Can it get much worse? The Senate tries postal reform, again

SteveBlog, Jamison Articles

BY MARK JAMISON

The Senate Committee on Homeland Security and Government Affairs finally took up its postal reform bill at a markup session on Wednesday, January 29.  The new S.1486 the committee took up is significantly different from the Carper-Coburn bill released last August.  The current version, aka the substitute bill or the managers’ amendment, has introduced changes to the rate system, regulatory oversight, and facility closings that are worth close scrutiny.

The leadership of the Postal Service has expressed satisfaction with the new substitute bill.  No wonder.  It reads like the fulfillment of PMG Donahoe’s and the Board of Governor’s wish list.  It grants them new powers over ratemaking, adds language regarding contract negotiations favorable to management, and creates a separate postal employee health plan within the current Federal Employee Health Benefit Plan (FEHBP).  The bill also addresses the retiree health benefit prefunding, while adding a new prefunding requirement for workman’s compensation.

Whatever its final form, the postal reform bill that comes out of the Senate will represent the next step in a process that has been going on since the Postal Service was created in 1971.  For the last forty years the leadership of the Postal Service has pursued a course that treats the postal network in terms of a corporate business model that simply provides a delivery service.  Postal leaders do not seem much interested in the view of the postal system as basic national infrastructure that connects American homes and businesses with each other and with their government.  They do not seem very committed to a broad vision of the universal service obligation.  They do not seem to understand what our Founders grasped so clearly — the important role of the postal network as a fundamental element of democracy, furthering access to information and creating connections in a way that bound the nation together.

The role of the Postal Service

In his response to the President’s State of the Union message the other day, Senator Rand Paul said, “It’s not that government is inherently stupid, although it’s a debatable point.”  Mr. Paul’s cynical, even nihilistic expression of governance may sound extreme, but in many ways it is an opinion shared by many Americans and by many politicians from both parties.

Rather than understanding government and governance as a necessary undertaking that affects the lives of everyone in this country, rather than viewing governance as a serious responsibility of elected officials, rather than seeing government as the creation and embodiment of the people, rather than accepting the Constitution’s challenge to “form a more perfect union” in order to “establish justice, insure domestic tranquility … and promote the general welfare,” Senator Paul and far too many others look at government as if it were simply imposition, merely an impediment to the business — and businesses — of America.

This attitude has been no more evident than in the treatment of the post office over the last forty years. Rather than viewing postal services as an essential element of American life and the postal network as infrastructure that offers great potential even as technologies change, legislators have tried to stuff the Postal Service into an ill-fitting role as a business while creating conditions that ultimately guaranteed failure.

The bill offered by Carper and Coburn does nothing to change that direction.  Instead, it furthers the apparent goal of privatizing a basic public service while eliminating hundreds of thousands of good jobs and turning tens of thousands of others into the sort of low-paying, low-benefit positions that have become the hallmark of the American economy.

The rest of this post discusses the new substitute version of S. 1486.  It starts with an overview of the main highlights of the bill.  That’s followed by a discussion of what happened at last week’s markup session.  At the end, there’s a quick section-by-section summary of the bill.  The full text of the bill is here.

 

Highlights of the bill

Benefit plans

The bill does address the retirement healthcare funding that has been such an issue because of the $5.5 billion annual prepayments required by PAEA.  It does this in conjunction with efforts to address surpluses in other retirement accounts.  Basically the bill eliminates the nearly $17 billion of RHBF payments the Postal Service has missed so far, and it recalculates the remaining liability (about $50 billion) and amortizes it over the next 40 more years (as opposed to the ten-year schedule mandated by PAEA in 2006).

On the other hand, though, the bill also requires the Postal Service to pre-fund workers’ compensation by $17 billion, so one burden will be replaced by another.

Surpluses in FERS are potentially returned to the Postal Service, but they can only be used to pay down existing debt to the Treasury or be applied to retirement, healthcare, or workers’ compensation liabilities.  A new prefunding requirement is added for worker’s compensation. The liabilities are now calculated to 80% rather than 100%, and postal specific assumptions are to be used in the actuarial calculations.

While the bill doesn’t take postal employees and retirees out of the Federal Employees Health Benefit Plan (FEHBP), it does create a separate postal risk pool and a separate postal plan within FEHBP.  With a few exceptions, employees and retirees will only be permitted to join plans within the postal plan.  Those eligible for Medicare must fully enroll in both Medicare Part A and Part B (there are exceptions but those are limited and eventually every eligible is shifted to Medicare).  There is an open season for those currently eligible for Medicare who have not enrolled, and a waiver period is granted for penalties that would apply to those who did not enroll in Part B when first eligible.

This plan does not remove postal workers and retirees from FEHBP as the PMG had proposed, but by segregating them from FEHBP, any future proposal to create a separate system would become much easier and have no impact on FEHBP.  Impact on FEHBP had been a concern of OMB, which will continue to manage both FEHBP and the new PSHBP.

The bill also has provisions for a separate retirement system for future employees who will not be eligible to enter FERS.

