The Senate does postal reform: An overview of S.1789

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If all goes according to plan, Senate bill S.1789 will come to the floor for a vote this week, perhaps as early as Tuesday.  The “21st Century Postal Service Act of 2012" is sponsored by Senators Lieberman, Carper, Collins, and Brown.  (A good summary of the bill is here.)

Though a few shades better than what Darrell Issa and the House will come up with, there’s little in the Senate bill to make one hopeful about the future of the Postal Service.   S.1789 just buys into postal management’s view of what needs to be done to right the ship — close post offices, consolidate the processing network, slow down the mail, reduce delivery days, cut back on delivery points to the door, and downsize the workforce by over 150,000 jobs. 

These steps are being touted as necessary to save the Postal Service, but they are really designed to turn the Postal Service into an enterprise that serves a corporate elite — the Postal Service’s biggest customers and suppliers — rather than the general public.  At the heart of the plan is hostility toward public-sector workers, unions, government, and public services. 

In order to get the country to go along with the plan, this elite has lobbied Congress, exercised its influence on postal executives, and shaped the media narrative.  The storyline has been simple and consistent: The Postal Service is hemorrhaging billions of dollars — millions each day — because everyone is using email and paying bills online.  The deficit is now $25 billion, mail volumes will continue to plummet no matter what, insolvency is weeks away, and millions of jobs and the entire mail industry are threatened.  The only way to save the Postal Service is by “rightsizing” it, i.e., dismantling.

With the New York Times, the Washington Post, and the rest of the mainstream media constantly reiterating this narrative, it’s been virtually impossible to hear another view.  The postal worker unions and a few progressives — notably John Nichols at Nation Magazine and Senator Bernie Sanders of Vermont — have tried to explain what’s really going on, but it’s been tough.

The postal deficit, they explain, has been caused not by the Internet but by the Great Recession and the 2006 congressional mandate to pay $5.6 billion a year into the retiree health care fund.  Were it not for those unnecessarily onerous payments, the Postal Service would have broken even for the past five years, and were it not for the recession, it would be showing a profit.  Draconian downsizing plans will not save the Postal Service: they will doom it.

The Senate bill that will come to a vote this week fails to acknowledge these basic facts.  Instead, it’s based on the false premise that the only way to deal with the deficit and the projected declines in First-Class mail is by dismantling the postal system.  The bill doesn’t try to correct the disastrous course postal management has elected to take.  It just slows things down.  It puts up a few more hurdles for closing post offices and processing plants, and it makes a rhetorical nod in the right direction when it comes to things like giving the Postal Service more freedom to innovate and diversify.  But the bill won’t stop the madness.

As weak as it is, the bill may yet turn into something halfway decent if a number of key amendments are passed.  There are several amendments on the table that would do more to protect post offices, plants, workers, and service.  But it will be tough getting any of them approved because Senate leaders have decided that it will take 60 votes to pass an amendment — an almost impossible threshold considering how evenly split the Senate is along party lines.

As is, the bill leaves much to be desired, and it will only get worse after it goes on to the House, which will pass some version of Issa’s bill, the ultimate goal of which is clear — privatization.  The two versions will then be sent to a conference committee to work out a compromise, which can only end up making worse whatever the Senate passes this week. 

From the looks of things, we’re going to end up with postal reform legislation that doesn’t save the post office from an untimely demise.  It will just do hospice.  Here’s an overview of  what’s in the bill.  Read it and weep.

 

Expanded products and services

While the postal deficit is a manufactured crisis, the slow erosion of First-Class mail due to the Internet is a fact of life, and as the secret markeing survey revealed, the declines will accelerate if the Postal Service implements its downsizing plans and reduces service standards.  It would definitely help if the Postal Service could develop new sources of revenue.

The Senate bill authorizes the Postal Service to provide new products and services that are not strictly speaking “postal,” but only after the Postal Regulatory Commission (PRC) has determined that the new service doesn’t create unfair competition with the private sector.

That proviso eliminates just about any profitable innovation that the Postal Service could come up with.  If a new service can bring in significant amounts of revenue, it will inevitably compete with the private sector, and there’s sure to be a corporate executive or lobbyist complaining that the competition is unfair.

