Avalanche averted: Postal Service backs off plan to close thousands of post offices

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The Postal Service has decided not to announce mass post office closures on May 16, when the moratorium ends, and it will instead proceed with the closings in a more gradual way.  How many, how slowly, remains to be seen.

In the meantime, the Postal Service has a new plan.  Some of the details were revealed to postmasters in a webinar yesterday afternoon, and the Postal Service will tell the rest of us about it at a press conference today.  Here’s the USPS press release with some more details.

 

If you can’t close them, reduce them

Rather than closing thousands of post offices, the Postal Service has decided to take a different approach.  In yesterday’s webinar with postmasters, the Postal Service revealed its new strategy.  It’s going to review its network of small post offices (level 16 and below), with an eye toward consolidating (reclassifying) them as stations.  In other words, instead of being the main post office for a town, the office would be downgraded into a sort of secondary facility, under the supervision of a main post office located in another town.

The change in status would make it easier for the Postal Service to staff the post office (now the “station”) with someone other than a career postmaster, such as a part-time postmaster relief (PMR), who gets paid far less.   It might also make it easier to further consolidate the office into a contract postal unit or “village post office” sometime down the road.

The more immediate result of the new strategy is that it will allow the Postal Service to reduce the window service hours at the office (there are rules about the hours for a main post office).  Depending on how much business the post office does, its hours could be reduced to six, four, even just two hours a day.  The Postal Service is also apparently saying that if a post office is not within 25 miles of another office (an unusual circumstance), the hours would not be reduced below six.

These measures have been in the works for a long time (that story is here).  In March 2011, the Postal Service proposed a number of changes to 39 CFR Part 241 designed “to improve the administration of the Post Office closing and consolidation process.”  In July 2011, it approved the changes and published the Final Rule in the Federal Register.  Judging by the scope of the new strategy, however, it may be significant enough in its impacts to require a new Advisory Opinion from the Postal Regulatory Commission, and apparently the Postal Service will request a new Opinion in May.

Reducing the hours at post offices and replacing experienced career postmasters with part-time workers with less experience will save some money, but it will naturally drive away business and encourage people to use alternatives.  Declining revenues will later be cited as a reason to close a post office, and the Postal Service will use the data on the shift to alternatives as more evidence that customers aren’t using post offices.

The loss in revenues will probably be ignored, however — the Postal Service never considers lost revenue when it does its cost-saving calculations for closing post offices.  But the Postal Service will be sure to say how much the changes will save.  Apparently, the Postmaster General is saying the new strategy will save $500 million, but it’s hard to see how.

There are currently about 27,000 post offices (as well as about 4,600 stations and branches), and there are about 23,400 postmasters.  The Postal Service has already saved millions by not filling the postmaster vacancy in more than 3,600 post offices, but how much could it save if it were to reclassify, say, 12,000 post offices as stations and replace 12,000 postmasters with PMRs and other categories of workers?  If the replacement worker earns, say, $25,000 less than a postmaster, that would yield a savings of $300 million.  The Postal Service will need to provide more details about how it hopes to save $500 million with its new strategy.  Maybe those 12,000 offices will only be open two hours a day.

In order to open up thousands of postmaster positions, the Postal Service will be offering postmasters retirement incentives (VERs) and deploying Reduction-in-Force (RIF) initiatives.  It’s also likely that when a postmaster vacancy occurs at a small post office, that office will be reclassified as a station and staffed by someone other than a career postmaster.  The tradition of the small-town postmaster is apparently coming to an end.

 

Closing announcements coming, “staggered and slower”

Word that the closings would not be coming fast and furious came as good news to the Postal Regulatory Commission (PRC), which was bracing itself for mass appeals on post office closings.

In 2011, 671 post offices received a Final Determination notice saying they would be closing in 60 days, and 220 were appealed to the PRC.  At that rate, if the Postal Service had announced the closure of three thousand of the 3,652 post offices in the Retail Access Optimization Initiative (RAOI), the PRC could have been looking at a thousand appeals.

In January, the Chairman of the Postal Regulatory Commission, Ruth Goldway, told a meeting of the PRC that she had been informed by the Postal Service that it would be issuing “mass closures” when the moratorium ended.  At a meeting of the Commission last week, however, the Chairman announced that the situation had changed.  Here are Goldway’s remarks from the May 2 meeting (PRC webcast at 23:50):

“There have been a lot of questions and concerns about the May 15th moratorium, and we at the Commission have been pressing the Postal Service quite hard to get a sense of how they plan to handle the 3,700 post offices that are on the RAOI list that have been under the moratorium.