 

Arbitration and collective bargaining

The PMG has long sought language in the part of the statute covering arbitration of labor disputes that requires arbitrators to consider the financial condition of the Postal Service. The new bill doesn’t give the PMG everything he wanted, but it comes close: “in rendering a decision under this paragraph the arbitration board shall consider such relevant factors as the financial condition of the Postal Service.”

Arbitrators have always been able to take any issue presented by the parties into consideration. Presumably the new language puts a thumb on the scale to make the financial condition of the Postal Service a primary, or least more significant, consideration.  Maybe that is as it should be, but it is worth noting that the current financial condition of the Postal Service was not an accident of fate caused simply by declining mail volumes.  In many ways it was intentionally created by actions of both Congress and the leadership of the Postal Service.

While the bill may tilt the scale more toward the management end, it does preserve collective bargaining.  If Rand Paul had had his way, that wouldn’t be so.  During the markup hearing, Senator Paul suggested that collective bargaining was inappropriate for postal workers.  It’s not an uncommon view, and the role of the unions has been a point of contention for people both inside government and in the private sector.  Last week Grover Nordquist’s organization, Americans for Tax Reform, published a piece saying that the problem was too many postal workers who get paid too much.

 

Plant Consolidations

The bill spends a great deal of time talking about preserving the mail processing network.  It requires that the delivery standards that were in place on October 1, 2013, be retained for two years, and it places a two-year moratorium on plant closings and consolidations.  That would mean the phase-two consolidations planned for 2014, now being temporarily postponed, would be delayed until 2016.

While these provisions may sound promising, at least for the short term, the bill is filled with enough vacillating and ambiguous language to make the moratorium something less than an actual guarantee.  For example, the bill defines a plant consolidation as occurring when all of the incoming or outgoing processing is removed.  Does that mean a plant could be reduced to a skeleton crew with nearly all of its processing shifted to another facility?  AMP studies are now required to look at reduction in capacity as well as simply closure or consolidation, but the language in the bill allows the Postal Service to present plans that mitigate negative impacts – plans that may or may not come to fruition – while continuing with a closure or consolidation.

The plant consolidations that have already been implemented are causing many problems, and it’s clear that the Postal Service was far too optimistic about how they would impact service.  Some of the plants that have received additional duties don’t have sufficient equipment to provide the additional processing.  Mail carriers are out later than ever.  We’ve heard that that thousands of carriers across the country returned after 8:00 PM on the day after the MLK holiday.  In at least one district, more than 35% of the carriers returned after 6:00 PM during a four-week period.  These kinds of problems can be directly attributed to the reduced processing capabilities.  It’s no wonder that the Senate bill puts off further consolidations for another two years, but what happens then?

 

Post office closings

As for post office closings, the bill puts a five-year prohibition on closing small rural post offices as well as making several other changes to this section of the law.  It includes stations and branches within the definition of “post office,” thus resolving a long dispute between the Postal Service and PRC.  It codifies POStPlan by requiring the Postal Service to consider alternatives to closing a post office, such as reducing the hours or setting up a contract postal unit in a private business.  And it expands on the factors the Postal Service must consider before closing a post office, such as availability of qualified employees, proximity of other retail facilities and retail access, the impact on the elderly, and scheduled hours that minimize negative impacts.

Much of the language here seems intended to make it more difficult to close post offices, but it’s not certain that it would have this effect, and it might even do the opposite. For example, closures are prohibited “unless the Postal Service determines that customers would continue to receive substantially similar access to essential items and the Postal Service takes action to substantially ameliorate projected loss of access to essential items (emphasis added).”  The Postal Service already says customers will receive similar access when their post office closes.

As for the new factors that the Postal Service must consider, these may turn out to be meaningless.  The Postal Service already “considers” factors like effect on community, but that turns out to mean simply that it looks at the issue.  It doesn’t mean it won’t close a post office because the effects might be negative. The Postal Service gets to define its responsibilities, and historically it has taken a rather Orwellian view of how it defines words like “consider.”

The moratorium on closing rural post offices may not mean much either.  At this point, the Postal Service has backed off on closing small post offices because of all the pushback it got when it started on this initiative a couple of years ago.  While post offices will continue to close, we’re not likely to see the mass closures that were threatened a couple of years ago.  POStPlan has accomplished much of what the mass closures would have achieved.  With over 10,000 postmasters replaced by part-time workers, most of the costs of operating small post offices have already been eliminated.  (That accomplishment was applauded during the markup by Senator Carper, who twice noted how well POStPlan had worked at exchanging good $50,000/year jobs for jobs that paid $12.00 an hour.)

One of the big problems with the Senate bill is that is seems to encourage more contract postal units, like the new postal counters in Staples and the Village Post Offices being created at the rate of about one a day.  With thousands of post offices now being staffed by part-time workers and an obvious push toward contract units in private businesses, we’re seeing more and more retail transactions being conducted by people with much less training, experience, expertise, and commitment than small-town postmasters and postal clerks.  Yet this obvious dumbing down of the system is somehow supposed to be viewed as a success because it’s saving a few hundred million dollars, a tiny percentage of the total budget.

 

Delivery

The bill allows the Postal Service to go to five-day delivery service if and when total mail volumes drop below 140 billion pieces in any four consecutive quarters.  Six-day package delivery is required to be maintained.

