Nothing stays these couriers (except on Saturdays): The Postal Service moves to five-day delivery


February 6, 2013

The Postal Service is going to stop delivering mail on Saturdays. The change will take place in August.  The Postal Service will continue to deliver parcels and to PO boxes on Saturdays, but that's about it.  The Postmaster General says the move is expected to save $2 billion a year once the plan is fully implemented.  

 

What about Congressional approval?

The first big question is how the Postal Service can do this without Congressional approval.  Today’s press release says simply, “The Postal Service continues to seek legislation to provide it with greater flexibility to control costs and generate new revenue and encourages the 113th Congress to make postal reform legislation an urgent priority.”

The press release doesn’t make it clear that, as the Postal Service’s own five-year plan noted, moving to five-day delivery requires new legislation.  In a statement released earlier today, Senator Susan Collins said quite clearly, "The Postal Service’s decision to eliminate Saturday delivery is inconsistent with current law and threatens to further jeopardize its customer base."

According to this morning’s New York Times report, “The agency has long sought Congressional approval to end mail delivery on Saturdays.  But Congress, which continues to work on legislation to reform the agency, has resisted.  It is unclear how the agency will be able to end the six-day delivery of mail without Congressional approval.” 

Postmaster General Donahoe says that he can make the change without new legislation.  The ban on five-day delivery is included in Congress's annual appropriations bill (not that the Postal Service gets any appropriation).  The Postmaster General says that because the government is operating under a temporary spending measure rather than an appropriations bill, he can make the change in delivery on his own.  He will also be asking Congress not to reimpose the ban when the spending measure expires at the end of March.  (More on the legal angle, here and here.)

With postal legislation at an impasse, it’s certainly not a given that Congress would even approve a move to five-day delivery.  The Obama administration has expressed its approval, and the House bill under consideration last year would have permitted the Postal Service to cut Saturdays as soon as six months after passage of new legislation.  That bill never got passed, however, and one reason may be that 222 members of the House signed on to a resolution maintaining Saturday delivery.

The Senate bill would have preserved six-day delivery for two more years, and it would have permitted elimination of Saturday delivery only if other cost cutting measures were inadequate.  Perhaps the Senate, under the leadership of Tom Carper, will back off this issue and allow legislation to move forward permitting the shift to five-day delivery.  Or perhaps public pressure on elected officials will put a stop to the plan before it’s ever implemented.

This, by the way, is not the first time the post office has discontinued Saturday delivery.  Back in April 1957, lack of funding caused the Department of the Post Office (before it was the Postal Service) to stop delivering the mail on Saturday.  That lasted exactly one day.  The chair of the House’s postal subcommittee summoned the Postmaster General and scolded him for the “reprehensible scare tactics” he was using to get more appropriations.  Saturday delivery resumed the following week.

 

The questionable cost savings estimates

The next question that should be on anyone’s mind is how the Postal Service came up with the figure of $2 billion in savings.  That estimate should come under serious scrutiny, as did the Postal Service’s earlier estimates when it presented the original plan to eliminate Saturday delivery back in 2010.

That plan was reviewed by the Postal Regulatory Commission in an advisory opinion issued in March of 2011.  It called for eliminating all Saturday delivery except for Express Mail and delivery to those Post Office Boxes currently receiving Saturday delivery.  It would have also eliminated Saturday outgoing mail processing (except for Express Mail and some destination entry bulk mail).  The collection of mail from street collection boxes would have also been eliminated on Saturday.  It's not clear yet how the new plan addresses those issues.

In presenting the 2010 plan to the PRC, the Postal Service said it would save $3.3 billion in operating costs and cause $0.2 billion in net revenue losses, for a net savings of $3.1 billion.  

After reviewing the plan for a year, the PRC determined that the Postal Service had overstated the gross savings by $1 billion and underestimated the net revenue loss by $0.4 billion.  According to its calculations, the net savings would be $1.7 billion — $1.4 billion less than the Postal Service had estimated.

The Postal Service disputed the PRC’s calculations, but their difference of opinion was never resolved.  However, in its five-year business plan, presented in February 2012, the Postal Service did downsize its original estimate from $3.1 billion to $2.7 billion, but that was still considerably more than the PRC’s estimate.

The new figure of $2 billion cited by the Postmaster General in today’s announcement reflects the fact that the new proposal maintains Saturday delivery for parcels.  But given that the Postal Service overstated the savings the first time around, it’s very likely that the figure of $2 billion represents a considerable overestimate of what the plan will actually save. 

Unfortunately, the new estimate will not be reviewed by the PRC in a second advisory opinion, so there will be no independent analysis of the Postal Service’s calculations.  You can be sure the news media will uncritically repeat the $2 billion figure ad nauseam.  (Update: According to this internal USPS memo, the Postal Service will ask the PRC to "update" its earlier advisory opinion.)

