Documente Academic
Documente Profesional
Documente Cultură
Authorize the Postal Service to Offer New Business Products 2. Oppose Cuts in Postal Retirement and Health Benefits Numerous proposals are pending in the Congress that would require postal employees and retirees to pay more for less in connection with their retirement and health care benefits. A key ingredient in attracting and retaining a high-quality workforce lies in providing competitive compensation, including good retirement and health care benefits. These proposals will substantially diminish the value of attractive compensation packages that postal workers receive. Cutting retirement and health care benefits will undercut the productivity of the Postal Service and undermine its ability to attract and retain the best and the brightest employees. Postal employees and retirees are willing to contribute their fair share toward deficit reduction. But disproportionate sacrifice is not only unfair, it is wrong. NAPS and its members vigorously oppose proposals that would balance the nations financial ledger on the backs of postal and federal workers and retirees.
However, mail volume and the Postal Service business model itself -- began to collapse five years ago, as the chart below illustrates. Postal Service mail volume has dropped precipitously over the past five years. In 2011 mail volume was down 21 percent since its peak in fiscal year 2006 at more than 213 billion pieces. A drop of this magnitude had not been witnessed since the Great Depression. The recession in the housing, finance and retail sectors which are among the largest commercial mailers contributed largely to the volume decline.
For the past two years, the Postal Service has suffered severe financial losses. It generated nearly $5 billion in losses in 2011, following a record $8.5 billion in losses in 2010. The foremost contributor to these losses was not the economy or the internet. The greatest cause of these losses was the obligation of the Postal Service to prefund its future retirees health benefits at a cost of approximately $5.6 billion per year for 10 years. Absent the prefunding requirement, the Postal Service would have been in the black for three of the last five years. Congress established the prefunding requirement in the postal reform law it passed in 2006 the Postal Accountability and Enhancement Act (PAEA). Budget scoring requirements were the driver that caused Congress to impose such an aggressive ten-year schedule of prefunding payments upon the Postal Service. Successive annual losses by the Postal Service these past two years have generated liquidity concerns. The Postal Service has acquired $13 billion in debt and nears its $15 billion debt limit. The Postal Service will be hardpressed to satisfy the $11 billion in retiree health prefunding payments it owes in 2012, including $4.5 billion that it deferred in 2011. Accordingly, the Postal Service has pursued several major cost-reduction initiatives to address its financial predicament. Over the last six years it has reduced its workforce by 240,000 employees, including 8,000 fewer management employees. Over that same period, the Postal Service has also reduced the number of mail processing facilities from 675 to 508. The most controversial closure efforts have involved USPS initiatives to close thousands of post offices and hundreds of mail processing plants, as part of a three-year $20 billion cost-cutting effort. Moratorium on Closures of Post Offices and Mail Processing Plants In July 2011, the Postal Service announced that it would close approximately 3,650 post offices primarily located in rural and suburban areas that the Postal Service says operate at a loss. In December 2011, the Postal Service also announced a preliminary plan, subject to further study, to close 252 mail processing facilities, nearly half of its entire nationwide mail-processing network, for cost-savings reasons.
First Class mail, the Postal Services most profitable mail category, has fallen almost 25 percent since its 2001 peak, and declines are accelerating, as the chart below illustrates. This has shifted mail volume to a less profitable mix. As a result, Postal Service revenue in real dollar terms has fallen over 15 percent since peaking in 2007. At the same time, electronic alternatives to physical mail including email, cell phones, electronic document delivery, e-bill pay, online banking and internet advertising continue to erode traditional mail volumes at a steady rate.