Based on current volume projections, it looks like the Postal Service might be able to switch to five-day as early as 2016.  This essentially fulfills Mr. Donahoe’s goal, and on a timeline that isn’t far from what he might have been able to implement if he was given immediate permission to reduce days of delivery.

The bill also promotes the use of cluster boxes and other types of centralized delivery.  It states that all new delivery should be evaluated for CBUs.  It requires District offices to study which residential deliveries are best suited for conversion and requires a plan to promote “voluntary” conversions.

I place the word “voluntary” in quotation marks because it is clear from past practice that local managers often have a different sense of what that word means.  CBUs were foisted upon the folks in Freistatt, Missouri, at the behest of a zealous district manager.  A local postmaster, along with a local official, tried to trade home delivery for a post office in Jekyll Island, Georgia.  There have been several reports from around the country about letters going out to customers persuading them to accept a change in mode of delivery.  It is very likely that this program will become something more than voluntary.

Changing from door or even curb delivery to centralized units is a fundamental change in postal services. It may be cheaper, but it also depersonalizes the service, and it takes the mail carrier away from the customer.  It also sets up an infrastructure that is easily accessible or even transferable to other delivery providers.

The bill doesn’t address the issue of who will pay for this new infrastructure. It doesn’t address how this infrastructure would be managed nor does it look at what impact this might have on people’s views on postal services.

 

Rates

Perhaps the most controversial section of the bill is the section on rates. The bill makes the recent exigent increase the permanent cost base and changes the CPI cap to CPI plus 1 percent.  More importantly, it transfers responsibility for rates almost entirely from the PRC to the BOG.

Throughout the bill the role of the PRC is diminished and nowhere is that more evident than in the area of rates.  This loss of oversight seems to change a fundamental principle about the nature of the Postal Service.  With diminished regulation, it becomes less like a government service provider and more like a corporation providing delivery. Throughout the bill, studies or evaluations that one might normally expect to be done by the PRC are passed to the GAO, and the BOG assumes most of the responsibility on rates.

Current law calls for the PRC to re-examine the entire rate system in 2017.  In the new bill, this power is transferred to the BOG, which means that the rate cap and other restraints on rates could be eliminated in a new rate system.  The mailing industry has expressed great concern with giving the BOG that much power.  Democrats, some Progressives, and Chairman Ruth Goldway have also expressed concern about eliminating oversight of the postal monopoly.

Section 301 has one other interesting provision.  It eliminates non-profit rate preferences for certain political committees, a provision that has met approval from both Republicans and Democrats.

 

Strategic Advisory Committee

The bill offers a smattering of other changes.  It allows for the mailing of alcohol.  It changes the composition of the BOG and sets a limit of two terms for members of both the BOG and PRC.  It requires the Postal Service to come up with a plan to reduce its Area and District management structures.  It shifts control of the Postal Inspectors to the OIG.

The bill would also create a Strategic Advisory Committee on Postal Service Solvency and Innovation.  The charge of this advisory committee reads like a proposal for privatization.  The seven-member committee would be appointed by the President and the party leaders in Congress.  It would be empanelled for the purpose for “developing a blueprint for the long term solvency of the Postal Service.”  While that sounds reasonable enough, it is done in a context that clearly prefers a vision similar to that proposed in the recent Napa-Pitney Bowes sponsored whitepaper on privatization.

The committee is to assess the current business model as well as future and alternative models while evaluating ways to balance cost reduction with new product offerings and identifying areas for growth and innovation.  Again, that sounds reasonable enough, but given what passes for conventional wisdom with respect to the future of the Postal Service, the committee’s charge looks very much like an order to find a path to privatization.

 

Chief Innovation Officer

The also provides for a new position entitled Chief Innovation Officer.  It’s striking how easily the bill’s authors seem to think the Postal Service can begin to innovate.

The word “innovate” and the concept of innovation have become touchstones in our current jargon. Businesses and individuals are urged to innovate as if the process of creativity and innovation is a foreign concept that people are unaware of and unable to grasp without special instruction.  It is as if everyone should simply release their inner Steve Jobs and suddenly the organization or the economy will take off to heretofore unknown heights.

Do these senators really expect an organization with a clearly dysfunctional culture like the Postal Service to suddenly come up with brilliant ideas simply because they have now been told to do so by the Chief Innovation Officer?  The USPS OIG has offered countless reports and white papers on innovative products and possibilities that the Postal Service could look into.  Just this past week the OIG released a white paper on postal banking, a subject that has received widespread attention in the last couple of years.  There have also been a number of papers on using the postal vehicle fleet as a platform for data collection.

The ideas are out there but the simple fact of the matter is that the leadership of the Postal Service has ignored most everything that wasn’t related to promoting advertising mail or cutting special deals with companies like Amazon and 1-800-Flowers.  EDDM and discounts for using QC barcodes are not groundbreaking ideas, nor is trying to capture the limited potentialin the same-day delivery market.  There is a fundamental disconnect between the expectations expressed in this bill and the reality of the current Postal Service.  It’s as if the senators are trying to build a Silicon Valley start-up company rather than preserving an essential service and a piece of national infrastructure.

