Carper and Collins seek USPS overhaul

Sep 15, 2011

WASHINGTON—The U.S. Postal Service would receive an infusion of funds to meet its pension benefit obligations and gain the legal authority to decide how many days of mail delivery it would provide, under legislation proposed by Sen. Thomas Carper, D-DE.

Carper calls the bill the Postal Operations Sustainment and Transformation (POST) Act of 2011. His bill joins an earlier bill by Sen. Susan Collins, R-ME, that would also provide financial relief for the ailing Postal Service, but would require Saturday mail delivery.

“For decades, Americans have taken the Postal Service for granted. We’ve assumed that it would always be there. But our troubled economy—coupled with the continued migration to electronic forms of communication—is putting the future of the Postal Service in jeopardy,” Carper said. “Furthermore, if the Postal Service were to shut down, the impact on our economy would be dramatic. The Postal Service operates at the center of an industry that employs about 7 million people and generates more than $1 trillion in sales and revenue each year. At such a difficult and fragile time for our economy, we can’t afford to lose those jobs and that kind of productivity.”

Carper chairs the Senate Subcommittee on Federal Financial Management, Govern-ment Information, Federal Services and International Security.

At a hearing on USPS’ stressed finances in May, Carper said he did not like the idea of cutting back on mail delivery, but he thought it essential.

Postmaster General Patrick R. Donahoe testified that mail volume and cash continue to plummet. The decline is led by First-Class Mail, down 6.6 percent in the first half of the postal fiscal year. Though Standard Mail has increased, it takes about three pieces of Standard Mail to make up the contribution to USPS overhead what a First-Class piece provides.

Donahoe laid out two paths for USPS, saying the choice of direction depends upon Congress.

In the first option, USPS would continue to try to cut costs, eliminate Saturday mail and close post offices and processing plants while Congress works to provide funds for the USPS. The second path would offer no financial relief. USPS will likely default on its obligation to contribute to a trust fund for future retiree health benefits. Its $15 billion debt ceiling will be reached. In 2012, Donahoe said, USPS will be out of money.

“At some point in FY 2012, the Postal Service easily reaches a point where making payroll is no longer possible. Unable to pay our employees or suppliers, we are forced to cut back service. We cannot afford fuel for delivery vehicles and lack resources to operate our facilities. Unable to support our infrastructure, the mail delivery system grinds to a halt,” Donahoe testified.

Carper and Collins seek financial rescue for USPS in the form of recovering from the federal employees’ two retirement funds large sums of money that independent actuaries say was overpaid by USPS.

Mailers’ groups, including National Newspaper Associa-tion, believe postage-buyers have paid too much into the retirement system and that the cash is being used to plug deficits in the federal civil service retirement funds.

Releasing the overpayments back to USPS would help it ease its cash crunch while it continues to try to fit its infrastructure to a shrinking mail volume and trying to grow new revenue, say mailers’ groups,

Sen. Claire McCaskill, D-MO, expressed concern about eliminating Saturday mail delivery. She noted that USPS is the only national delivery system with Saturday deliveries.

“You are giving away the advantage you have,” she said.”Are we talking about the beginning of a death spiral?” She also faulted USPS’ research on the impact of five-day mail on rural areas, saying its studies of rural America had focused on two relatively suburban counties near Atlanta and Seattle.

Donahoe responded that when Americans are asked whether they would rather give up Saturday mail, face large postage increases or lose a local post office, survey respondents have said they would prefer to lose the Saturday mail service.

“A Hobson’s choice, designed to elicit the answer wanted,” Max Heath, NNA Postal chair, called the research.

“It sets up a wrong-headed choice that pushes people to agree to ending Saturday delivery and it games the result to influence mailers and the Congress. The fact is that a lot of post offices will be closed anyway, and USPS already asked for that major rate increase. But the Postal Regulatory Commission denied it. The research fooled most of the mailers, and at least some of the Congress into believing that cutting service is going to somehow help fix the system,” said Heath.

“Postal Service management would rather risk accelerating its losses by cutting delivery days and continuing to eliminate jobs and service than deal more aggressively with the much tougher core questions of labor costs.”

Tonda Rush, NNA’s chief executive officer and general counsel, said NNA and an informal group of other mailing organizations have devoted much of the spring to helping members of Congress to understand the true choices ahead.

“Every major industrial system in the U.S. has faced this painful and awkward set of choices, from the steel manufacturers to the auto industry, and now the publishing world,” Rush said. “Great workers and excellent managers can apply every nostrum within easy reach to avoid the inevitable, but eventually you either reach a collapse or you find gentler ways to match labor costs and anticipated revenues. The Postal Service has good people in charge and they know this is what they must do, but sometimes cutting by eliminated services is the path of least resistance. We can see, because we have identified gaps in the research, that some of these service cuts are going to drive a lot more business out of the system. We fear that.”

Rush said NNA supports the Collins bill, and liked much of what Carper hopes to accomplish in his proposal. But NNA has a long standing policy in support of six-day mail, so it cannot agree to the Carper provisions on days-of-delivery reduction. She said NNA will work with Carper and Collins on a package of changes to help the Postal Service avoid a 2012 collapse.