A Civil Action: The People of the United States vs. The U.S. Postal Service

February 21, 2012

The Postal Service juggernaut keeps rolling on with its downsizing plans, and it seems prepared to crush whatever stands in its way — postal workers, post offices, communities, history.  There doesn’t seem to be anyone or anything that can stop it — not Congress, not the unions, not the Postal Regulatory Commission.  Perhaps it’s time for the People of the United States to take the U.S. Postal Service to court.  

The opportunity for a legal case presented itself just a few days ago when the Postal Service released its Environmental Assessment (EA) of the potential impacts of the Network Rationalization initiative, the plan to consolidate 250 processing plants.  The EA minimizes the potential effects of everything the Postal Service is planning to do, and the case, as they say, looks ripe for judicial review.


The FONSI Scheme

The EA was done pursuant to the National Environmental Policy Act (NEPA), which requires government agencies about to embark on an action that could have significant environmental impacts to conduct a thorough review prior to making decisions. 

On February 10, the Postal Service released the environmental assessment describing the impacts of the plan.  It’s called the Programmatic Environmental Assessment (PEA).  You can find a pdf of the PAE here.  (Note: It’s long — 170 pages plus appendices — and may take a while to download.)

Based on the results of the PEA, the Postal Service has issued a Finding of No Significant Impact (FONSI), indicating that the Network Rationalization plan will not have a significant impact on the environment.

A finding of “no significant impacts” is pretty amazing when you consider that the PAE encompasses everything from air quality to socioeconomic factors, and when you also consider that the scope of the PAE is not limited to the plant consolidation plan.  NEPA requires agencies to consider the "cumulative effects" of a proposed action and the other related actions being proposed because effects may be exacerbated when they interact with each other.

The PAE thus considers several components of the USPS 2010 Action Plan, “Delivering the Future,” such as previous plant closings (AMPs), the Retail Access Optimization Initiative (RAOI) to close 3,652 post office, eliminating Saturday delivery, enhanced alternate sites like the Village Post Office, and disposition of “excess buildings.” 

That’s a lot to consider, but the PAE still does not go as far as it should have.  At the same time it was doing the PAE, the Postal Service was preparing its Five-Year Plan, and the new business plan goes much further than the 2010 Action Plan.  Just in terms of post offices, for example, closing all 3,652 post offices in the RAOI would save $200 million, but the Business Plan indicates a savings of $2 billion in the retail network. That could only come from closing many thousands of post offices — probably 15,000, the number mentioned several times by the Postmaster General.  The PAE does not even begin to consider the impacts of that component of the Five-Year plan.  (More on the business plan here.)

According to NEPA, the agency doing the environmental review can come to one of three conclusions: (1) the action is a “categorical exclusion” (i.e., it’s so minor there won’t be any significant impacts, like installing energy efficient lighting); (2) there will be a significant environmental impact, in which case the agency must proceed to prepare an Environmental Impact Statement (EIS); or (3) the impacts are uncertain, in which case the agency must prepare an environmental assessment (EA).  (There’s more about all this in the Citizen’s Guide to the NEPA.)

The Postal Service has gone down the third path, and the PAE, having reviewed the impacts, says the Network Rationalization plan, even combined with the RAOI and other actions, will not have a significantly adverse effect on the environment. 

The Postal Service has thus issued a “Finding of No Significant Impact."  The FONSI's main purpose is to show why the impacts will be negligible or at least not significant enough to merit a full Environmental Impact Statement.  That would have taken a lot of time and effort, and even more important, it would have given the public an opportunity to get involved in a very considerable way, with a draft EIS, scoping meetings, public comment periods, expert testimony, and a final EIS. 

The FONSI means that the environmental review of the Postal Service’s plans will have been very minimal, and the public will have essentially been excluded from any serious involvement with the process.  

A Mess in Maryland: Mail delayed and workers call for an investigation

February 20, 2012

Last year, when the Postal Service was studying the Processing and Distribution Center in Frederick, Maryland, for consolidation, postal officials said customers could expect the same level of service as before.  It doesn't look like things have worked out that way.  Numerous problems have come to the attention of the local press, and several former employees at the plan have filed a formal complaint with the USPS Inspector General.

On November 19, the Frederick P&DC was closed, and its processing work moved to the facility in Baltimore.  Frederick’s 180 employees were excessed to various other plants, including Baltimore (a congested 50-mile drive away) and Linthicum, Maryland (also 50 miles away). 

The consolidation actually began in October, and troubles occurred almost immediately.  Julie Maynard, editor and owner of The Brunswick Citizen and The Valley Citizen newspapers, told the Frederick News-Post on Nov. 21 that some of her customers still had not received papers that were printed Nov. 9.  Usually her subscribers receive the issue the day after it goes to press.  Maynard thinks that she lost a number of subscribers because of the delay, and she told the News-Post, “It’s just the beginning.”