The potential is that they could post a note on each one of those post offices on May 16, and then communities all around the country would be considering whether to appeal to the Postal Regulatory Commission, and we could really have an avalanche.

We have been assured by the Postal Service that they don’t intend to do that and that they are reconsidering most of the post offices on that list in one way or another, and to the extent that they make decisions, they will be in a more staggered and slower fashion than would be possible if they just wanted to go overwhelming [inaudible]….

The Postmaster General himself said something publicly on CNN or something, which was quoted saying that he himself was not going to be closing post offices.  So I feel comfortable in at least giving you some advice that we expect that the changes that are possible after May 15 will come a bit more slowly than could otherwise be the case.”

The Commissioners have their hands full right now with the Advisory Opinion on the Network Rationalization plan to consolidate mail processing plants, as well as a couple of price cases, so the prospect of an avalanche of appeals could not have been very appealing.

Chairman Goldway did not say anything about the 220 post offices set to close when the moratorium ends.  These post offices were issued a final determination last fall, and many of them lost an appeal with the PRC.  They are not part of the RAOI, and they would be the first to close.

 

Extending the moratorium?

Chairman Goldway did not address the possibility that the Postal Service might extend the moratorium, but clearly the Postmaster General is facing pressure from Congress to do just that.

The Senate bill that just passed, S.1789, has a passage entitled “Sense of the Senate” (Section 411), which states that “the Postal Service should not close or consolidate any postal facility… or post office before the date of enactment of this Act.”

The four architects of S.1789 — Senators Lieberman, Carper, Collins, and Brown — have also written to the PMG asking him to extend the moratorium.   On May 2, they were joined in that request by over 40 senators, who signed a letter to the PMG urging him to extend the moratorium on closing both post offices and processing plants.  (The letter is here, and a list of the senators, here.)

On the House side, 17 Republicans have written a letter to Speaker Boehner and Minority Leader Pelosi expressing their fear that “the Postal Service may be misguided in targeting rural post facilities as a means of addressing its shortfall.  In response, Darrell Issa and Dennis Ross, co-sponsors of the main House bill, wrote their own letter to Boehner and Pelosi adding their support for an amendment to their bill that would limit the number of rural post office closures to 500 per year.

Rather than officially extending the moratorium, the Postmaster General might choose simply not to close any post offices for a while.  A “de facto moratorium” might be a way for Postmaster Donahoe to show he is sensitive to the will of the Senate but strong enough to stick to his guns.  The PMG might even close a few post offices just to show he hasn’t changed his mind about the need to downsize the retail infrastructure.  In any case, the new plan being announced today suggests that the Postal Service will proceed much more cautiously with post office closings than it looked like just a few weeks ago.

The leaders of the Postal Service find themselves in a difficult spot.  They remain committed to saving $2 billion in the retail network as part of their Plan to Profitability, which would only be possible if something on the order of 15,000 post offices were closed.  Even that many closings would probably save only about one billion dollars, and it would mean closing nearly every small rural post office and thousands of larger urban and suburban offices as well.

At the same time, the Postal Service sees that closing post offices is not a very popular idea in Congress.  The legislation that comes out of the House may not be good for preserving the jobs of postal workers or delivery service standards, but it’s likely to have some protections for post offices, especially rural offices.

That’s why USPS Board of Governors Chairman Thurgood Marshall, Jr., released a statement last week that tries to have it both ways.  “In the coming weeks,” said Marshall, “the Postal Service will provide detailed plans describing the steps it intends to take regarding rural Post Offices.  We are committed to pursuing cost reduction strategies in a thoughtful way, and we believe these announcements will lay to rest many of the concerns about our path going forward.  The Board of Governors is committed to serving rural America and to preserving the role of the Postal Service in every American community.”

While the Postal Service may still be committed to closing thousands of post offices, that won’t be happening anytime soon.  The Postal Service is not going to make headlines next week with announcements of hundreds or thousands of post office closings when the moratorium ends.  With the issue of post office closings resolved, at least to some extent, Congress can now turn its attention to the other elements of the legislation, like plant consolidations, Saturday delivery, the allocation of the surplus in the pension plan, and the payments to the retiree health care plan.

