OopsPlan: The Postal Service forgets to count PMRs


July 7, 2012

When the Postal Service presented POStPlan to the Postal Regulatory Commission in May, it would not put a number on how much the plan would save, but the USPS press release said $500 million a year.  The Commission asked the Postal Service to provide the calculations that led to this estimate, and the Postal Service submitted a spreadsheet showing how much it currently costs to staff 22,000 post offices, and how much it would cost if 13,000 of them were staffed with part-time workers and the hours of operation were reduced to match revenues (USPS-LR- N2012-2/6).

Using the average salary for postmasters at each level of post office (11, 13, 15, etc.), the spreadsheet estimates the total cost for labor under the current system at $1.66 billion a year.  Under POStPlan, labor would cost $1.14 billion.  That yields a net savings of $517 million.  (There’s more about the cost savings calculations in this post.)

A couple of day ago, the Postal Service responded to a question about cost savings posed by the PRC's Presiding Officer, Nanci Langley: “In calculating the cost savings as shown in Library Reference No. 6, how does the Postal Service treat offices with a current Postmaster vacancy and which may be managed by (a) an Officer in Charge (OIC) and (b) a Postmaster Relief (PMR)?” 

The Postal Service replied that the average used in the calculations was “an average of the salaries for Postmasters currently assigned to each of the respective levels.  The Postal Service used this average salary for offices with an OIC or PMR covering the assignment.” (POIR 4-6)

In other words, the Postal Service based its cost-savings estimate of $500 million on calculations that average the salaries of postmasters, without taking into consideration the fact that in over 3,000 POStPlan post offices, there is no postmaster.  Instead, there’s a non-career employee who earns a half or third as much.  The savings from using these PMRs have therefore already been realized, and they are not part of the savings for POStPlan.  By not counting PMRs, the Postal Service has significantly overstated the cost of labor under the current system.  The $500 million figure thus overestimates the savings by a considerable amount.

The PRC, or one of the participants in the Advisory Opinion process, may ask the Postal Service to provide a revised cost savings estimate using the actual salaries of employees at the POStPlan post offices.  While we wait for the results, here’s a rough estimate of how including PMRs will affect the cost savings analysis.  

As the table shows, there are over 3,000 post offices where there’s a postmaster vacancy being filled by a PMR who earns much less than a career postmaster.  The Postal Service has overestimated the cost of labor under the current system by $134 million.  That means the actual estimate for savings from POStPlan should be reduced from $517 million to $383 million — a reduction of over 25 percent.

It should probably come as no surprise that the Postal Service would count as cost savings something that has nothing to do with the plan.  It's done the same thing with the Network Rationalization plan, which boasts cost savings that have nothing to do with consolidating processing plants per se, such as using non-career employees.

But it's still strange that the cost-saving analysis for POStPlan would fail to include the reduced cost of labor due to the use of PMRs.  When the Postal Service calculates cost savings for closing a post office, it always uses a full postmaster salary, even if the office has been staffed by a PMR for years.  The PRC has repeatedly complained about this practice when it issues orders on appeals.  For just that reason, when Save the Post Office made a preliminary estimate of the savings for POStPlan, weeks before the Postal Service provided its official estimate, we included PMR savings, and that made quite a difference in calculating labor costs.

The reduced cost savings of $383 million does not tell the whole story.  Other modifications may be necessary in calculating cost savings.  Earlier this week, the APWU revealed that it’s going to challenge POStPlan because using thousands of PMRs violates the 2010 Collective Bargaining Agreement.  If the union prevails in this dispute, the Postal Service may find it necessary to staff part-time post offices with employees who earn more than PMRs. 

The $383 million also doesn’t include any of the costs that may be incurred with implementation, like training thousands of new part-time employees and sending employees from other offices to a remotely managed office to deal with problems.  Nor does it take into consideration the cost of giving 4,600 postmasters a 2 percent raise when their office is upgraded to a Level 18, probably about $5 million a year.

More important, the cost savings estimate does not include any lost revenue that will be caused by reducing total window hours at 13,000 post offices by a third, from 35 million to 25 million.  The Postal Service claims that it cannot predict revenue losses because it has never done anything like POStPlan before.

But the Postal Service does have experience with reducing hours (1,500 post on the POStPlan list operate at 2, 4, and 6 hours a day), eliminating Saturday hours, and filling postmaster positions with PMRs. 

The Postal Service knows a lot about the issues with using casual non-career personnel instead of trained, experienced postmasters, but it doesn’t mention any of the problems and costs in the POStPlan testimony.  

The Postal Service could easily survey customers at post offices where these changes have been made, but instead it commissioned a study to show that people would prefer reduced hours to closing the office completely. 

The Postal Service could also examine the books on these post offices to see how revenues were impacted when the hours were cut or a postmaster position left vacant.  These estimates might not be perfect, but they’d be more believable than the Postal Service’s current position that because it can’t estimate lost revenue, there won’t be any.

When all is said and done, POStPlan probably won’t save very much at all.  But that’s not really its goal.  The plan is just a way to phase out brick-and-mortar post offices.  It’s not about saving money, since post offices don’t cost much to begin with, and saving a couple of hundred million dollars, or whatever POStPlan might save in the end, means nothing in the context of a $65 billion budget.  The Postal Service’s ultimate goal is replacing post offices with postal counters in supermarket chains and big box stores — another step in the path to privatization.

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