A short but useful summary of the differences between the Postal Service’s calculations and the PRC’s can be found in the PRC’s 2011 Annual Report (pp. 29-30).  There’s also a March 2011 GAO report on five-day delivery.  Like almost all GAO reports, it recommends the cost-cutting move.  Because it came out shortly before the PRC advisory opinion, it does not examine the Commission’s alternate cost savings analysis or question the Postal Service’s numbers.

 

The Commissioners disagree

In its 2011 advisory opinion, the PRC did not make a recommendation for or against eliminating Saturday delivery because there was a difference of opinion among the commissioners.  As a result, the commissioners issued their own “separate views” about the proposal.

As Chairman Ruth Goldway explained in her statement, “While the Commission as a whole certifies the preceding advisory opinion, and its extensive analysis of the potential cost savings and impact on citizens of service cutbacks, we did not agree on the broader policy concerns arising from the Postal Service Proposal."

The two Democrats on the Commission were critical of the proposal, while two of the three Republicans were in favor.  The fifth, Commissioner Mark Acton, did not issue his own statement, but it’s probably safe to assume he sided with his fellow Republicans.

The commissioners who came out in favor were Tony Hammond and Dan Blair.  Commissioner Hammond wrote, “No postal customers want less service, but our analysis shows that even after the Postal Service’s somewhat optimistic estimates are corrected, eliminating Saturday delivery would provide substantial financial benefit.”

Commissioner Dan Blair wrote, "The proposal represents a dramatic step toward realignment of the Postal Service’s universal footprint so that postal operations and expenses are in line with revenues.” 

After leaving the PRC, by the way, Mr. Blair went on to become the director of the National Academy of Public Administration, which is currently reviewing (and probably about to endorse) a plan to privatize half the Postal Service – all but the delivery component — and turn it into a hybrid "public-private" entity.  

Commissioner Nanci E. Langley disagreed with her fellow commissioners, noting in her statement that “the Postal Service’s proposal overstates estimated savings, understates the impact on service, and overlooks the impact of cutting Saturday delivery and processing on rural, remote, and non-contiguous populations.”  Langley expressed serious reservations about the plan and recommended that the Postal Service address the concerns identified in the advisory opinion before proceeding.

 

Goldway: “Does not conform to the Nation’s postal policy”

Chairman Goldway took an even stronger position against the plan.  She concluded quite explicitly that “eliminating Saturday mail delivery does not conform to the Nation’s postal policy.”  The chairman observed that the Postal Reorganization Act of 1971 (PRA) requires the Postal Service to provide equitable postal service for all areas of the nation (Title 39, sections 101 and 403).

 “The Commission’s advisory opinion,” wrote Goldway, “describes how the Postal Service’s plan will produce a significant and disparate reduction in levels of service throughout the nation, and that the impact of that reduction in service will be particularly felt in remote and rural areas.”

That’s because, as Goldway explained, “As the record of the Commission’s opinion shows, some 25 percent of mail will be delayed by two or more days, which is more burdensome to any population that has greater reliance on the mail….  More importantly, remote and rural areas rely on a wide variety of postal services provided by rural carriers and highway contract route carriers, in locations where a post office can be quite distant.  By removing Saturday delivery, that aspect of service is left unfilled. I believe this rural divide is much greater than is intended in national postal policy.”

 

Counting up the job losses

While Goldway was primarily concerned about the Postal Service fulfilling it Universal Service Obligation and the disparate effects of the plan on rural populations, there was some testimony before the Commission about the job losses the plan will cause.  Senator Akaka of Hawaii, for example, submitted testimony noting the job loss issue.

While there is some cost savings in fuel and wear-and-tear on vehicles, nearly all of the savings comes from slashing jobs.  According to the March 2011 GAO report on eliminating Saturday delivery, the Postal Service estimated that if 5-day delivery had been in effect in fiscal year 2009, it would have realized the $3.3 billion in gross savings by saving over 40,000 full-time equivalent (FTE) positions, including 26,400 city-carrier and 9,925 rural-carrier FTE positions.

The National Association of Letter Carriers (NALC) came up with an even higher estimate and put the figure at somewhere between 50,000 and 80,000.

Because the new plan announced today maintains Saturday delivery for parcels, its impact on job losses would be less than that associated with the original plan, but they would still be considerable and measured in the tens of thousands.  Figuring an average salary with benefits of about $75,000 per postal worker ($50,000 salary, plus benefits), a savings of $2 billion would translate into 27,000 jobs.

In briefing materials shared with the postal worker unions, Postmaster General Donahoe said that eliminating Saturday deliver would translate into 23,000 fewer carrier jobs.  There would also be thousands of additional job losses in other areas, like mail processing.  An internal talking points memo distributed by the Postal Service says that a total of 35,000 full-time positions would be eliminated.  The PMG said that through attrition and the elimination of overtime, he hoped to avoid having to lay anyone off.  