Because the mail processing facility closures will create greater distances for mail to be transported for processing, slowing mail delivery times, the Postal Service also sought to reduce its mail service standards, particularly for First Class Mail, to allow next-day mail to be delivered in two or three days. Delivery of periodicals would slow down as well. Overnight local delivery of First Class Mail would be eliminated. Negative reaction from Congress to these post office and processing plant closings and related changes prompted the Postal Service on December 15, 2011 to impose a five-month moratorium on facility closings that extends until May 15, 2012. The moratorium gives the Congress more time to reach agreement on comprehensive postal reform legislation, as well as the Postal Service and its unions on the completion of labor contract negotiations. During the moratorium, the Postal Regulatory Commission on December 23, 2011 rendered a non-binding negative advisory opinion on the Postal Services methods and data for identifying potential post offices for closure. The Postal Service has not indicated what, if any, remedial efforts it will undertake to reconsider the original closure list of 3,650 rural post offices. Despite the moratorium, the Postal Service has proceeded with planning efforts associated with closures. Following study and numerous public hearings in communities around the country, the Postal Service on February 23 announced that it would close 223 processing facilities or merge them with nearby locations. The Postal Regulatory Commission also is reviewing whether the processing facility closures and reductions in mail service standards would have a nation-wide impact on the mail system. The PRC is not expected to issue its non-binding advisory opinion in the matter until July at the earliest. Postal Legislation in Congress These developments have created heightened interest in Congress over the Postal Service and ways to alleviate its difficulties. Nearly 30 bills have been introduced in the House of Representatives and the Senate addressing the Postal Service and its operations. The two chief bills arising in the House and Senate are: The Postal Reform Act of 2011 (H.R. 2309). Introduced by Rep. Darrell Issa (R-CA) and Rep. Dennis Ross (R-FL). It was approved, as amended, by the
House Committee on Oversight and Government Reform on October 13, 2011. It awaits floor action. The 21st Century Postal Service Act of 2012 (S. 1789). Introduced by Sen. Joe Lieberman (I-CT) and Sen. Susan Collins (R-ME). It was approved, as amended, by the Senate Committee on Homeland Security and Governmental Affairs on November 9, 2011. It awaits floor action. NAPS opposes the House bill, H.R. 2309. The bill will destroy the Postal Services most important assets: universal service throughout the country; its capacity to continue as a provider of good-paying middle class jobs; employment for returning veterans; and a government presence in every community in the country. H.R. 2309 creates unnecessary and additional costs, adds bureaucracy and undermines the security and integrity of the mail system. By providing the pathway for privatization of the profitable parts of the current postal system, the measure will make service to rural areas far more costly. This will cause service reductions and add greater costs to assure continued service to rural areas, whether by USPS or private means. NAPS believes the Senate bill, S. 1789, represents the more favorable approach between the House and Senate bills toward comprehensive and lasting postal reform. At the same time, S. 1789 should be strengthened in several respects, which we describe below. Ongoing efforts by a group of about two-dozen Senators since December have been devoted toward strengthening S. 1789 in several key respects. NAPS supports those efforts and believes that comprehensive postal reform legislation should fix the prefunding problem, reimburse the Postal Service for its pension overpayments, assure universal service, and provide a business foundation for the Postal Service to remain a vibrant institution in the twenty-first century. NAPS believes there are five key solutions: Reduce or Eliminate the Retiree Health Prefunding Requirement Return Pension Overfunding to the Postal Sevice and Use the Proceeds to Provide Retirement Incentives
Preserve 1-3 Day Delivery Standards and Overnight Local Delivery Rightsize the Mail Processing and Transportation Networks Authorize the Postal Service to Offer New Business Products These five elements will stabilize the financial health of the Postal Service and provide a foundation for new business in the digital age. Each of these five elements is described below. 1. Reduce or Eliminate the Retiree Health Prefunding Requirement During the current financial crisis, Congress should suspend the prefunding requirement until the Postal Service is financially stable enough to satisfy prefunding, even at reduced levels. No other business or government agency is required to pre-fund its future retiree health care benefits like the Postal Service. While prefunding, in principle, is a prudent measure for assuring that future retiree obligations can be successfully met, the aggressiveness of the prepayment schedule established in 2006 by Congress (solely to satisfy PAEA budget scoring requirements) has been far greater than possible for the USPS to satisfy, as the chart below illustrates.
This mandate costs USPS between $5.4 and $5.8 billion per year, and it accounts for 100 percent of the Postal Services 13 billion debt. Without it, the USPS would still have significant borrowing authority with the United States Treasury to ride out tough economic times.
Under the 2006 postal law, the Postal Service is mandated to make six more mandated future retiree health benefits payments from FY 2011 through FY 2016, as the chart above shows. These payments amount to $34 billion, and will comprise a significant portion (more than 7%) of the Postal Services approximately $75 billion annual operating expenses. The House bill (H.R. 2309) would maintain as is this costly and burdensome requirement that is certain to drive the Postal Service into bankruptcy. More reasonably, the Senate bill (S. 1789) would reduce the annual retiree health benefit obligations by half, based on a longer, 40-year amortized payment schedule. It would also reduce the pre-funding goal to 80%. NAPS believes that sound public policy overwhelmingly supports terminating these prefunding payments because adequate reserves already exist. Prefunding at the right time under reasonable terms represents a prudent goal for assuring USPS financial security and the availability of future retiree health benefits. This is not the right time in the life of the Postal Service for prefunding. The Retiree Health Benefit Fund has continued to grow as a result of prefunding payments, and now has reached $44 billion in assets. The Office
Source: James I. Campbell, Jr., Return to Sender: Reforms for the Failing Postal Service, Nov. 4, 2011.