That’s how it’s always been.  There’s a good article in this week’s New York Times (one of the few decent pieces it’s run on postal matters) about how Congress has prevented the Postal Service from diversifying the way foreign posts have done.  In the 1990s, for example, the Postal Service wanted to get into phone cards, money transfers, and e-mail, but Congress said no.  With the 2006 Postal Accountability and Enhancement Act (PAEA), Congress made the attitude a matter of law and “told the agency to stick with delivering the mail.”  In 2008, the Postal Service wanted to sell postal meter cartridges branded with its logo, but Pitney Bowes complained that the service would cause “immediate harm” to its business.

Although the Times doesn’t look back to the earlier history of the post office, this excellent monograph by postal scholar Richard B. Kielbowicz examines the period 1790 to 1970.  Kielbowicz shows how the post office has had to deal with criticisms that it was unfairly competing with private businesses since its very inception.  The post office could have “postalized” the telegraph and telephone systems (i.e., turned them into public entities), it could have gotten into the e-mail and Internet business, it could have expanded its low-cost parcel post business, and it could still be in the banking business (as it was from 1910 to 1966).  But in every case, private corporations complained about the unfair competition and lobbied Congress to handcuff the post office.

The new Senate bill does little to remove those handcuffs.  The only innovation that is specifically approved and not subject to the “unfair competition” restriction is the authorization to deliver beer and wine.  While that may come as welcome news to a few wine clubs and people living in remote rural areas thirsty for a nice bottle of pinot noir, this is just a parody of the idea that the Postal Service needs more freedom to innovate and diversify. 

 

Plant consolidations and service standards

As with many of its provisions, much of what the bill has to say about plant consolidations is already standard operating procedure.  For example, S.1789 would give the public an opportunity to comment about a consolidation plan, and it would require the Postal Service to complete a study prior to the closure of a processing facility and to publish the study on its website.  But these steps are already part of the process.  The bill would require the Postal Service to consider downsizing a plant rather than closing it completely, but that too is already a standard procedure, and many of the 223 plants approved for consolidation are not closing completely. 

Service standards for delivery (sec. 201):  The bill does have some significant provisions concerning consolidations, however.  For example, the bill says that for the next three years the Postal Service must provide overnight delivery for mail that is both mailed and delivered in an area served by the same processing plant.  The Postal Service wants to eliminate all overnight delivery, so this provision might require modifications of the Network Rationalization plan.  It would certainly maintain overnight delivery for a lot of customers, since a large portion of the mail is local.  The bill also prohibits any consolidation or closure for the next three years if the consolidation would prevent the Postal Service from maintaining the overnight service standards for the areas that qualify for it.

The plant consolidation process (sec. 202): This section requires certain steps before the closure or consolidation of a mail processing facility.  As noted, many of them are already part of the AMP study process, but there are a few changes.

One of them is that the study to consolidate the plant would need to be published before the public comment period.  Under current procedures, the public only sees the study after it’s been completed, and then only in a heavily redacted form.  Many people have complained that they can’t respond to the proposal to consolidate when they don’t have all the facts, and this provision in the bill might help with that. 

In studying a proposed consolidation, the Postal Service must consider the effect of the closing on the community, the effect on travel times for affected customers, the effect on delivery times, and geographical and other characteristics of the area that may result in the closing or consolidation having a unique effect.  The Postal Service considers such factors already, but “considering” them is one thing, and changing the plan to mitigate them is something else.  Perhaps this section of the bill will put more pressure on the Postal Service to give more serious consideration to these factors.

Appeals: Perhaps the most significant aspect of the bill with respect to plant consolidations is that the Postal Service’s decision could be appealed to the Postal Regulatory Commission (PRC), which would review the case when there is an allegation that a closure or consolidation did not conform with the requirements set out in the legislation.  If the PRC starts hearing appeals on plant consolidations as well as on post office closings, things could get interesting.  The PRC is currently doing an Advisory Opinion about the Network Rationalization plan, so the Commissioners will have a very good perspective from which to evaluate appeals on plant consolidations.