The remainder of the bill is a rewrite of the Federal Employees’ Compensation Act, the law that governs workers’ compensation for Federal employees.  The postal reform bill passed by the Senate in the previous Congress had the same language, which was drafted by Senator Susan Collins, who is no longer on the committee, and Senator Daniel Akaka, who has since passed away.  It addresses various problems with current law, particularly the problem of injured workers who remain on workers’ comp long past retirement age.

 

Disposal of real property

Senators Carper and Coburn have also tacked on to their postal reform bill a final section that deals with the management and disposal of federal property.  This section does not deal strictly with postal properties, and it was presented as a separate bill back in July 2013, the Federal Real Property Asset Management Reform Act of 2013.  It’s not clear why the senators thought it was a good idea to include this bill within their postal reform bill.  Much of what is has to say may not even apply to the Postal Service, which has more control over its properties than other federal agencies.

In any case, this section of the substitute bill is entitled “Property Management and Expedited Disposal of Real Property.”  It would require each federal agency to conduct an inventory of real property under its control and to identify excess and underutilized property.  It would also establish a Federal Real Property Council (FRPC), chaired by the OMB Deputy Director for Management, and charge it with creating a management plan.  It would also tell the GSA to maintain a single database of all real property owned by federal agencies, and task agencies with independent leasing authority to submit a detailed annual report describing its leases. Finally, the bill would establish a pilot program to expedite the disposal of surplus properties by disposing up to 200 properties each year.

How this section of the postal reform bill would apply to postal properties per se isn’t spelled out.  It might have a positive impact in that it would encourage the Postal Service to work harder at leasing out extra space in its post offices, but its emphasis on expediting disposals would inevitably lead to the sale of more post offices.  Considering that one out of four post offices owned by the Postal Service is a historic property, on or eligible for the National Register, this section of the bill could lead to the sale of many more historic post offices.

 

Highlights of the markup

So that’s the bill.  On Wednesday, January 29, the Committee for Homeland Security and Government Affairs gathered to perform what is known as markup.  This is a committee session designed to allow the senators to offer amendments and changes to the draft bill.  There’s a good summary of the hearing here, so rather than recount the session in detail, we’ll look at a few highlights.

Fun with numbers

The session began with Senator Carper offering opening remarks that for the most part mirrored remarks he has made on other occasions.  Senator Carper offered his hope that the bill would satisfy the stakeholders of the post office, which he counted as the customers, the employees, and the taxpayers, who he claimed were on the hook for $215 billion.  It isn’t clear where the senator came up with this figure.  It represents, one supposes, the total of long-term liabilities the Postal Service might owe over perhaps the next 75 years.  At the most recent hearing in September, the written testimony supplied by GAO indicated future unfunded liabilities of $90 billion.

It’s been common for those involved in postal issues to misstate or overstate various figures or present figures without any context.  At various times PMG Donahoe and others have claimed the Postal Service was losing $25 million per day or even $48 million.  In this hearing both Senator Coburn and Senator Carper misstated postal losses from last year claiming $12 billion – the actual loss was $5 billion – and at no time did either senator note the source of the losses as primarily from the RHBF prefunding requirement.  It is as if the goal is to make the situation sound as bad as possible in order to justify what they intend to do to the Postal Service.

The purpose of the session was to markup the bill, and all of those attending seemed anxious to get on with the business at hand, so all of the senators other than Carper and Coburn demurred on opening remarks.  The senators then began offering their amendments, alternating between the two parties, first a Democrat and then a Republican.

 

Paul: Bankruptcy and bargaining rights

The first moment that has to be on the highlight reel belonged to Senator Rand Paul, a conservative Republican who serves the state of Kentucky and who is often mentioned as a potential presidential candidate.

Without hesitation, Senator Paul announced that the Postal Service was simply not salvageable.  He declared that it wasn’t tenable in its current form and ought to be sent directly to bankruptcy with the current labor contracts being abrogated.  He offered an amendment to do just that and to deny collective bargaining rights to postal employees and eliminate the current no layoff clause. Mr. Paul suggested that while he wasn’t “opposed to all unions” he did think that unions were inappropriate for public service workers.  He pointed out how successful, in his view, the elimination of public service bargaining rights had been in Wisconsin.

It’s likely that some of the other Republican senators at the table agreed with Senator Paul, but only Senator Johnson was willing to say that out loud.  Earlier Senator Johnson had declined to offer an amendment indicating that although he disagreed with much of the bill he was willing to go along to get something done. This was a point that both Senators Carper and Coburn had stressed, that there was much compromise involved in getting an acceptable bill.

Senator Paul’s amendment was voted down.

 

McCaskill and Enzi: Moratorium on post office closings

The floor then went to Senator McCaskill, who offered an amendment putting a one-year moratorium on post office closings.  The bill has a five-year moratorium on closings, but it comes with a very large “unless” clause that leaves closings within the realm of possibility.  Printed versions of the amendments were not available, but it also appears that Senator McCaskill’s amendment required that an alternate postal facility be within ten miles of a discontinued facility.

