WASHINGTON — They may not agree on much, but Rep. Darrell Issa, R-Vista, and the U.S. Postal Service share one view—the agency, which lost $8.5 billion last year, should be able to cut Saturday mail delivery.
While that possibility has circulated for a while—and would save the agency $3.1 billion annually—The Postal Service Reform Act of 2011 Issa introduced last week proposes several other dramatic solutions that he said will save the agency from an imminent taxpayer bailout.
“Many regulations put in place by Congress aren’t helping and need to go,” Issa said in a statement to the Union-Tribune. “This legislation is intended to fix this mess without a massive taxpayer giveaway to rescue an agency that is supposed to be self-sustaining.”
What Issa is Proposing
- Allows USPS to cut delivery to five days a week.
- Creates Postal Service Financial Responsibility Management Assistance Authority. If the USPS defaults on any obligation to the federal government for more than 30 days, the Authority will take over financial control including overseeing the budget, contract negotiations and borrowing.
- Gives the Authority the power to throw out collective bargaining agreement terms if a compromise cannot be found, or doing so would cut costs.
- Closure of $1 billion worth of post offices in first year. Closure of $1 billion in mail processing locations in second year and a 30 percent reduction in management facilities.
- Cuts the discount for non-profits by 5 percent a year, eventually dropping from 40 percent to 10 percent.
- Ends rate preferences for national and state political committees.
- Allows USPS to sell advertising space in facilities and vehicles.
In 1971, the Postal Service transitioned from a federal department to an independent agency of the government, which does not directly accept taxpayer dollars. It’s currently borrowing from the Treasury to cover its mounting losses, though.
In addition to allowing the Postal Service to reduce mail delivery to five days a week, Issa, the chairman of the House Oversight Committee, proposes creating the Postal Service Financial Responsibility Management Assistance Authority. The committee would oversee the budget and contract negotiations if the Postal Service defaults on any government obligation within 30 days.
The Postal Service responded that the federal government should not have that authority.
“There is a misconception that we need more oversight, but we want to operate in a business-like fashion,” said Postal Service spokesman Dave Partenheimer.
Frederick Hill, the communication director for Issa’s committee, said the bill does preserve the ability for collective bargaining for postal service workers, but does add “some common sense reforms.
The bill specifically gives the government the right to “reject, modify or terminate one or more terms or conditions of an existing collective bargaining agreement” if a deal can not be made through mediation and doing so would help “achieve the specific economic savings or workforce flexibility goals” of the Postal Service.
This is a point of contention for unions and Rep. Susan Davis, D-San Diego, who does not support the proposed legislation.
“I can’t support short-sighted decisions with destructive long-term consequences like this,” Davis said, referring to those reforms. “Greed on Wall Street got us into this recession and public servants like our postal employees should not be the ones paying the price.”
Sally Davidow, senior manager of media relations of the American Postal Workers Union, said the union supports none of the provisions in Issa’s bill, including the five-day mail delivery. One of the world’s largest postal unions, the APWU represents more than 220,000 employees and retirees and nearly 2,000 private-sector mail workers, according to its website.
If passed, in addition to shuttering $1 billion worth of post offices in the first year, Issa’s bill would close another $1 billion in processing facilities in the following year.
“That’s a huge, huge cut to the service to the American people,” Davidow said. “Congressman Issa’s bill would destroy the Postal Service as we know it.”
Rep. Duncan Hunter, R-Alpine, was unavailable for comment but his spokesman, Joe Kasper, said Hunter is reviewing the bill and appreciates Issa’s reform efforts.
“From Mr. Hunter’s perspective, there’s no disagreement with the need to reform the postal service,” Kasper said. “It’s important that the Postal Service get on stable ground and stay there, so that costs are manageable and taxpayers aren’t left footing the bill.”
A. Lee Fritschler, a professor at George Mason University and the former U.S. Postal Rate Commission chairman under President Jimmy Carter, said Issa’s bill is “pretty remarkable.”