As Christmas approached and mail volumes increased, the problems got worse.  The News-Post asked post office customers who had noticed a delay in mail service to contact the newsroom, and about 50 people responded.

One told the News-Post that medication refills he ordered in November from an online pharmacy in Florida were delivered to his home a month later.  A jewelry designer said pieces she sent to mail-order customers in early December had not reached their destinations two weeks later, forcing her to remake the pieces and resend them via UPS.  Other complaints described bills, insurance documents, and invitations that arrived late or never at all, and sale flyers arriving after the sale was over.

Last week, several of the former workers at the Frederick plant wrote a formal complaint to the USPS Inspector General.  The letter identifies examples of when the mail was significantly delayed, when mail was diverted to facilities other than Baltimore, and when trucks of mail were backed up for days, sometimes parked illegally on public roadways.  

The Postal Service Unrolls Its Five-Year Plan

February 19, 2012

The former Soviet Union was famous for five-year plans.  Between 1928 and 1991, it announced thirteen of them.  The plans were designed to increase economic production, achieve efficiencies through centralized planning, and redistribute the wealth along Marxist principles.  Each was announced with great fanfare and fantastic posters designed by progressive artists employing the latest propaganda techniques.  (The one at the left, done in 1930, says, "Fulfill the five-year plan not in five years, but in four.")

The Postal Service has just released a Five-Year Plan of its own.  Entitled “Plan to Profitability,” the new Business Plan is designed, like the Soviet plans, to take advantage of automation and improve efficiencies.  It too will redistribute the wealth, though the money will not be flowing in a direction Marx would have approved of.

The new Business Plan is basically a version of what the Postal Service floated this past summer in a couple of white papers on "workforce optimization" and the retiree benefit plans.  There may be a more thorough business plan sitting somewhere in postal headquarters, but the document released to the public is basically a Powerpoint presentation with a lot of groovy graphs and charts.  It's mostly PR, and the Postmaster General is doing the media circuit promoting the plan.  It's crunch time.  The moratorium on closing post offices and plants ends on May 15, and Congress needs a kick in the butt or else the Postal Service will have to execute its endgame, whatever that is.

The Soviet plans were mostly disasters — they caused famine, failed to reach goals, and led to a deteriorated standard of living — and the last of the plans, unrolled in 1991, didn't get past year one — the Soviet Union dissolved before it could be implemented.

We'll have to see how things go with the Postal Service's Five-Year Plan.  The headlines have all focused on the fifty-cent postage for a First-Class stamp, but there's a lot more in the plan worth noting, starting with who wrote it.


The Postal Service outsources its business plan

The Business Plan was produced with the help of Accenture and Boston Consulting Group, joined by the new member of the team, Evercore.  The Postal Service has hired the first two several times in the past to make projections and prepare action plans.  Their help does not come cheap.  Accenture received $125 million in 2011 in business from the Postal Service (it’s #7 on the list of biggest suppliers). 

Accenture is a global management consulting and technology outsourcing company that the Postal Service contracted to help produce the 2010 Action Plan and the background report for the USPS's 2008 "Report On Universal Postal Service and The Postal Monopoly," which argues the Postal Service needs "flexibility" in the way it defines the "universal service obligation."

The Boston Consulting Group is another of these global management consulting firms.  It “has played a major role in preparing companies for deregulation and privatization in post-Cold War Europe.”  BCG prepared a report projecting mail volumes through 2020 that the Postal Service frequently cites.

Evercore is the investment banking firm founded by Roger Altman, the “ultraconnected” Wall Street and DC insider who’s made millions parlaying his connections and giving out high-priced advice, like helping with the restructuring of General Motors.  The Postal Service hired Evercore a few months ago to provide the agency with advice on “restructuring.”  

(Update: The USPS press release about the Business Plan says that it "reflects prior business model analysis from McKinsey & Company."  McKinsey is another of these global management consulting firms.  According to Wikipedia,  it has an interesting track record: Enron CEO Jeffrey Skilling is an alum of McKinsey, Swissair entered bankruptcy after following recommendations from McKinsey, AT&T was told by McKinsey in 1980 that cellphones would only be a "niche market," and McKinsey has been named as a defendant in Hurricane Katrina litigation.  McKinsey was hired by Japan and India when their postal systems considered privatization, and the company website says, "We support our clients as they position themselves to meet regulatory requirements and accompany them on the road to successful privatization."  More here and here.) 

With consultants like these pitching in on the Business Plan, it’s not hard to guess what direction the Postal Service is heading.  

The plant consolidation plan: 35,000 jobs lost, and "no significant impact"?

February 16, 2012

In order to comply with the National Environmental Policy Act (NEPA), the Postal Service has prepared a Programmatic Environmental Assessment (PEA) for the Mail Processing Network Rationalization Initiative.  Although 250 communities and 35,000 postal workers will be directly affected, the PEA states that the consolidation plan will have “No Significant Impact."