Timing: The bill does not indicate, however, when the changes concerning plant consolidations would go into effect.  If the bill becomes law in, say, May, would it put a stop to the plant consolidations that have already been approved?  If so, that could seriously derail the Network Rationalization plan, especially if the 223 approved consolidations can be appealed.  If the bill is not retroactive in this way, this section will be fairly irrelevant because Network Rationalization will consolidate nearly all of the plants the Postal Service has its eye on, and there won’t be many left that fall under the new requirements.

 

Post Office Closings

The bill makes it more difficult for the Postal Service to close post offices, especially in small towns and rural areas, but it probably won’t stop thousands of post offices from closing.  The Postal Service wants to close half the country’s 32,000 post offices.  The bill will just help determine which ones close.  The Senate should have taken a firmer stand on preserving brick-and-mortar post offices — perhaps by putting a limit on how many can be closed in a given year. 

Post offices cost very little to operate and not much is saved by closing them, but the Postal Service has decided there are cheaper ways to bring in revenue, like kiosks, online sales, and partnering with supermarkets and big-box stores.  The Postal Service says that 80% of post offices lose money, but that’s just because the big mailers enter their mail at a few locations, leaving it to the vast network of post offices to do the rest of the work, without getting any credit in the revenue column.  Big mailers don’t use small post offices, and they think they’re subsidizing these post offices with the rates they pay.  Postal management and big mailers would be fine with a postal system consisting of a few hundred entry units and a delivery system without post offices.

Retail Service Standards (sec. 203): Thanks to the efforts of the postmasters' associations — NAPUS and the League of Postmasters — the Senate bill does have one promising feature.  It requires the Postal Service, within six months of enacting of the law, to establish service standards for retail services, analogous to the way service standards set out rules for delivery times.  Once the standards are established, the Postal Service would need to consider them before closing a post office. 

These standards would encompass factors like geography, including the reasonable maximum time a postal customer should expect to travel to access a postal retail location; the availability of Internet, broadband or cell phone service; population density; and demographic factors, such as age, disability status and poverty.  The Postal Service would also need to consider the ability of customers to travel to a postal retail location, and that would include transportation challenges, like bad weather, that might impede access.

Just how effective the service standards would be in protecting post offices is hard to say.  There are many places, for example, where the post office is a valuable community asset, but where there’s another post office within a few miles, good broadband, a population without a large number of “vulnerable” groups, and so on.  There are several thousand post offices in this category, and it doesn’t look like the new service standards will help them very much. 

Plus, the language in the bill on retail service standards is intentionally vague; it’s left to the Postal Service to spell things out more specifically.  What is the maximum traveling time one should reasonably be expected to go to another post office?  What is “limited” broadband availability?  What portion of the population would need to be seniors or minorities to reach a threshold of significance? 

The impact of retail service standards on post office closings will depend on how such questions are answered and on how the standards are articulated, interpreted, and enforced.  Under current rules, for example, the Postal Service is required to “consider the effect on community,” but the way that’s interpreted by the Postal Service makes the provision virtually meaningless.

Maximum degree: This section of the bill says the Postal Service will establish service standards that “guarantee its customers regular and effective access to retail postal services nationwide.”  For some reason, the bill does not use the language of Title 39, which promises a “a maximum degree of regular and effective access.”  That phrase is crucial, and a lot of time was spent during the Advisory Opinion process for the Retail Access Optimization Initiative — the plan now underway to close 3,600 post offices — discussing what “maximum degree” means.  Why that phrase is omitted in the Senate bill is not clear, but the omission is significant, as you can tell from the fact that Senators Coburn and McCain have actually proposed an amendment (#2059) that would strike “a maximum degree” from Title 39.  

Expanded Retail Access (sec. 204): This section of the bill encourages the Postal Service to expand retail access through kiosks, the Internet, contract postal units, and so on.  That reiterates what Congress told the Postal Service six years ago when it passed the PAEA.  The Postal Service is happy to be encouraged to develop these alternatives, since they cost less than post offices, they please the big mailers who don’t want to support post offices, and they are part of the Postal Service’s master plan to get rid of traditional post offices.  Making it easier for people to do postal business is fine, but “expanded retail access” has been twisted into a rationale for developing alternatives that are then used as justification for closing post offices. 