“He has thrown down a very dramatic proposal because frankly in the past nothing has worked,” Fritschler said. “What is really needed is major reform.”
How Big Is the Problem?
In 2005, Standard Mail volume outpaced First-Class Mail volume for the first time in Postal Service history. Only three years earlier, the Postal Service lauded its First-Class Mail performance.
First-Class Mail was the impetus for starting the Postal Service, said George Mason University professor A. Lee Fritschler, former U.S. Postal Rate Commission chairman under President Jimmy Carter. Last year, the Postal Service lost an unprecedented $8.5 billion. Agency officials reported a $2.2 billion loss for the first quarter of this year, more than 25 percent higher than 2010.
So, what happened?
“Our financial problems are due, of course, to the recession and drop in mail volumes and also restrictions imposed by Congress that have prevented us from responding to the losses like a normal business,” said Postal Service spokesman Dave Partenheimer.
But blaming the problems on the recession isn’t completely accurate, Fristcher said. Many imagine the problems with the Postal Service are directly linked to the economy, but in a recession, Postal Service volumes plunge then typically recover. Developments in technology have markedly weakened the agency’s upswing, he said.
As of June 24, the Postal Service stopped making bi-weekly employer contributions of $115 million to the Federal Employees Retirement System (FERS) in order to “conserve cash and preserve liquidity.” The move will free up roughtly $800 million for the current fiscal year.
“The Postal Service is not far away from the death spiral I believe that many have been predicting for years,” Fristcher said.
Over the last four years, the Postal Service has reduced its size by 110,000 career positions and saved $12 billion, according to a press release dated June 22. The cuts are not enough according to Issa.
“The Postal Service’s leadership hasn’t dealt with declining revenues by achieving needed reductions in labor and inadequately used facilities,” Issa said in a statement to the Union-Tribune.
But what will solve the problem? The Postal Service wants to end mandates requiring retiree health benefit pre-payments, which costs $5.5 billion annually. Frederick Hill, the communications director for the House Oversight Committee, said not requring pre-payments could result in the Postal Service failing to meet future obligations.
They also want access to almost $7 billion in overpayments they claim were made into the Civil Service Retirement System and FERS.
There is some contention over that money, as Issa’s team and some independent officials question whether it exists. Hill said conversations about that money surfaced in 2003—only after the Postal Service realized developments in technology meant more consumers were paying bills online. The Issa camp contends that no money is owed because the Postal Service agreed to incur that cost during the transition into an independent agency. Hill called their claim to the money “a desperate attempt by a cash strapped Postal Service to renegotiate the deal it had previously agreed was proper.”
The Postal Service did not comment further on the matter.
How would an expert fix the Postal Service?
Global consultancy firm McKinsey & Co. published a report in March 2010 outlining a plan to address the growing problems facing the Postal Service. They made the following suggestions, including legislative and non-legislative changes, as well as a list of four key solutions to stay afloat past September of this year. McKinsey will not comment on client work.
Changes Postal Service could implement on its own
- Target aggressive growth through Priority Mail Flat Rate Box expansion and commercial contracts
- Maximize profitability by store segment within a plan to reduce costs and increase access through P.O. Boxes, consumer products and passport growth
- Increase workforce flexibility by taking advantage of natural attrition
- New product innovations such as hybrid mail
- Exigent price increases
- Move delivery location to curbside or cluster boxes
- Change First Class Mail delivery period from 1-3 days to 2-5 days
Changes achieved through legislative action
- Reduce delivery frequency to 3 or 5 days per week
- Shift retiree health benefit payments to a “pay as you go” system comparable to other federal agencies and private sector companies
- Significant change in the retail network through a combination of increased access with partners and eventual franchising and/or closure of existing locations
- Eliminating or reducing subsidies for non-profits
- Expand access through private sector partnerships, kiosks and direct (online, mobile)
- Increase prices on periodicals, non-profit mail, and media and library mail
Options to maintain solvency in September 2011
- Retiree health benefit restructuring
- Increased debt limit
- Exigent price increase
- Shift to 5 day delivery