In 1970, there were 7,241, and in 2010, there were 3,694.  After the openings and closings in 2011, there are 3,519 contract units remaining.  That represents a total decline of over 50%, and an average of about 90 closings a year.  

Congressman Hinchey calls for a moratorium on the closing studies

January 28, 2012

New York Congressman Maurice Hinchey has written a letter to Postmaster General Patrick Donahoe asking him “to place a moratorium on the USPS's current discontinuance studies until the USPS resolves the numerous problems the PRC identified in the RAIO. “  Hinchey is circulating the letter in Congress, looking for others to sign on with him.

The letter calls attention to the “serious flaws” identified by the Postal Regulatory Commission (PRC) in its Advisory Opinion on the Retail Access Optimization Initiative (RAOI).  The letter cites (1) inadequate financial data on all the post offices in the plan, “which makes it impossible to accurately calculate cost savings from proposed closures”; (2) inaccurate representations of revenue (various kinds of non-stamp-sale revenue were not included in the Postal Service’s calculations); (3) using geographical rather than driving distance as a criterion for putting post offices on the closing list; and (4) using criteria that disproportionately target rural post offices, a violation of 39 U.S.C. 101(b). 

The Postal Service has not yet issued a formal reply to the Advisory Opinion, and it has apparently conveyed its intention to proceed with the closings to Ruth Goldway, Chairman of the PRC.  At a meeting of the PRC on January 5th, the Chairman made some introductory remarks about the status of the closings, intended to make sure everyone understood that the moratorium did not mean the discontinuance studies had stopped.  As the Postal Service said when it announced the moratorium, the studies are ongoing — only the final closing of the doors is postponed until May 15.

Goldway also said that the Postal Service would be holding a second community meeting for most of the post offices still under study (about 3,300 of the original list of 3,652).  A second round of meetings is not required, so they are apparently intended to help rectify some of the problems the PRC had identified.  Goldway also said that we could expect to hear announcements of “mass closures” when the moratorium ends. 

Hinchey’s letter asks the Postmaster General to put a moratorium not just on the closings but on the studies themselves.  That would prevent the "mass closures" Goldway referred to.  It would also give Congress more time to address postal reform.

Just yesterday, Fredric V. Rolando, President of the National Association of Letter Carriers (NALC), announced that due to pressure from the unions, the Senate would delay a vote on S. 1789, which had been expected soon.  That's the bill introduced by Joe Lieberman (I-CT), along with Susan Collins (R-ME), Tom Carper (D-DE) and Scott Brown (R-MA).  It has some decent features, but a lot of problems.   

There's a passage on “service standards” that would restrict post office closings by ensuring that certain criteria are considered, like geography and demographics, but that would not prevent thousands of post offices from closing.  The bill  would return $11.4 billion in overpayments to the Federal Employees Retirement System (FERS), but not the $50 billion to $75 billion in overpayments to the Civil Service Retirement System (CSRS).  It would re-amortize payments to pre-fund healthcare benefits for future retirees over a 40-year period instead of 10, but still cause excessive payments.  It would also permit a shift to five-day delivery in two years, reduce workman’s comp for employees of retirement age, change contract negotiations to favor management, and move toward an exit of the federal health benefit program (FEHBP). 

The bill is still a lot better than the one likely to come out of the Republican-controlled House, which will probably be some version of H.R. 2309, the Postal Reform Act introduced by California Darrell Issa.  That bill is intended to dismantle the Postal Service and it's nothing but bad news for postal workers, post offices, and the country's postal system.  

The best of the bills are H.R. 3591 and  S.1853, introduced in the House by Oregon Democrat Peter DeFazio, co-sponsored by Hinchey and fellow New Yorker Louise Slaughter (D), and introduced in the the Senate by Vermont Independent Bernie Sanders.   These bills would “recalculate and restore retirement annuity obligations of the United States Postal Service, eliminate the requirement that the United States Postal Service pre-fund the Postal Service Retiree Health Benefits Fund, place restrictions on the closure of postal facilities, create incentives for innovation for the United States Postal Service, to maintain levels of postal service, and for other purposes.”

If the DeFazio-Sanders bill were to reach President Obama’s desk, all would be well with the Postal Service.  But that’s not going to happen.  If the House and Senate can agree on legislation — and that’s a big “if” — it will more likely be some compromise between the Issa and Lieberman bills.  It’s hard to imagine how that kind of postal "reform" will make supporters of the post office and postal workers happy.

Invisible Hands: The Businessmen’s Campaign to Dismantle the Post Office

January 24, 2012

The leaders of the Postal Service have made no secret of their plans for reforming the postal system.  They have issued white papers, given speeches, presented “optimization” programs, and appeared before Congressional committees.  The plans are clear: eliminate the layoff protections in union contracts; cut the career workforce by nearly half while tripling the number of non-career workers; reduce service standards for first-class mail; do away with Saturday delivery; give management control of workers’ benefit plans; consolidate away over 250 processing plants; and close 15,000 post offices.

What we don’t see very often are the players making this all happen.  We assume the Postmaster General is making the decisions, but he is merely the front man.  Behind him are the USPS Board of Governors, the mail industry stakeholders, and the corporate class as a whole.   These businessmen (and women) prefer to keep a low profile, so we rarely hear from them in public.  They leave it their surrogates — journalists and academics, politicians and pundits — to speak for them.  But it’s the businessmen who fund the think tanks, endow universities, make campaign contributions, pay lobbyists, and run the news media.  Yet for the most part, they are not to be seen.