Preserving Community Post Offices (sec. 205): In addition to the new retail service standards, the bill section seeks to preserve post offices in other ways, albeit in a rather half-hearted manner.  Almost everything required in this section is already part of the Postal Service’s practice.  The bill requires the Postal Service to provide advance notice of its intention to close or consolidate a post office and to give customers an opportunity to present their views; it requires the Postal Service to consider alternatives to closure, like reducing the number of hours the office is open, or by providing retail services through, say, the rural carrier, and it requires a customer survey about people’s preferences among these options.  All of these requirements are already part of the discontinuance process, and they aren’t helping much.  The Postal Service doesn’t pay a lot of attention to people’s preferences, since their main preference — keep the post office open — is inevitably going to be ignored.

Appeals to the PRC: The most important aspect of this section of the bill is that it gives the PRC expanded authority when dealing with appeals.  Under current statutes, when someone appeals a closing decision to the PRC, the Commission can either affirm the decision to close the post office or remand it back to the Postal Service for further consideration.  The bill would give the PRC the power to set aside a closure decision instead of just remanding the decision.

There’s also a provision authorizing the PRC to stay a closure while an appeal is being considered.  The PRC routinely does that now if the petitioner files the appropriate paperwork, although in some cases the Commission has ruled that because the closing is actually a “relocation,” it doesn’t have the authority to stay the closing while the appeal is heard.  It’s not clear if this section of the law would be relevant in such cases.

This section of the bill is also important because it prohibits the closure of post offices until the Postal Service establishes retail service standards.  If the bill is enacted soon, it would extend the moratorium due to end in May for another six months.

Historic post offices: Finally, there’s a passage in the bill about protecting historic post office buildings.  Over the past few months, the Postal Service has embarked on a plan to sell off its properties, and many historic post offices have been sold or put on the auction block.  The bill says the Postal Service would be required to offer the opportunity to lease historic post office buildings to federal, state, and local governments for public use — in cases where the post office is closed and the Postal Service has not been able to sell the building. 

That last proviso renders this section of the bill meaningless.  The Postal Service can always close the post office — it just moves the retail activity to another location — and it can always sell the building.  This passage, while well intentioned, is thus useless, and it will do nothing to stop the sale of over two thousand historic post offices.

 

Saturday delivery and home delivery

There are two important aspects to what the bill has to say about delivering the mail, and neither is good.

Home Delivery (sec. 207): The bill would give the Postal Service more leeway to deliver the mail to wherever it wants, rather than right to your door.  In many cases, homes and businesses used to getting the mail delivered to their door will get it curbside or at a cluster box down the road.  The National Association of Letter Carriers strongly opposes this section of the bill.  If enacted, an estimated 35 million to 40 million households would lose direct-to-the-door delivery.

Limitations on Five-Day Delivery (sec. 208): The bill gives the go-ahead to eliminate Saturday delivery, but not for two years.  There’s also a provision saying the Postal Service can move to five-day delivery only after it identifies and develops remedies for those who may be disproportionately affected, but as we’ve seen with post office closings, the Postal Service always has an answer for issues like that.  The bill also says the Postal Service’s decision to go to five-day delivery must be reviewed by the Government Accountability Office (GAO), but that shouldn’t be an issue because the GAO has been very supportive of the Postal Service’s plans to downsize. Overall, the bill virtually guarantees Saturday delivery will soon become a thing of the past.

 

Pension and Health Care Plans

Prefunding Retiree Health Benefits (sec. 103): When Congress passed the Postal Accountability and Enhancement Act in 2006, it decided to require the Postal Service to pay off 75 years of retiree health care benefits over a 10-year period.  The entire postal crisis could have been avoided if Senators Carper, Collins, and the other architects of the PAEA had listened to the Office of Personnel Management and used a 40-year schedule of payments.  Even as recently as 2010, the USPS Inspector General was telling Congress it could avoid a crisis by simply rescinding the mandate. 

