Shrinking a Behemoth

The U.S. Postal Service's plan to consolidate 233 mail processing plants nationwide triggered a fierce debate about the future of one of the largest federal employers.

• By Jerry Laws
• Apr 01, 2012

On one hand, the U.S. Postal Service is hemorrhaging money, having posted a $3.3 billion net loss for the first three months of its 2012 fiscal year (Oct. 1 through Dec. 31, 2011) alone and seeing mail volume decline in that quarter by 6 percent. But on the other hand, the survival of the agency whose first postmaster was Benjamin Franklin is vital to major worldwide delivery companies in the 21st century, as well as to the U.S. economy, 574,000 career employees, and thousands of retired employees.

The future of USPS is a red-hot topic at the moment. Two bills pending in Congress would delay the USPS plan to begin consolidating more than 200 mail processing centers nationwide, closing many of them and eliminating 35,000 jobs after May 15 to save around $20 billion annually.

The bills are S. 1789, the 21st Century Postal Service Act of 2011, and H.R. 2309, the Postal Reform Act of 2011. Expected action March 26 by the U.S. Senate on S. 1789 did not materialize, as Sen. Joe Lieberman, Ind-Conn., a co-sponsor of the bill, announced the Senate will consider it in mid-April, after its Easter recess.

The major USPS unions, the National Association of Letter Carriers and the American Postal Workers Union, are wary of both bills, and they say the Postal Service's consolidation plan would cost more than it will save. Despite the drop in mail volume, USPS would be profitable if Congress had not forced it to pre-fund future retirees' health benefits, their leaders say.

Postmaster General Patrick R. Donahoe testified May 27 before the U.S. House Federal Workforce and U.S. Postal Service Subcommittee that taking postal employees out of the Federal Employees Health Benefits Program and shifting them to a USPS-sponsored health care program would save $7 billion annually, if the required prefunding of retiree health benefits is eliminated. This, too, is opposed by the USPS unions.

"The Postal Service is at a crossroads," Donahoe testified. "Our business model is broken. We have insufficient revenue to cover our costs and are rapidly approaching our statutory debt limit of $15 billion. If the Postal Service were a private company, we would be engaged in Chapter 11 bankruptcy proceedings. Our financial crisis is the result of a restrictive business model and a permanent and fundamental shift away from first-class mail. During the past five fiscal years, the Postal Service recorded cumulative losses of $25 billion. The requirement to prefund retiree health benefits, mandated by the Postal Accountability and Enhancement Act of 2006, drove $21 billion of the five year losses. It should be noted that development of a Postal Service sponsored health care plan will eliminate the need to make the prefunding payments mandated by the PAEA. It is clear our current operating costs are unsustainable."

Unions Seek 'Real Reform Measure'
"Thank you to the more than 50,000 NALC members who took part in Sunday's [March 25] national teleconferences," NALC President Fredric Rolando said following Lieberman's announcement, "and thank you to the thousands of letter carriers and allies who, over the past two days, flooded Senate offices with calls to voice our opposition to this deeply flawed bill. It's this unparalleled level of commitment that will help us win the fight to preserve the Postal Service for decades to come. We hope that senators will now use this extra time to carefully analyze the service's financial problems so that when the Senate resumes its business after the break, it will be prepared to work on a real reform measure designed to strengthen the agency, not dismantle it."

"From medicines to checks and bills, the Postal Service is the backbone of a $1 trillion mailing industry that operates without one dime of taxpayer funds. It is funded by the sale of stamps and postage," APWU President Cliff Guffey says in TV ads that began running March 14 on CNN, MSNBC, and Fox News. "But in 2006, Congress imposed a burden on the Postal Service that no other company or government agency faces, and it is driving the Postal Service toward insolvency. Congress talks about job growth, but unless they take action, 100,000 jobs will be lost. The Postal Enhancement and Accountability Act drains more than $5 billion a year from the USPS by forcing the agency to fully pre-fund health care benefits for future retirees -— a burden faced by no other government agency or private business."

In the ads, Guffey asks his union's members to contact their U.S. senators and urge them to support amendments to S. 1789. "Congress created this problem, and Congress can fix it," he says.

APWU represents more than 220,000 USPS employees and retirees, and NALC represents about 200,000 active USPS letter carriers. Leaders of both unions strongly oppose eliminating Saturday mail delivery or carrying out the consolidation as USPS has proposed. USPS already is slimming down, however, having cut 8 million work hours and $180 million in total compensation and benefits expenses during the first quarter, following a reduction of 75 million work hours in 2010.

USPS spends about $1.9 billion on salaries and benefits every two weeks and consumed 399 million gallons of fuel during 2010.

The day of reckoning is coming soon. Joe Corbett, chief financial office of USPS, warned in February 2012 that the Postal Service is nearing default on two retiree health benefits pre-payments due to the federal government this year. "Even if legislation changes or eliminates the pre-funding payments, we may reach our $15 billion debt ceiling in the fall of this year," he said.

One way to keep track of the debate is by following an entertaining blog written by Alan Robinson, executive director of the Center for the Study of the Postal Market, editor of the Postal Journal, and president of Direct Communications Group.