Ms. McCaskill’s offering was interesting because of the ensuing discussion.  Senator Coburn repeated that the Postal Service had indicated that it had no plans for additional closings but he acknowledged there was a trust factor involved.  Ron Stroman, the Deputy PMG, who was present at the hearing, was asked directly if the Postal Service was okay with the proposed change.  He said that although it was more restrictive than the current language, the modified language was “generally acceptable” to the Postal Service.  He went on to affirm the Postal Service’s commitment to the universal service obligation to rural America and ended with, “We are not interested in closings at this point.”

Senator Mike Enzi of Wyoming then offered an amending extending the closing moratorium and setting conditions on closing urban post offices, which was accepted.

 

Baldwin: Rate issues

Senator Tammy Baldwin of Wisconsin next offered an amendment to strike all of Section 301 from the bill with the exception of language denying certain political committees non-profit rates.  Section 301 is the part of the bill that deals with ratemaking.  It transfers most of the responsibility for setting and reviewing rates from the PRC to the Postal Board of Governors, and it makes the exigent rate increase permanent, along with raising the CPI cap to CPI plus one percent.

Senator Baldwin has been outspoken with regard to the exigent rate case.  She has made appearances at Quad/Graphics, one of the largest printing companies in the country and a large presort mailer.  She has also spoken about Wisconsin’s reliance on the paper industry.  During the hearing, the Senator expressed concern about the impact of exigent rate increase on future rates combined with the new standard of CPI +1.  She said this would result in a three-year increase of as much as 22% in rates.

A spirited conversation ensued with Ron Johnson, Senator Baldwin’s colleague from Wisconsin, leading the charge.  Senator Johnson’s educational background is accounting, and before being elected to the Senate as a Tea Party favorite, he ran PACUR, a plastics manufacturer.  In a previous hearing before the committee, Senator Johnson took representatives from GAO and OPM to task for the assumptions they used in calculating Postal Service liabilities.  Senator Johnson is proficient at using bluster, misdirection, and obfuscation as a means of raising questions about numbers and data that don’t support his preferred conclusions.  He has on several occasions expressed his belief that the Postal Service ought to be privatized.

Prior to the session the committee’s staff had distributed information that purported to show different financial projections given various scenarios related to the rate cap. Senator Baldwin questioned their validity beyond 2017, since a revamping of the rate system was scheduled both by PAEA and the current reform bill.  Under the reform bill, the BOG, not the PRC, would be responsible for that redesign. Senator Baldwin argued that not only was it pointless to make projections based on a rate system that might not exist but that transferring authority to the BOG was problematic.

The discussion became more heated as Senator Carper proposed a compromise that would eliminate the “plus 1” and allow the rate cap to remain at CPI.  Throughout this discussions and discussions of other amendments, points were raised about what might not only pass out of committee but also pass on the floor of the Senate.  It seems clear from those references that the future of this bill is fairly narrow.  It is apparent that Senators Carper and Coburn have crafted a bill that many senators on both sides of the aisle will go along with but reluctantly.  On the other hand, DPMG Stroman indicated that the Postal Service was quite satisfied with the bill.

During the discussion both Senator Coburn and Senator Johnson pointed out that in their view the postal letter monopoly was of little value. They both argued that the Postal Service should be forced to compete in the market.  Senator Coburn has a manner that suggests he is playing the role of the reasonable man, and on several occasions he offered compromises suggesting that he would consider cuts to revenues if equivalent cuts to costs were included. “Bring me your solution” is what he said.

The problem with this is that the good Senator has carved out a very narrow terrain.  He refuses to look at the Postal Service as anything other than a business, and he expresses a great desire to protect the taxpayers while using large numbers out of context to portray a more dire situation than what actually may exist.  At one point he compared the ability of the Postal Service’s ability to raise rates on market dominant products to a recent rate increase by UPS, knowing full well that in competitive products, the product categories in which the Postal Service competes with UPS that it has pricing flexibility.

Senator Baldwin was scheduled to be on the Senate floor so the discussion took on a sense of urgency as she began running out of time.  She insisted that she wanted a vote on her amendment, and based on the support she was receiving from her Democratic colleagues, they seemed to be caucusing as the discussion proceeded.  It appeared that her amendment could pass, but Senator Carper seemed determined not to bring the amendment to a vote, instead offering what at this point was a rather complicated substitute that was not even in writing.

It was finally determined that Senator Baldwin’s amendment would be tabled until later in the session after a written form of Senator Carper’s substitute could be drafted by staff.

 

Paul: More guns in post offices

The discussion over Senator Baldwin’s amendment seemed to take the steam out of the committee’s sails, but Senator Paul was saving his big moment for the end.  Senator Paul offered an amendment that would allow firearms to be carried in post offices.  More specifically, it would eliminate the federal ban on firearms in postal facilities and give the states and municipalities authority to decide about guns in post offices.

The Postal Service has reduced its ranks by over 300,000 in the last several years, small town post offices are seeing reduced hours and diminished service, mail carriers are increasingly at risk as slowed mail processing puts them out on the street after dark, and with all of this going on, Senator Paul is concerned that someone with a concealed carry permit might not be able to bring their gun into a post office.  Never mind that postal employees may be a bit on edge after the many incidents of workplace violence that have taken place over the years, the incidents that gave birth to the expression “going postal.”