Unfortunately, all that advice was ignored.  Though it’s a bit late in the game, the Senate bill finally acknowledges that the payments to the health care fund for retirees need to be restructured.  The bill would amortize the remaining payments over 40 years, and rather than requiring funding 100% of the liability, the bill recognizes that 80% is enough. 

That’s a step in the right direction, but the bill could have said, as the Inspector General has concluded, that there’s enough in the account right now, and no further payments are necessary.  After all, most private-sector businesses don’t prefund health retiree health care at all, and private and public entities rarely fund at such a high percentage of the liability. 

FERS surplus (sec. 101): The bill does not address the huge overpayments to the Civil Service Retirement System (CSRS) account — two accounting firms have put the surplus at $50 to $75 billion — but the bill does address the $11 billion surplus in the Federal Employee Retirement System (FERS).  The overpayments to FERS for 2011 to 2014 would be transferred to the Postal Service and used for buyouts to encourage retirements.  If there’s anything left, the money could be used for other purposes, such as paying down debt and meeting other obligations related to workers’ compensation, pensions, and retiree health care.

Retirement incentives (sec. 102): The bill authorizes the Postal Service to access the FERS money and to offer eligible workers cash buyouts up to $25,000.  The Postmaster General could also offer service credits that effectively speed up an employee’s eligibility for retirement: up to one year for Civil Service Retirement System employees and up to two years for FERS employees.  

While these retirement incentives may encourage some postal workers to make the leap, the $25,000 buyouts won’t go very far in today’s economy, so it’s not likely that over a hundred thousand workers will take the money and run.  Calls for eliminating the no-layoff clause in union contracts are not going to go away.

New health care plan (sec. 104): The bill authorizes the Postal Service to work with the postal worker unions to develop an independent health care plan, rather than remaining under the Federal Employees Health Benefits Plan. This cannot move forward without the unions’ approval.

Workman’s compensation(sec. 302 – 316): The bill contains several sections that “reform” the Federal Workers Compensation System (FECA) in ways that are not beneficial to workers.  For example, the bill reduces benefits for totally disabled enrollees to 50 percent of the pre-disability wage upon the enrollee reaching full retirement age. The details are complicated, but the drift is clear: Benefits will be reduced, and thousands of postal and federal employees who were injured on the job and who receive compensation from the Office of Workers Compensation Program (OWCP) will suffer even more than they already have. 

 

The Amendments

Some 39 amendments that will come up for a vote this week.  A complete list is here, and the text of the amendments can be found in the Congressional Record, here.  Below is a rundown of some of the key amendments.

Plant consolidations

Casey (#2042): This amendment would maintain service standards on delivery times for the next four years.  The amendment would not stop all plant consolidations, but it would presumably mean that the Postal Service would not be able to proceed with its Network Rationalization plan to close 223 mail processing plants, since that plan hinges on the change in service standards.

Wyden-Feinstein (#2068): This amendment would prevent the closing of processing plants in states with popular vote-by-mail programs, like Oregon and California, until after the election in November.  The Postal Service already plans to suspend consolidations beginning in September, but a lot of them could take place this summer; this amendment would prevent that, at least in some states.  The amendment would also require the Postal Service to conduct impact studies on how closing post offices would affect voting by mail. (More here.)

Post Office closings

Tester (#2056): This amendment would strike section 205 on “Preserving Community Post Offices” as described above and replace it with language that would make it somewhat more difficult to close post offices. The amendment reaffirms that the Postal Service has an obligation to provide “a maximum degree of effective and regular postal services to rural areas, communities, and small towns where post offices are not self-sustaining.” It would also add as one of the criteria the PRC would look at in evaluating an appeal whether “substantial economic savings are likely to be achieved as a result of the closing or consolidation.”  That presumably addresses the fact that the savings from closing small post offices is often quite insignificant and frequently inflated by the Postal Service’s cost-saving analysis.