The “environment” includes not just air quality, noise, land use, and waste disposal but also socioeconomic considerations, like the economic impacts on the community.  It’s hard to believe that the Postal Service thinks closing a large processing plant will have no significant impact on a community, and there’s not much in the report to support the claim, either.

As part of the report, the Postal Service has provided more detailed numbers about the reduction in the workforce than it initially included in the Request for an Advisory Opinion to the Postal Regulatory Commission (PRC).  Nearly 35,000 positions would be affected.  The breakdown is summarized in the following table.

The Postal Service has previously provided a discussion about how the workforce reduction would be achieved, given that the union contracts have no-layoff clauses.  In the materials provided to the PRC back in December, there’s testimony by Kevin Rachel, a Manager in the USPS labor relations department, so for more details about RIF, VER, eReassign, etc., see his testimony, here.

The PAE also includes a discussion about the economic impacts on communities that lose their processing facility.  As the report explains, “These impacts may be direct impacts through loss of employment and expenditures to service providers and suppliers, and indirect through loss of jobs in other sectors of the local economy and loss of sales at local trade and service businesses, such as restaurants and gas stations.  In addition, service providers who are contracted directly with the Postal Service would also be impacted.”

The following table shows how the workforce reduction breaks down in terms of dollar amounts: 

As the table shows, cutting 34,058 jobs would have a direct labor impact of $2.58 billion.  That’s nearly $2.6 billion no longer flowing into communities through the salaries of postal workers.  But that’s just the beginning of the impact.  There’s also a huge ripple effect  on the rest of the community — non-postal workers in the service and retail sectors who lose their jobs, lost retails sales, lost tax revenue, and so on.

In order to assess what that might mean to an individual community, the Postal Service turned to a study of the economic impact of job losses in Springfield, Illinois (Sangamon County), where the Postal Service has a mail processing plan slated for consolidation.  The study was commissioned by the Greater Springfield Chamber of Commerce, and it was conducted by the Regional Development Institute of Northern Illinois University.    

The study provides the following table showing the losses that closing the plant would cause:

The "direct" employment number refers to the 300 postal workers who would lose their jobs, and the “indirect” employment figure of 145 refers to service, retail, and other non-USPS jobs that would be lost if the plant closed.  The next three lines offer three different ways of calculating the losses.  The first, 'Employee Compensation," calculates the total salaries for the 300 postal workers (it uses an average of salary of $78,333, including benefits), plus the salary of 145 non-postal workers.  “Output” refers to the value of an industry’s business activities, including retail sales, that would be lost.  “Value added” refers to the gross domestic product of the county, and it includes employee compensation, rent, interest, taxes, and profit paid or earned.

The NIU study shows that you can't measure the impacts on the community by just looking at the salaries of postal employees.  The losses in "indirect" costs would be very large as well, whatever method of calculation you choose to use.  In the case of output losses, for example, the indirect losses are almost 40% of the total loss.

Just to put the losses in context, the total output losses of $42.7 million would be about 2.1% of Sangamon County's total output (in sales) of $2.1 billion.  Not a lot percentage-wise, perhaps, but still a considerable sum.

To get a sense of the impacts nationwide, we can extrapolate from the Sangamon numbers.  The Postal Service is planning to reduce the workforce by 35,000 jobs.  The Postal Service's own numbers show an impact of over $2.5 billion in salaries alone (that includes benefits).   But the output impacts, direct and indirect, would total $5 billion, and the lost wealth in terms of GDP would be about $3.7 billion. 

The PAE does not calculate nationwide impacts like this.  It simply concludes the discussion of economic impacts as follows: "The Proposed Action would result in a moderate adverse impact on local economies.  However, these impacts would not be significant.  On a national or programmatic level the economic impacts would be negligible because the overall economic system is much larger and some of the jobs lost at 'study' facilities could be offset by additional jobs at 'gaining' facilities.  Therefore, any impacts on the national economy would not be significant."

Deciding whether a particular economic impact is "moderate," "significant," or "negligible" is a qualitative judgment.  What may be "negligible" to the Postal Service may be very "significant" indeed to the community suffering the economic impacts of a consolidation.  And the notion that more economic activity in the communities with the "gaining" facilities will offset losses for the closing facilities makes little sense.  It's not as if the jobs are just going from one town to another.   The whole purpose of the consolidation plan is to eliminate 35,000 jobs.

The Postal Service says the consolidation plan will lead to "significant" cost savings for itself of $2.1 billion — about 3% of its annual budget.  In order to achieve this relatively modest cost savings, the Postal Service is willing to put 35,000 postal employees and 17,000 non-postal employees out of work and inflict $4 or $5 billion of losses on 250 communities across the country.  All so that it can save maybe $2 billion.  That’s postal math for you.

(Photo credit: Springfield IL post office & processing facility)

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