Since our gun fetish in this country is treated quite seriously, no one in the Senate hearing room could actually laugh at Senator Paul’s amendment, at least without risking be characterized as being intent on taking away America’s guns.  So the senator’s amendment was treated seriously.  It was pointed out that many post offices were in Federal buildings and courthouses and that bringing guns in these sensitive places went against the advice of the U.S. Marshall and defied common sense.

Senator Paul acknowledged that might be a problem and said that he would redraft his amendment to exclude postal facilities housed within Federal buildings.  The bill may yet include Paul amendments, and we can look forward to the day that there are more guns in post offices.

 

Winding up

The session ended with an exchange between Senator Carper and Senator Tester, who expressed grave concern about making extensive changes to FECA in a postal reform bill.  Senator Carper insisted that it was appropriate since 40% of Federal workers’ comp claims come from the Postal Service.  He also pointed out that this was the same language that the Senate had passed by a large margin two years earlier.

Senator Tester acknowledge both those points but suggested that a major rewrite of a separate law that impacted all Federal workers was worth at least some discussion and perhaps some hearings.  This discussion was left unresolved.

After two noncontroversial amendments from Senator Begich of Alaska, were accepted the committee adjourned for lunch.  A call to committee staff indicated that the senators would not be returning for an afternoon session. The staff member said that the meeting might be continued the following day, but nothing was scheduled.  The committee later announced that will reconvene to continue its mark-up of S. 1486 on Thursday, Feb. 6 at 10 a.m.

 

The business of America

One comes away from the hearing with an impression that the current bill is a very tenuous compromise that Senators Carper and Coburn are trying to push through with as little major modification as possible. Senator Carper has a soliloquy for every occasion, but most of them end up at about the same place: Let’s take the Postal Service in the direction that has been carved out by senior postal leadership over the last forty but particularly the last fifteen years.

That direction is towards privatization.  While it may have a few small bright spots, the bill continues the relentless war against a public postal network and postal employees.  Rand Paul’s disdain for government — as epitomized by his remark about government being inherently stupid — may seem like the position of an outlier but, unfortunately, it isn’t.

One of our political parties — along with the populist movement that drives it — has taken a position that is so far beyond cynical as to be nihilistic.  It is a view that fosters discord and dysfunction.  But Republicans are not alone, and there are many Democrats who also view government as merely an extension of business.  This vision was captured by Calvin Coolidge’s famous line, “The business of America is business.”  It’s inevitable, then, that the “business” of the Postal Service can be nothing more than business.

But the heart and soul of America is not business.  Much of that heart and soul is embodied in our founding views of self-government, a view that saw government as an entity that facilitates justice and the general welfare of all our citizens.  Jefferson’s idea of “the pursuit of happiness” was not merely about the pursuit of business or money.

For well over two hundred years, the Postal Service has facilitated both commerce and citizenship. Viewing the Postal Service as nothing other than business does a great disservice to our founding ideals. The ethic that has driven cuts in service, abandoned a staunch commitment to universal service, and treated human labor as nothing other than a commodity does not serve us well.

Much of our political discussion today revolves around a number of self-serving myths about debt, deficits, and economics generally.  These myths are designed to further the sort of empty, ugly vision that people like Rand Paul promote.  They confuse liberty with greed, and they are leading us to solutions to the problems of the Postal Service in ways that are harmful to people and communities.

You know you’re on the wrong track when a United States Senator waxes rhapsodically about how many hundreds of thousands of postal jobs have been cut and how wonderful it is that fewer people are making a decent living and more people are working part-time for wages that can’t support a family.  Surely we can find solutions that support communities instead of leaving them with fewer resources, less access, and worse service.   Surely we can find solutions that continue traditions like door delivery and the small-town postmaster.  Surely we can find ways to innovate and create that don’t simply replace people or service with cheap replicas.

If the goal is to create a sustainable Postal Service, then let us think beyond what that means in crass, reductive business terms.  Let us create a Postal Service that sustains people, communities, and the institutions and values that this country was built on.

 

The bill, section by section

Section 101: Annual Retirement System Assessments

  • Allows for postal-specific assumptions to be used in calculating Postal Service liabilities to the FERS and CSRS retirement systems.  The Postal Service has argued that using assumptions based on the population of postal employees rather than the general population would result in more realistic (and favorable) calculations.
  • Creates a protocol for handling surpluses or deficits that occur in FERS and CSRS.  As best as we can figure, it goes like this.  It allows for the return of up to $6 billion of overpayments that existed as of the end of FY2013, but the money can only be used to repay existing debt to the Treasury.  A second calculation will be done at the end of FY 2014, and the Postal Service may request up to two-thirds of that money be returned.  This money may be transferred to the RHBF, the CSRS retirement fund, or a new fund, the Postal Service Workers’ Compensation Accrued Liability Fund.  For years after FY2014, any surpluses may be transferred to the previously specified funds or can be amortized over 40 years to reduce future contributions to FERS.