McCaskill-Merkley (#2031): This amendment would establish a two-year moratorium on closing rural post offices.  It would also prevent the Postal Service from closing a rural post office unless several factors were considered: seniors would continue to receive their medications through the mail as before the closings; businesses served by the post office would not suffer financial losses; the area is served by broadband; the closing would not require customers to drive more than ten miles to a post office, and so on.

Mail delivery

Schumer (#2050): This amendment would strike Section 207 and preserve home and business door delivery. 

Udall (#2043): This amendment would strike Section 208 and preserve six-day delivery for the foreseeable future. 

Corker (#2051): This amendment would allow the Postal Service to switch to five-day delivery immediately, without waiting for two years. It also backs permitting the Postal Service to raise stamp prices beyond the rate of inflation and to lay off workers if necessary. 

Workplace issues

McCain (#2033): Like the House bill proposed by Issa, this amendment would establish a Commission on Postal Reorganization to overhaul postal finances and review sites for potential closure. 

Akaka (#2034): This amendment would replace the changes in FECA with the NALC-supported FECA reform bill (H.R. 2465) that has already passed the House of Representatives. 

Paul (#2038 and #2039): In addition to trying to insert an amendment tying postal reform to cutting aid to Egypt, Paul proposed an amendment (2038) that would end the mailbox monopoly and another (2039) that would prohibit the Postal Service from entering into a collective-bargaining agreement with any labor organization.  Both amendments are a wet dream for the privatizers.  They’re not going to pass, but you can’t blame the guy for trying. 

Coburn (#2061): This amendment would require postal workers eligible to retire to retire, and prohibit retirement-eligible employee to perform service as an employee of the Postal Service.

Warner (#2071): This amendment would address problems associated with inaccurate pension estimates and slow payments.  (There’s a good piece in Dead Tree Edition explaining the amendment.)

Tester (#2032): This amendment would limit the salaries of the six most-senior USPS executives to a base salary of not more than $200,000.  That may be good for headlines, but the top six salaries range from $230,000 to $276,000 — not much more than $200,000.  The problem is all the extras — bonuses and compensation packages — which can double the base salary.  The Tester amendment would also reduce the size of the Board of Governors by two governors, but there won’t be much savings there — they earn $30,000 a year.

 

What happens next?

The moratorium on closing post offices and processing plants ends on May 15.  It’s doubtful that the legislative process will be completed by then, so it’s an open question what will happen over the coming weeks.

Will the Postal Service shelve its immediate plans to close thousands of post offices, extend the moratorium for another six months, go to work on the new service standards, and come back next January with a new optimization initiative?  Or will it try to close as many post offices as it can before the new law takes effect?  Rumors are already circulating that there will be a big announcement of closings on May 18.

As for the plant consolidations, USPS VP David Williams, the man running the Network Rationalization show, told the PRC on March 20 that the Postal Service planned to publish the final rule on the change in service standards in mid-April, and implementation will begin soon after that.  The Postal Service wants to get as much of the new processing system in place as possible before September, when consolidations will be suspended to avoid problems during the election and holiday season.  The Postal Service isn’t even waiting to hear what the PRC has to say in its Advisory Opinion.  Will postal reform legislation be enacted in time to affect the consolidations already approved?  Will it stop the Network Rationalization plan?

Whatever happens over the coming months, one thing is clear.  The powers-that-be in postal world — the Board of Governors, the executive officers in postal headquarters, the big mailers and industry stakeholders, and the postal “experts” in Congress — are all on the same page.  They have decided that the Postal Service of the future is going to be a lot smaller than the one we have now, and it’s going to be designed to serve the biggest customers. 

That’s not good news for the American people.  While the big mailers continue to enjoy generous discounts and good service, we’re going to see our rates go up, our post offices closed, and our mail delivery suffer.  The “21st Century Postal Service Act of 2012” is not going to change that.

(Image credits: Senators Brown, Lieberman, Collins, and Carperword cloud; face on stamp cartoon; wine shipping ad; April 17 rally in Portland; 80% graphic;  Wooldridge MO post office, studied for closure; historic downtown Reno NV post office, for sale; carriers' rally; downsizing cartoon; computer mailbox)

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