In her excellent book Invisible Hands: The Businessmen’s Crusade Against the New Deal, historian Kim Phillips-Fein paints a very revealing picture of how the corporate class operates.  Her theme is the way conservative businessmen worked behind the scenes to undo the New Deal.  Believing all would be right if government stayed out of the economy and left everything, in Adam’s Smith famous expression, to the “invisible hand” of the market, these businessmen have spent decades working to weaken unions, eliminate social welfare programs, minimize government regulation of their companies, and diminish public services.

While the U.S. Postal Service is obviously not a product of the New Deal, that same conservative agenda is behind the attack on the Postal Service we’re witnessing today.   Cutting the workforce, closing post offices and plants, and moving toward privatization through outsourcing and divestiture of assets — these are all part of an effort to shape the postal system in ways that serve the interests of an elite business class rather than the good of the country as a whole.  The free-market ideology and greed for profits that drove efforts to undo the New Deal are basically what’s driving the “postal reform” movement today.  

A post office worth preserving

January 18, 2012


[Mr. Jamison serves the town of Webster in the mountains of North Carolina as its postmaster.  He has written extensively on postal issues.  In keeping with the USPS Administrative Support Manual, Mr. Jamison does not "speak for or act on behalf of the Postal Service."  These are his thoughts on where things stand and where we ought to be headed.  Mr. Jamison can be reached at —Ed.]

FOR MANY MONTHS NOW, postal management and a chorus of pundits have delivered one message: Out-of-control deficits are dooming the Postal Service, and it will survive only if management is given the authority to radically downsize the system.  Half the country's post offices and processing plants must close, Saturday delivery must go, service must be reduced, and over two hundred thousand jobs must be cut.  

These steps, however, will not ensure the survival of the Postal Service.  This is not a vision for the future.  It's an invitation to a funeral.  

After Postmaster General Patrick Donahoe spoke at the National Press Club at the end of November, it should have been clear to anyone following the trials and tribulations of the USPS exactly what vision postal senior management had for the future of the institution.  Mr.  Donahoe stated that it was his goal to wring $20 billion of costs out of the system within the next few years.  He essentially demanded free rein from Congress to disassemble the postal network as we know it.

The vision expressed by Mr. Donahoe was one of declining mail volumes, an entity that had outlived its relevancy in a technological age, and the need for a business model which transformed an institution of national infrastructure into simply another player in the mailing and delivery business.  He spoke of a future that consigned the purpose and the past of a national treasure to the dustbin of failed business models, right next to the graveyard of buggy whip makers.

The plans advanced by senior postal management involve shedding much of the current retail network and well over half of the plant facility network.  In addition, the service standards that have made the Postal Service useful and reliable were to be revised downward in what appeared to be a relentless quest for mediocrity.

The plans also involved eliminating tens of thousands of good, middle-class jobs and replacing many more with low-wage casual workers, while also dismantling retirement and health benefit systems that have served generations of workers well.

What Mr. Donahoe offered was a vision that has become popular among a small segment of the American political class.   It is a vision of an impotent public sector, a downsized, out-sourced, minimum-wage work force, and it shows a complete disregard for infrastructure.   It is a view of globalization come full circle, America as a third-world country.

Not long after Mr. Donahoe’s speech, several members of Congress awoke from their slumber and began seeing the future Mr. Donahoe proposed.  As calls from their communities became more alarming, telling of closed post offices and shuttered plant facilities, and as it became apparent that the proposed changes were not merely a matter of rightsizing postal operations but dismantling them and denigrating service, Congress began showing heightened interest, eventually demanding a moratorium on some of the proposed changes.

Yet even after agreeing to a moratorium on plant and post office closings, the Postal Service continued with the procedures and steps needed to close facilities.  Even after the Postal Regulatory Commission (PRC) found in its Advisory Opinion on the Retail Access Optimization Initiative (RAOI) that the Postal Service’s plans to rationalize the network had very little foundation, the Postal Service continued with requests for vendors to take over the hub-and-spoke operations that would be eliminated by plant closings.

The fact is the PRC found, as many of us have been saying all along, that the Postal Service’s plans were less about finding a successful business model than they were about simply carving up the postal network into bite-size chunks.  The RAOI decision returned to many of the same points raised in previous decisions, like the exigent rate case and the five-day delivery case — primarily that the Postal Service’s plans lacked substance. 

The plans espoused by the management of the Postal Service appear less the articulation of a successful outcome, the re-envisioning of a successful business model, than they are the actions a vulture capital firm might undertake when dissolving a business by extracting whatever value might exist and leaving the rest to “creative destruction.”  No one from the Postal Service has yet offered a picture of what a successful outcome might be.  Actually that isn’t terribly astonishing since it would be awfully hard to describe success when your every action is built towards taking the enterprise apart.


AT THIS POINT, the story is clear in terms of what got the Postal Service in these straits.  We know the excessive extraction of funds from the Postal Service by the poorly conceived 2006 Postal Accountability and Enhancement Act (PAEA) has resulted in non-operational deficits.  We know too that various retirement accounts have been over subscribed and that other accounting devices, like accounting for workman’s compensation obligations, have been rigged to transfer funds from the Postal Service to the Treasury.

We know too that volumes have dropped, and while some of that may be due to changing technology, a good bit is due to the ongoing recession and some may even be due to the continual atmosphere of crisis that the postal management has ginned up.

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On Privatization

Good Reading on Postal Privatization

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


Privatization in the UK

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Organizing to Save Rural Post Offices

A Community Organizing Toolkit

Revised November 2012

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