Section 102:  Postal Service Authority to Negotiate Retirement Benefits for New Employees

  • Allows the Postal Service to negotiate retirement benefits for employees who won’t be covered by FERS.  It grants access to TSP for those employees.

Section 103: Restructuring of Payments for Retiree Health Benefit Fund (RHBF)

  • Changes amortization schedule to 2052 (rather than 2016)
  • Amortizes to 80% of the liability rather than the current 100%
  • Cancels the RHBF payments that the Postal Service has failed to make

Section 104: Postal Service Health Benefits Program

  • Creates a separate health benefit plan for postal employees.  The plan remains in FEHB and continues to be managed by OPM, but it becomes a separate risk pool.
  • Requires employees and annuitants to enroll in PSHBP plans, although there are some exceptions in the event the employee’s current plan doesn’t have an offering in the new pool or if a PSHBP plan is not offered in a particular geographic area.  Those changing plans must change into a PSHBP plan.
  • Requires those eligible for Medicare to fully enroll in both Part A and Part B. All plans must offer a drug benefit that satisfies the Medicare Part D requirement.
  • Gives those who are already Medicare eligible a six-month open season and waiver of the Medicare premium penalty (this penalty applies to those who do not enroll in Part B when they become eligible).

Section 105: Labor Disputes

  • Adds the following language to the sections of Title 39 that deal with labor arbitration: In rendering a decision under this paragraph the arbitration board shall consider such relevant factors as the financial condition of the Postal Service.

Section 106: Prefunding and Financial Reporting with Respect to Workers’ Compensation Liability.

  • Establishes a prefunding requirement for workers’ compensation of $17 billion
  • Computes the present value of the liability and sets up an amortization schedule through 2058.  The liability is funded at 80%
  • Relieves the Postal Service of the obligation to make a payment in any year it fails to make $1 billion in net income.
  • Allows the fund, beginning in 2018, to pay a portion of the annual liability.

Section 202: Maintenance of Delivery Standards

  • Freezes the delivery standards that were placed into effect on October 1, 2013, for two years.  GAO, not the PRC, will conduct a study on how the Postal Service measures delivery times and will determine whether the methods account for time from actual mailing to actual delivery.   The issue of how the Postal Service measures delivery times (e.g., whether they accurately reflect actual service or only start after a mailpiece is cancelled) has been the subject of discussion in various hearings.

Section 203: Preserving Mail Processing Capability; Review of Discontinuances, Closings and Consolidations.

  • Establishes a two-year moratorium on discontinuances, closings and consolidations for any facility that was open on October 1, 2013.  The term consolidation is defined as the transfer of all incoming or outgoing processing (emphasis added).
  • Requires new AMP studies to include a plan to reduce capacity without closing.  Existing AMP studies must address the same issue.
  • Describes the procedures for the notice, publication, and public meeting and comment procedures in detail.
  • Requires the Postal Service to consider the impact of a closing on communities, businesses, and the region, but it is given the opportunity to consider “the extent to which the Postal Service can take action to mitigate significant negative impacts identified through considerations in this paragraph.”  This final clause would seem then to allow the Postal Service to discount the impacts it identifies by offering plans for mitigation.
  • Requires the Postal Service to continue to receive mail at or near the same location, a provision that seems designed to assist mailers whose BMEU will move as a result of a closure.

Section 203: Preserving Community Post Offices

  • Prohibits closures for five years (after the enactment of the bill) unless the Postal Service determines that customers would continue to receive substantially similaraccess to essential items and the Postal Service takes action to substantially ameliorate any projected loss of access to essential items (emphasis added).  The availability of broadband access and the presence of year round road access to alternate facilities are also to be considered.
  • Revises section 404(d) of Title 39 to that “post offices” is defined to include stations and branches or “other facility that is operated by the Postal Service.”  This resolves a long-standing dispute between the PRC and the Postal Service over which facilities are subject to appeal.  It continues to exclude contract facilities like CPUs and CPOs from the discontinuance provisions.
  • Codifies POStPlan procedures for reductions of hours by requiring notice, community meetings, and considerations such as the availability of qualified employees, proximity of other retail facilities and retail access, the impact on the elderly, and scheduled hours that minimize negative impacts.

Section 204: Changes to Mail Delivery Schedule

  • Allows the Postal Service to shift to five-day delivery after four consecutive quarters if total mail volume drops below 140 billion pieces (currently projected for 2016).  Once the volume limit, is reached the Postal Service retains the authority to reduce to five day.
  • Tasks the GAO to provide a report within 270 days after enactment evaluating whether the change in delivery would improve the financial condition of the postal Service.  (GAO is already on record as recommending the change in delivery schedules.)
  • Maintains package service at a six-day level for a period of five years after a reduction to five-day delivery.

Section 205: Delivery Point Modernization

  • Charges the Postal Service to use “the primary mode of delivery that is most cost effective and is in the best long term interests of the Postal Service,” except where otherwise specified in the bill.
  • Mandates centralized delivery to new delivery points, unless otherwise specified.
  • Tasks the Postal Service to carry out a program to shift business delivery to either centralized or curb delivery.
  • Charges district offices with identifying residential areas where switching from door delivery is cost effective.  The Postal Service is given one year to implement a program to voluntarily convert residential deliveries to the most cost effective mode available.
  • Grants exceptions where barriers or the presence historical districts prevent conversion from door delivery.  Procedures are to be established for waivers for those with physical hardships.

