No Last-Minute Delivery on Postal Reform

By Leslie Paige

WasteWatcher, December, 2012

The United States Postal Service (USPS) announced on November 15, 2012 that in fiscal year (FY) 2012, which ended on September 30, the agency lost a record $15.9 billion. In June, 2012 at a PostalVision 2020 conference in Washington, Postmaster General (PMG) Patrick Donahoe flatly stated that if the USPS management team was not soon allowed to address its multiple structural deficiencies, its long-term fiscal outlook would most resemble the strife-ridden country of Greece. “We need less expensive work hours, and we need more flexibility on who can do what jobs…Nobody can operate with 1940 work rules in a 2020 environment,” stated Donahoe.

The USPS has defaulted on two of its mandated future retiree health benefit payments since August. In September, the USPS also bumped up against its statutory borrowing limit of $15 billion.

These dire developments deposit yet another layer of fiscal gloom and doom onto a jammed congressional agenda at a time when it is most focused on avoiding the “fiscal cliff.” While the USPS’s fiscal condition must be added to Congress’s “to do” list, reform must not be grafted onto some stop-gap measures; it makes more sense for taxpayers and for the USPS if postal reform is taken up by the next Congress, when members can grapple with the issue under less overheated circumstances.

USPS management has been seeking the flexibility to close and consolidate postal facilities and move to a five-day delivery schedule (which would save an estimated $3 billion a year), along with statutory changes that would force labor arbitrators negotiating contracts between USPS management and its unions to take the fiscal health of the agency into account when rendering its decisions. More problematically, it is also seeking relief from its pension pre-funding requirements. Postal unions have claimed that it is these pre-funding requirements that account for the USPS’s unstable fiscal condition, but had those requirements been lifted last year, the agency would still have posted a net loss of $4.8 billion.

Had the contributions also been waived in 2011 and 2010, USPS would still have suffered losses of $5.1 billion and $3 billion, respectively. Those who claim that the retiree contributions should be suspended and that the USPS’s retiree benefit fund has $45.7 in assets tend to neglect to also point out that the fund has projected liabilities of $93.6 billion and an unfunded liability of $47.8 billion. If the Congress permits the USPS to suspend its contributions to that fund, it will be allowing the agency to emulate the ill-advised actions that some states have taken with regard to their own massive pension liabilities.

The downward spiral of the USPS has been well-known for years and yet Congress has refused to grapple with the issues facing the agency. As with so many of the complex and controversial policy questions bearing down on the country, Congress has been in a state of denial and crisis avoidance rather than rationally working toward solutions.

Even though the USPS has winnowed its bloated workforce by 30 percent since 1999, the main driver of its fiscal woes remains exorbitant labor costs, a surfeit of workers, and inflexible work rules. Much more needs to be done to contain labor costs and right-size the agency’s far-flung and inefficient bricks-and-mortar infrastructure.

The 21st Century Postal Service Act (S. 1789), sponsored by Sens. Scott Brown (R-Mass.), Tom Carper (D-Del.), and Susan Collins (R-Maine) passed in the Senate on April 25, 2012 by a vote of 62 to 37. S. 1789 is a toxic and contradictory combination of provisions that both block the agency from taking necessary and prudent steps that could tighten its business operations, while at the same giving it unrestricted access to cash and allowing it to leverage its unfair advantages to enter non-postal markets and compete against private sector companies without any meaningful systemic reform.

A far better bill, H.R. 2309, co-sponsored by Reps. Darrell Issa (R-Calif.) and Dennis Ross (R-Fla.), would establish a Commission on Postal Reorganization Act, modeled on the successful military Base Realignment and Closure (BRAC) Commissions, and a Financial Responsibility and Management Assistance Authority. It would permit the USPS to reduce hours of operation at underperforming post offices, and shift to a five-day delivery schedule. It would introduce the structural changes the USPS needs to survive without a taxpayer bailout.

Whatever happens with the “fiscal cliff” negotiations, taxpayers can count on Congress to emerge with a sloppily-crafted bill at the eleventh-hour that may prove to be a seductive vehicle for postal stakeholders intent on bypassing Congress to hitch a ride on such a “must-pass” bill. House and Senate leadership should be mindful of that well-established opportunism and take a hard line to hold postal reform until the next Congress convenes in January, where it will receive the measured consideration it requires.