Dire Straits – USPS Floundering | Citizens Against Government Waste

Dire Straits – USPS Floundering

The WasteWatcher

Those were the exact words of the United States Post Office’s (USPS) Postmaster General (PMG) Patrick Donahoe earlier this week during a hearing before the Senate Homeland Security and Governmental Affairs Committee.  The hearing came just days after the USPS announced that it will move to terminate Saturday delivery of first class mail on August 5, 2013. The hearing began with testimony by House Oversight and Government Reform Chairman and Ranking Members Darryl Issa (R-Calif.) and Elijah Cummings (D-Md.), who recapped attempts last year to get a postal reform bill passed.  The testimony was peppered with (an excessive number of) football metaphors to ultimate disposition of postal reform legislation last year.  It was on the five-yard line, in the “red zone,” etc.  The Senate had passed the “21st Century Postal Service Act of 2012.”  Although Chairman Issa’s committee had passed its own version of postal reform, which differed sharply in several key respects and was the superior of the two from the taxpayers’ point of view, a final bill never made it to the floor for a vote.  (Tiresome football references one again ensued; the inadvisability of “fumbling” the postal reform ball during the next congressional session, you get the picture.) Senate Homeland Security and Governmental Affairs Committee Chairman Tom Carper (D-Del.) was favorably disposed to the bipartisan optics of the moment, with Chairman Issa and Ranking Member Cummings sitting side by side at the witness table, expressing their commitment to the goal of passing bipartisan, bicameral postal reform legislation. It is likely that, once the down-and-dirty legislative process gets underway during the 113th Congress, that display of comradery could dissipate quickly. In fact, several members of the committee provided a preview of the friction taxpayers can expect to see over the next few months. Sens. Carl Levin (D-Mich.) and Mark Pryor (R-Ark.) sharply questioned the PMG over the source of his statutory authority to move to five-day delivery without congressional approval.  The PMG claimed that his team of attorneys had blessed the decision and pronounced it legal, but then explicitly implored the members not to stand in the USPS’s way.  Given the skeptical tone of the questions, it would not be surprising to see some members attempt to stymie the USPS’s move to a five-day delivery schedule. And there was also push back from several senators, including Jon Tester (D-Montana) and Mark Begich (R-Alaska), who were concerned about the impact of a five-day delivery schedule on their rural states. More eye-popping facts came from witnesses on the second panel, when both PMG Patrick Donahoe and Comptroller General of the United States Gene L. Dodaro delivered an impressive and encyclopedic catalog of the USPS’s fiscal challenges.   USPS lost $15.9 billion last year and has already posted a $1.3 billion loss in the first quarter of 2013, exhausted its statutory borrowing limit of $15 billion, and is currently losing $25 million each day.  Its accumulated liabilities (debts, medical and pension obligations, etc.) will eventually reach $25 billion.  In addition, the jump to five-day delivery will yield only about $2 billion in savings; the PMG stated that the USPS has a $20 billion hole to fill.  Although the agency has shaved its workforce through attrition, it has been unable to right-size its labor pool to keep pace with the systematic loss of mail volume.  And, of course, all of its fiscal problems only ripen and become more costly as reform is delayed. Postal unions have claimed that the USPS’s worsening fiscal status is the result of an unfair statutory mandate, enacted in 2006, requiring them to pre-fund its retirees’ healthcare benefits.  The GAO’s Dodaro, who has had the USPS on its High-Risk list for years, blew a hole in that argument; had the USPS been free of that obligation last year, it would still have posted losses of $4.8 billion.  Its woes are structural and long-term, its liabilities are massive, and will have to be paid eventually, so eliminating the pre-funding requirement will not eliminate the liability itself, nor is it the holistic panacea that the postal unions believe it is. From the taxpayers’ perspective, there was one other noteworthy issue that cropped up during the hearing that is cause for concern Chairman Carper, as well as Rep. Cummings, other members of Congress, postal unions and postal management will be angling to give the USPS the authority to chase new revenues outside their mandated areas. In 2011, the USPS commissioned a report entitled Is Diversification the Answer to Mail Woes?,” which explored the possibility of the USPS expanding into other business sectors, such as logistics, retail banking, marketing, and document management, all sectors of the U.S. economy that are mature, competitive, and well-served by a host of nimble, innovative private-sector companies.  The report concludes that diversification into non-postal business sectors doesn't offer the USPS a viable solution to its widening profit gaps. In addition, in a peculiar departure from its mandate to root out waste, fraud, and abuse, the USPS’s Office of Inspector General (OIG) released a report on April 19, 2011 entitled The Postal Service Role in the Digital Age: Part 2, Expanding the Postal Platform, which contained the following language:

“The transition to a new digital landscape is already under way, but the path forward is undefined.  The Postal Service should consider new products and services that reflect the evolving mandate to “bind the nation together” in a new world where people are increasingly communicating digitally. Using a foundation that links a physical address to an electronic mail box for every citizen and business, the Postal Service can build a digital platform that facilitates communications and commerce for postal, governmental, and commercial applications that are available to all.”

Allowing the USPS to engage in mission creep is not the answer to its prayers; attempts by USPS to leverage its government privileges and infrastructure to compete against private-sector businesses would be disruptive and extremely damaging. One of the goals of some in Congress (and certainly the postal unions) who support USPS’s encroachment into non-postal areas to scrounge for new revenue is to avoid the need to right-size its bloated workforce. Even after increasing productivity and cutting the postal workforce from 761,000 in 1990 to 584,000 in 2010, labor still represents 80 percent of the agency’s costs.  The agency still struggles with not only a surfeit of workers in the face of falling mail volumes and the global communications revolution, but also rigid, union-negotiated work rules, the inability to deploy its workers flexibly and effectively or close or consolidate its bricks-and-mortar facilities, congressional micromanagement, and a glacial regulatory regime. Instead of preparing a plan to transition its aging workforce into (a very well-heeled) retirement (the average age of postal workforce is 54 years and hundreds of thousands are currently eligible to retire), postal unions want to rationalize the current workforce levels, and simply find them something new to do. Lawmakers should consider some innovative alternative proposals currently being reviewed by the National Academy of Public Administration, which envision a truly hybrid model that preserves the USPS’s responsibility for the “final mile” pickup and delivery, but allows private-sector entities to perform all its other functions. Congress is poised to reengage on postal reform in the 113th Congress.  The jurisdictional committee in the Senate, Homeland Security and Governmental Affairs, has had significant turnover since the presidential election and many of its newest Republican members lean more toward free-market, pro-taxpayer, fiscally conservative approaches. Last year’s House bill, championed by Chairman Issa, still offers the best launching point for debate in the upcoming congressional session.  It will be essential that postal reform legislation be much more transformational than the status quo ante bill that emerged in 2012 from the Senate.

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