 

Final Tally on Post Office Appeals

The PRC has finally caught up on the backlog of appeals that it has been working on since the influx began last year.  Although there were a few more successful appeals over the past few weeks, the record for the past year and a half shows that it was very difficult to win a remand decision from the Commission.  (A “remand” means the Final Determination is sent back to the Postal Service for further consideration.  That’s the most the PRC can do right now — it can’t overturn a closing decision.)

Out of 188 decisions either affirming the closing decision or remanding it back to the Postal Service, only 16 cases — about 9% — won a remand.  Of the 172 decisions that were affirmed, more than 130 ended in a tie vote,  with Chairman Goldway and Vice-Chairman Langley voting to remand, and Commissioners Acton and Taub voting to affirm the Final Determination.  (For more on all that, see this earlier post.)

Here’s a summary of the orders issued since January 1, 2011, along with some data on the history of appeals.  (The data for the past sixteen months comes from the PRC website; an unofficial list of the 2011-2012 appeals is here; information about the historical data is here.)

PRC Decisions on Post Office Appeals
Period
1976 – 2010
Jan. 1, 2011 –
May 3, 2012
Disposition
Number
% affirm vs. remand
Number
% affirm vs. remand
Affirmed
190
75%
172
91%
Remanded
62
25%
16
9%
Dismissed
39
8
Withdrawn
23
Other
1
Total
291
220

As the table shows, the number of appeals filed in 2011 was unprecedented: Almost as many appeals were filed in just one year as in the previous 35 years.  But the appeals were not nearly as successful as in years past: 9% versus 25%.

Some 23 Final Determinations were withdrawn by the Postal Service.  The reasons behind this change of heart are not made public when the Postal Service withdraws its case, but there may be several explanations: The Postal Service may have decided its case was flawed, it may have yielded to pressure from elected officials or others, it may have reviewed the case and decided the circumstances had changed, and so on.

Several cases were dismissed by the PRC, usually because the appeal was filed prematurely, i.e., the post office had not been officially discontinued yet.  There’s one open appeals docket still on the PRC website, and it’s likely to be dismissed for just that reason.

The post office in Kirksey, Kentucky, was suspended on April 5, 2012, and an appeal was filed on the same day.  The Postal Service says it was “unable to find a qualified postal employee to staff the office.”  While it decides what to do, the Postal Service has opened a Village Post Office in the Kirksey Country Store.  Apparently the post office in nearby Lynnville was also recently suspended for the same reason, and STPO has been told that in both cases the Postal Service didn’t look very hard for replacement personnel; the Postal Service, however, says they are continuing to search for someone for Kirksey.

That brings us to the PRC ruling listed as “other” in the table.  The post office in Cranberry, Pennsylvania, was closed for an emergency suspension in September 2009 when the leased expired.  The citizens of Cranberry filed an appeal, arguing that the Postal Service did not look for an alternative location for the post office and did not conduct a formal discontinuance process.

As with Kirksey, the Postal Service asked the PRC to dismiss the case because the post office had not been discontinued, i.e., it was just temporarily suspended and not officially being studied for permanent closure.  On Feb. 1, 2012, the PRC issued an order that the Postal Service needed either to proceed with permanently closing the post office or to find a new site and re-open the office.

When the Postal Service does resume closing post offices and the PRC returns to dealing with appeals, there will be new rules in place that will make the process more “user-friendly.”  It’s also possible that postal reform legislation will give the PRC more power in dealing with appeals.  The Senate bill (S.1789, sec. 205) gives the PRC the authority to not just remand a closing decision but to overturn it.  The bill (sec. 202) also gives individuals the right to ask the PRC to review the Postal Service’s decision to close or consolidate a mail processing facility.

One more thing will be different at the PRC.  Last week, Tony Hammond was sworn in as the fifth commissioner.  How Commissioner Hammond will vote on post office appeals remains to be seen, but at least the days of two-to-two decisions have come to an end.

There’s one question still waiting for an answer.  What’s going to happen to the 220 post offices that have already received their Final Determination notices, 130 of which received one of those tie votes at the PRC?  Is the Postal Service going to proceed with closing them when the moratorium ends, or will they be spared as part of the new plan being announced today?  We’ll soon see.

(Image credits: Cartoon by Ed Fischer, cartoonstock; Kirksey, KY post office, google street view)

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