Postal Reform is Coming…
On Wednesday, February 6, 2013, the United States Postal Service (USPS) announced its intention to terminate Saturday first-class mail delivery on August 1, 2013. The announcement will certainly trigger a spirited public debate over the impact of such a dramatic change and could prompt resistance or outright obstructionism from lawmakers who don’t believe that the USPS is legally authorized to take such action without congressional approval. But the pronouncement serves to limn, once again, the depth and breadth of the USPS’s financial and structural woes. It also focuses attention on postal officials’ drive to reshape operations to adjust to significant and ongoing drops in first-class mail volume in the face of stultifying, costly labor work rules, excess infrastructure that straitjacket the agency. The USPS announced on November 15, 2012 a record $15.9 billion loss in fiscal year 2102.
According to the USPS, elimination of Saturday delivery will save the agency $2 billion a year. Postal management also announced today that, although it will keep post offices open on Saturdays to serve customers who want to send packages, it will trim the hours of operation of a portion of its facilities. Overall, mail volume has declined more than 20 percent since 2006. First-class mail, which is a protected monopoly and makes up the bulk of USPS’s revenue, has dropped 28 percent, from 102 billion pieces in 2002 to 73 billion in 2011. That trend is anticipated to continue unabated in the wake of electronic bill payment and the global communications revolution.
In the 112th Congress, 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. The bill contains provisions that would have blocked the USPS from eliminating Saturday delivery for two years, as well a collection of other changes that would have given the agency unrestricted access to cash and allowed it to compete unfairly in non-postal markets against private sector companies that don’t enjoy is quasi-governmental advantages. The Senate bill contained no systemic reform.
In the House, H.R. 2309, co-sponsored by Reps. Darrell Issa (R-Calif.) and Dennis Ross (R-Fla.), would have created a Commission on Postal Reorganization, similar to the successful military Base Realignment and Closure Commissions, and a Financial Responsibility and Management Assistance Authority. It would have permitted the USPS to reduce hours of operation at underperforming post offices, and shift to a five-day delivery schedule. No bill made it to the floor for debate.
In June, 2012 at a PostalVision 2020 conference in Washington, Postmaster General (PMG) Patrick Donahoe stated that if the USPS management team was not soon allowed to make overdue structural reforms, its long-term fiscal outlook would soon start to resemble debt-laden 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 postal unions, which vehemently oppose the elimination of Saturday delivery, as well as the closure and consolidation of post offices, have repeatedly laid the blame for the agency’s chronic woes on a federal law that mandates that the USPS pre-fund its retirees’ healthcare benefits for future retirees.
The numbers tell a very different story; 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, resulting in an unfunded liability of $47.8 billion.
If Congress is pressured into allowing the USPS to suspend retirement contributions to backfill losses, independent of meaningful structural modifications, it will be allowing the agency to follow in the footsteps of many states and the federal government itself regarding long-term pension and retiree healthcare liabilities. The USPS would be allowed to pursue a short-term, politically-expedient quick fix to long-term fiscal liabilities that arise from underlying fiscal deficiencies that must be resolved.
While postal management labors under the auspices of multiple congressional mandates and an obsolete business model, novel and innovative models for bold postal reform are emanating from other corners.
The National Academy of Public Administration (NAPA) released a report in January, 2013 authored by four veterans of the decades-long postal reform wars: Ed Gleiman (former chairman of the Postal Rate Commission); George Gould (former chairman of the National Legislative and Political Director of the National Association of Letter Carriers); Ed Hudgins (Director of Advocacy, The Atlas Society), and John Nolan, (former Deputy Postmaster General). The plan posits a hybrid public-private partnership that would allow private-sector entities to step in to perform all of the USPS’s current functions, except the “final mile” delivery stage.
According to the authors:
“Under the new hybrid public-private partnership model today’s trusted USPS letter carriers will deliver mail, packages, and products the “final mile” to every address in the country while the 2 private sector fulfills virtually all upstream mail processing, transportation and logistics functions under the quality and security oversight of the USPS. Commercial mailers will pay private sector logistics companies to collect, process and transport their letters, magazines, catalogues, packages, and other products. Those companies similarly would pay the USPS a delivery charge.
“This model would preserve and leverage what is currently the Postal Service’s key strategic asset – its unparalleled last-mile delivery network that touches every home and business six days each week. It would also preserve its nationwide presence through a slimmed down network of Government post offices while expanding access to postal services through private sector partners. Melding these assets with private sector innovation can support a sustainable enterprise.
“Implementing this solution will ensure the confidence businesses and consumers need for the postal system to thrive…
“Private sector capabilities exist, however, that can fulfill others tasks in the postal network and do so at a lower cost and with greater efficiency and innovation and without political and regulatory interference. To meet the current and future needs of our country and to spur economic growth, the new postal model should integrate the private sector into postal operations as necessary.
“Thus, the new Postal Service would oversee a largely privately-operated postal network and would supply the final mile ‘feet on the street’ for daily mail delivery. The trusted letter carrier would remain the public face of the U.S. Postal Service.”
NAPA is conducting an independent review of the paper and intends to convene a Panel of Academy Fellows, chaired by former U.S. Comptroller David Walker, to review the model and hold a public discussion of the results in March.
For its part, key members of Congress are weighing in on the five-day delivery announcement. Senate Homeland Security and Governmental Affairs Chairman Tom Carper (D-Del.) expressed disappointed with the announcement, but continued by saying “That said, I have long argued that Congress should reduce the number of service mandates it places on the Postal Service so that the Postmaster General and his team can more easily adjust operations to reflect the changing demand for the products and services they offer.”
Others key members of Congress were more supportive. House Government Oversight and Reform Chairman Darryl Issa (R-Calif.) called it a “common-sense reform” that “would save the Postal Service more than two billion annually….Supporting the US Postal Service’s plan to move forward with 5-day mail delivery is one such solution worthy of bipartisan support.”
Along with the announcement of the termination of five-day first-class mail delivery, USPS management also reminded observers that it will be releasing a five-year plan on March 1, 2013, which will contain more cost-cutting changes. Lawmakers will be considering another postal reform bill during the 113th Congress. In gridlocked Washington, D.C., real postal reform may be one bright spot on the horizon this year.