Section 206: Postal Services for Market-Dominant Products

  • Orders the Postal Service to “develop and promote adequate and efficient postal services with respect to market-dominant products.”  It continues the PRC’s role of providing advisory opinions in nature of service cases but tightens the time limits on those cases and requires the Postal Service to respond to the PRC recommendations.

Section 301: Postal Rates

  • Rewrites Section 3622 of the current law to give the BOG primary responsibility for determining rates.  The PRC’s role is reduced to a review role.
  • Makes the recent exigent rate increase permanent and the new base for future rate increases.  The CPI cap is modified to CPI plus one percent. Provisions remain for exigent rate increases.
  • Gives the BOG authority, on or after January 1, 2017, to propose a new system of rates.  Current law gives that responsibility to the PRC; under the new language, the PRC would have only review responsibilities.
  • Addresses workshare discounts at length. The standards remain essentially the same; discounts must be limited to costs saved. However, a number of exceptions and extenuating circumstances are permitted. It becomes the BOG’s responsibility to ensure that appropriate standards are maintained.
  • Continues NSAs.

Section 302: Nonpostal Services

  • Allows the Postal Service to add nonpostal services with provisions to ensure they pay their costs, make money, and are not anti-competitive.

Section 303: Shipping of Wine, Beer, and Distilled Spirits

  • Allows the Postal Service to ship alcohol.

Section 401: Board of Governors of the Postal Service

  • Reduces the BOG to eight members plus the PMG.  Some internal procedures of the board are changed.
  • Limits board members to two terms.

Section 402: Strategic Advisory Committee on Postal Service Solvency and Innovation

  • Empanels a new seven-member advisory committee. Three members are chosen by the President with the remaining members selected by the party leaders from each branch of Congress.  The members may not be elected officials or Federal employees and should have experience in business, technology, and public administration with a focus on revitalizing organizations facing financial challenges.
  • Charges the panel with developing a strategic blueprint for the long term solvency of the Postal Service. The committee is to assess the current business model, assess future and alternative models including an evaluation that balances cost reduction with additional opportunities for revenue. In addition, the committee will develop strategies for dealing with future liabilities, identify areas for growth and innovation, and identify areas for future cuts, all with the purpose of providing a twenty-year vision of a sustainable Postal Service.
  • Charges the panel with looking at potential interagency agreements with Federal, State, and local governments.

Section 403: Long-term Solvency Plan; Annual Financial Plan and Budget

  • Charges the PMG with developing a long-term plan for solvency. The plan is to be presented to the BOG within 90 days. After the BOG approves or modifies the plan, the BOG submits it to Congress.
  • Requires the plan to include an analysis of the changes the Act makes, anticipated cost savings from future employee negotiations, projections on mail volumes, employee complement, and long-term capital needs.

Section 404: Chief Innovation Officer; Innovation and Strategy

  • Directs the PMG to a Chief Innovation Officer.  The officer will submit a report within nine months that gives a comprehensive strategy for improving the net financial position of the Postal Service through innovation.
  • Directs the report to give specific postal and Nonpostal services to be developed and the estimated date those services will be introduced along with the cost of developing and offering the services; anticipated sales volume; anticipated revenues; the likelihood of success; and the market trends that may affect success over the coming five years.

Section 405: Area and District Office Structure

  • Charges the Postal Service with reviewing the current Area and district office structure and submitting a plan to Congress within one year of how that structure will be reduced to be more cost efficient and cost effective.

Section 406 Inspector General of the Postal Service

  • Gives oversight of the  Postal Inspection Service to the OIG.
  • Gives oversight of the OIG to the BOG.

Section 407: Postal Regulatory Commission

  • Limits terms of Commissioners to two terms.
  • Changes some of the reporting relationships within the Commission.

Section 501-517: Federal Employees’ Compensation Act

  • Rewrites FECA. The language in this section duplicates the language that was in the Postal Reform Act passed in the previous Congress. The language was written by Senator Collins, who is no longer on the committee, and Senator Akaka who has since passed away. The issues related to FECA are far too complex to go into here.

Section 601: Property Management and Expedited Disposal of Real Property

  • Requires each federal agency to conduct an inventory of real property under its control and identify excess property.
  • Requires the GSA to establish and maintain a database of all real property owned by federal agencies.
  • Requires agencies with independent leasing authority to submit a detailed annual report describing its leases.
  • Expedites disposal of excess property.

[Mark Jamison is a retired postmaster for the US Postal Service.  He can be reached at Mij455@gmail.com.]

(Photo credits: Senators Coburn and CarperFERSCollective bargainingRally against Flint consolidationPO closed; Cluster boxRate increaseStrategyInnovation playbookBronx General Post OfficeSen. CarperSen. PaulSen. McCaskill; Sen. BaldwinRand Paul as RoboCopSen. TesterCoolidge for president)

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