Congressional Testimony

The USPS Board of Governors announced today that it has decided not to go forward with the plan to end Saturday delivery on August 5, 2013. The press release is here.

The Board acknowledged that the Continuing Resolution passed recently by Congress means that the Postal Service must continue delivering the mail six days a week.  Apparently a recent analysis from the GAO and pressure from some members of Congress trumped Darrell Issa's contention that the Postal Service could proceed with the new delivery schedule under current law. 

The BOG said it was “disappointed with this Congressional action,” but it will “follow the law” and delay implementation of the new schedule until Congress passes legislation permitting it.

Given the Postal Service’s “extreme circumstances and the worsening financial condition,” the Board is now looking for other ways to cut costs and increase revenues.  The BOG has therefore directed management “to seek a reopening of negotiations with the postal unions and consultations with management associations to lower total workforce costs.”  It’s not clear what kind of workforce reductions the BOG is envisioning, but we’ll undoubtedly hear more about that soon.

The BOG has also told the Postmaster General to consider requesting an exigent rate increase from the PRC.  That’s not going to make mailers happy.  

In case you’re not up on the subject of exigent rate increases, this refers to the fact that the Postal Accountability and Enhancement Act (PAEA) of 2006 capped postal rate increases at the rate of inflation (as measured by the Consumer Price Index).  If the Postal Service wants to raise rates beyond the CPI, it must ask the PRC to approve an exigent rate increase. 

In July 2010 the Postal Service submitted a request for an exigent rate increase of 5.6% percent, which would have brought in an extra $3.2 billion annually.  The request went back and forth between the Postal Service and the PRC (and even ended up in court).  One of the key questions was simple enough to understand but difficult to answer: How much of the Postal Service’s deficit was due to the recession (an “extraordinary circumstance” that justified a rate increase) and how much was due to electronic diversion (a systemic problem that should not be solved by a rate increase). 

The Postal Service determined that its losses due to the recession for 2008-2009 were somewhere between 67 percent and 97 percent, depending on how one did the calculations.  (The Internet, in other words, had much less to do with the Postal Service's financial condition than we're constantly led to believe.)

As a result of its exchanges with the PRC, the Postal Service reduced the rate increase request from 5.6 percent to 4 percent (about $2.3 billion a year).  Then in August 2011, due largely to pressure from big mailers, it looked as if the Postmaster General had decided not to pursue an increase at all.  But in November 2011, the Postal Service said it was proceeding with the request.  

Sometime after that, the Postmaster General changed his mind again and dropped the request.  As recently as last September, he was described as “standing by his guns" and saying he wouldn't pursue the increase. 

Now the increase it back on the table.  The big mailers will put up a huge fight to prevent it, just as they did the first time around.  They're probably calling their lobbyists right now, telling them to press Congress to pass legislation that allows the Postal Service to end Saturday delivery and take other cost-cutting steps that would make a rate increase unnecessary.  In fact, the Board of Governors may have raised the prospect of an exigent rate increase for precisely that reason.  

Speaking of threats, the USPS press release also quotes the BOG saying, "Delaying responsible changes to the Postal Service business model only increases the potential that the Postal Service may become a burden to the American taxpayer, which is avoidable."  

Now even the BOG is crying "bailout."

Dennis Ross, Tea Party congressman from Florida, held another hearing on the post office today.  The question before the committee was “Postal Infrastructure: How Much Can We Afford?"  Given that Ross is no friend of the Postal Service, you can can quess the answer—not much. 

Below is a video of the hearing, and after that, a brief summary and response.

The first panel’s witnesses were Mr. David E. Williams, Vice President of Network Operations Management for the USPS, and Mr. Phillip Herr, Director of Physical Infrastructure Issues of the Government Accountability Office.  Herr, you may recall, was the focus of a Bloomberg article about the Postal Service a few weeks ago.  The GAO has been one of the main forces behind the downsizing of the postal service.  Along with the OIG, it’s been issuing report after report about the need to close post offices and the kinds of changes to the law, regulatory procedures, and postal service administrative policies that would make it faster and easier to close post offices.