 

Winners and losers

If Saturday delivery is eliminated, the big winners will be those big mailers who don’t care about a day or two in delivery times.  That’s basically a large segment of the ad mail business,  like Valpak, the coupon company, which testified on behalf on the plan when it was reviewed by the PRC.  The catalog companies are fine with the shift to five-day delivery as well — "they think the savings will be passed on to them in the form of fewer future rate increases."  

These stakeholders are not overly concerned about delivery speed.  Their primary concern is keeping postal rates as low as possible, and they generally endorse any downsizing and cost-cutting steps that help the Postal Service maintain their low rates.

The losers are going to be mailers who care about fast delivery, like time-sensitive ad mail (announcing sales) and newspapers.  As the New York Times reported last year, small daily and weekly newspapers, which are delivered on Saturday, are opposed to five-day delivery.  “It does no good for last week’s newspaper to arrive on a Monday,” said Tonda Rush, chief executive of the National Newspaper Association, a trade group of small weekly and dailies. “By then its history, not news.”

Community newspapers may find it necessary to hire their own delivery companies, and that means higher costs for the publishers (and their readers) and less revenue for the Postal Service.

Cutting Saturday delivery could also hurt businesses like Netflix.  When the plan was proposed back in 2010, NBC reported that “the elimination of Saturday delivery would mean that Netflix subscribers will have to endure two consecutive days of no service — nothing to scoff at in a time when consumers have come to expect high speeds and (nearly) instant gratification.  And Saturday is a big movie day.” 

No Saturday delivery will drive more customers to the streaming option on Netflix (if they have high speed internet access, that is), and that too will mean less business for the Postal Service.

The credit card and insurance industry may also be adversely affected because slowing down delivery impacts cash flow and billing cycles.  They’ve been shifting over to email notification, and eliminating Saturday delivery will accelerate that process, as Arthur B. Sackler, executive director of the National Postal Policy Council, has acknowledged.

 

Public opinion and the public interest

As for the general public, it will be the biggest loser, especially people who live in rural areas.  They have less access to broadband internet and they live further from their post offices (which under POStPlan are open fewer hours), so they'll be most inconvenienced by losing a day of delivery.

People who vote by mail — an increasing percentage of the population — will also be negatively impacted.  In the PRC's advisory opinion process, an expert witness testified that losing a sixth day of delivery could jeopardize the timing involved in voting routines in Oregon and might disenfranchise some voters.

The problems are exacerbated by the fact that the elimination of Saturday delivery is not happening in isolation.  The Postal Service has also slowed down First-Class mail with its Network Rationalization plan to close over two hundred mail processing plants, and it's reducing hours at 13,000 rural post offices.  

So imagine it’s Wednesday and you want to put something in the mail, something that you’re used to see delivered the next day.  But because of the reduced hours at your post office, you can’t get there until Thursday.  The next-day mail now takes two days because of all the plant consolidations, so your mail won’t be delivered until Saturday.  But starting in August, there’s no delivery on Saturday, so your mail won’t be delivered until Monday (if it’s a holiday, make that Tuesday).  

Yet according to the Postal Service and the mainstream media, people don't care and actually support eliminating Saturday delivery.  Today's USPS press release says, “Market research conducted by the Postal Service and independent research by major news organizations indicate that nearly seven out of ten Americans (70 percent) supported the switch to five-day delivery as a way for the Postal Service to reduce costs in its effort to return the organization to financial stability.”

One of the surveys cited by the press release is a Gallup poll conducted in June of 2012. (After the 2012 election, who listens to Gallup anyway?)  Here’s how the poll put the question:

The USPS press release also cites a Washington Post poll that came up with similar results.  The Post titled its article about the survey as follows: “Poll says most Americans back halting Saturday mail but not closing post offices.”  

This poll also put the question in terms of limited options: end Saturday delivery (71%);  close some branches, including your local post office (35%); provide additional federal funding (44%); raise stamp prices (44%).

Aside from incorrectly implying that the Postal Service already gets some federal funding ("additional"?), the Post's survey, like Gallup's, shows only that people would prefer to keep their post office open and stamp prices down rather than maintaining Saturday delivery.  Despite what the Postal Service says and what the news headlines repeat, the polls do not show that most Americans favor eliminating Saturday delivery.  

Needless to say, these surveys didn’t include other options that might not have degraded service, like requiring large bulk mailers to pay 100 percent of what it costs to process and deliver their mail (which would bring in more revenue than any of the options mentioned in the surveys) or having Congress change the law on prefunding retiree health care costs (which would eliminate 80 percent of the postal deficit). 

Nearly all Americans, if they understood what the Postal Service was really up to, would not favor eliminating Saturday delivery or any of the other cuts in service the agency has proposed or implemented.  But the way the major media will tell today’s story, there’s no reason to think average Americans will have any idea how the leaders of the Postal Service, corporate interests, and privatization ideologues are working together to steal away the people’s postal office.


(Photo credits: New Yorker cover)

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