The thrust of the questioning from Ross and fellow Republicans, as well as a Democrat or two along the way, was that there are too many post offices and too many processing facilities, and this is one of the main reasons the Postal Service is having financial problems.  No news here.

There were a couple of interesting moments, however.  At one point (it's 28 minutes into the you-tube video),  Congressman Stephen Lynch, a Democrat from Massachusettes, asked Herr, "Of the 38,000 post offices in the US today, how many do you think we really need?"  Herr wouldn’t "venture a guess," and instead kicked the question to Williams, who wouldn’t give a specific number either.  Williams said it hinged on the growth of "alternative access" (grocery stores, Office Depot-type outlets, online, etc.).  When there are enough alternatives, then brick-and-mortar post offices won’t be so necessary. 

Given how many post offices run in the red, no wonder that Herr and Williams didn’t want to come up with a specific number.  Imagine if one of them had said that half the post offices should be closed.  That might have actually made the evening news.

Another interesting moment occurred when Grace Napolitano, Democrat from California, gave the witnesses a piece of her mind about a consolidation that had taken place without, in her view, satisfactory notification.  Spurred by complaints from citizens and city council resolutions, she asked the USPS for an explanation and was “given the run around.”  Saying the information she requested was “proprietary,” the USPS sent her a redacted report that she waved to the hearing room—it consisted of nothing but columns of black blocks. Clearly frustrated, she said, “This is not how you treat a member of Congress.”

The Postal Regulatory Commission is is an independent government agency charged with oversight of the Postal Service.  Ruth Y. Goldway is the chairman of the Commission, and she testified before the Senate yesterday (May 22, 2011).  A key part of her statement concerned the closings of post offices across the country.  She made two key points:  (1) the Postal Service has already gone too far in its closing process without first getting an Advisory Opinion from the Commission, and (2) the Postal Service is ignoring the public's rights to notification and participation in the closing process.  Here's an excerpt from her statement (here's the full statement):

"The Postal Service has said that it plans to request an Advisory Opinion within months related to the closing of a large number of post offices nationwide. It is apparent, however, from the volume of news reports and customer inquiries received by the Commission from around the country that the Postal Service is already taking substantial action to close post offices or evaluate them for closure. The Postal Service has not provided details of this activity to the Commission.

"I am concerned that the Postal Service should not be undertaking nationwide service changes without first requesting an Advisory Opinion. Their suggested timing of such a request may obfuscate the purpose and intent of Congress in requiring such Advisory Opinions.

"The Commission has provided comments to the Postal Service’s Federal Register filing regarding changes to the closings process, as well as in an Advisory Opinion on Station and Branch Closings. I am concerned the public’s rights to notification and participation in the closing process are now ignored. The Postal Service is a government monopoly with obligations to all its citizens, not only a delivery service for business mailers — as important as that may be to our nation’s economy.

"Effective regulatory oversight is especially vital when the entire mail system faces major changes. The Commission ensures transparency, accountability and adequate service levels and supports positive changes needed to keep the Postal Service vital and relevant."

Representatives of the postal system appeared before a Senate subcommittee yesterday to give testimony on the financial condition of the post office as well as addressing bills before the Senate.  President of the National League of Postmasters Mark Strong had this to say:

"There appears to be renewed interest in some sectors in closing small rural post offices, an interest that is too often simplistically tied to the notion of closing excess facilities to drive excess capacity out of the system. This interest has arisen despite the fact that small rural post offices are the keystone of many rural communities, and the fact that closing post offices saves the Postal Service very little money. According to PRC data the total net cost of the 10,000 smallest Post Offices—more than one-third of all Post Offices in the United States—is less than seven tenths of one percent (0.7%) of the total cost of the United States Postal Service.

"Thus, closing post offices is not a cost savings measure of any serious import, no matter how anyone spins it. It is one of those cost saving measures that is popular with senior postal managers who wish to look good and give the impression that they are driving costs out of the system, without really doing so. . . . 

"Small post offices should not be closed, and indeed cannot be closed without doing serious damage to rural America and the image of the federal government in those areas."