of Inspector General of the Postal Service has projected, in fact, that the level of assets is so sufficient that, without further Postal Service payments, the Funds reserves could grow through investment in Treasury securities and reach fully funded status in eleven years. 2. Return Pension Overfunding to the Postal Service and Use the Proceeds to Provide Retirement Incentives According to the Office of Personnel Managements latest calculation, the Postal Service is entitled to a reimbursement of billions of dollars it has overpaid into its two pension accounts for CSRS and FERS employees. These payments were intended to satisfy its employer obligation to the pensions of its employees. The amount of FERS overfunding has grown to $11.4 billion and the amount of CSRS overfunding to $2 billion. Both the House and Senate bills would give the Postal Service access to the pension overpayment money estimated at $13B and use it to offer buyouts or retirement incentives to reduce the active postal workforce, potentially by as many as 100,000 positions over the next several years. NAPS supports the use of buyouts and retirement incentives to promote sensible right-sizing of the postal workforce. The use of excess CSRS and FERS funds to finance incentives to assist the Postal Service in reducing its overall staffing levels makes sense. At the same time, Congress needs to assure that the Postal Service has a sufficient transitional plan to assure timely and efficient delivery service. The capability of the Postal Service to trim 100,000 or more employees without jeopardizing service standards is questionable; already postal operations are understaffed and there is high overtime usage where staffing is not balanced. 3. Preserve 1-3 Day Delivery Standards and Overnight Local Delivery The Postal Service intends to close 223 mail processing facilities throughout the country, reducing the number of facilities by nearly 50%. The Postal Services plan would move processing responsibilities from closed facilities to other remaining facilities to reduce operating costs. Achievement of these goals relies upon the lowering of current service standards by eliminating overnight service commitment for First Class Mail. These reductions would result in a substantial decline in the reliable and expedient postal service that Americans have come to
expect. Forty percent of all First Class Mail is delivered overnight in virtually every part of the country. For example, mail that is dropped in the mailbox in Alexandria, Virginia on a Monday is currently delivered throughout the Washington metropolitan area the following day, Tuesday. The Postal Service succeeds in getting all local mail in the Washington area delivered the next day over 96 percent of the time. With the elimination of overnight First Class delivery, however, the same mail sent on Monday from Alexandria, Virginia will not be delivered in the Washington area until Wednesday. This means that for the first time in its 235-year history, the Postal Service will have fundamentally altered its operations by slowing down the mail, not speeding it up. The loss of a reliable First Class overnight service level will harm the entire postal system and many of its customers, driving some away, and increasingly more over time. This will contribute to a death spiral with disastrous consequences for the Postal Service. Neither the House bill (H.R. 2309) or the Senate bill (S. 1789) do anything to stop the Postal Services plan to diminish its First Class Mail service standards. They do nothing to prevent the closure of the Postal Services mail processing facilities. The Senate bill only requires the Postal Service to complete a study prior to the closure of a processing facility. The study must evaluate the option of downsizing rather than closing the facility. The bill also guarantees the opportunity for public comment and requires the Postal Service to identify and document the important factors have been considered prior to closure. The Postal Services plans to dismantle much of its mail processing network will impact thousands of postal employees, including large numbers of veterans and disabled veterans. Approximately 25% of the Postal Services 590,000 employees are veterans of our armed forces. Many of these veterans are employed at Postal service mail processing facilities. Although veteran preference protections insulate veterans in many postal workforce realignment situations, there are limitations on the bumping rights of veterans under reduction-inforce (RIF) procedures, which will apply to the closure of mail processing facilities. Veterans do not have the same bumping rights that are afforded when a facility remains open and positions are reduced.
Furthermore, the Postal Services contractual commitments to APWU under its new contract will complicate the relocation of displaced postal employees. The new agreement places significant restrictions on the reassignment of employees impacted by a facility closure or consolidation where the movement of jobs is over 50 miles. The closure of 223 processing facilities will impact thousands of employees who are subject to the provisions (Article 12, Section 5) of the national agreement between the Postal Service and APWU. The reassignment process will be time-consuming and expensive, requiring the payment of travel pay and commuting expenses for as much as six months following the closure. The House and Senate postal bills need to be strengthened by mandating the preservation of current service standards guaranteeing the delivery of First Class mail within 1-3 days. The Postal Service cannot afford to disappoint its customers by allowing delivery times to appreciably slip. The Postal Service does not exist in a vacuum; it competes for market share with private services that have the capacity to offer convenient and expedient delivery. If the Postal Service becomes inconvenient and slow, many of its most loyal customers from home delivery medication companies to newspaper publishers will turn to private mailing options. Once these customers leave, they are most likely not returning, and the Postal Services financial woes will continue to spiral downward. 4. Rightsize the Mail Processing and Transportation Networks NAPS believes that the Postal Service should develop a plan to downsize the current facilities and maintain the current network with fewer and more widely dispersed closures to continue to provide overnight delivery of First Class Mail in metropolitan areas. Through the development of a plan to right size the staffing levels of current processing facilities, the Postal Service could maintain service standards, assure the continued employment of thousands of American workers, including military veterans, and avoid the problems that will be encountered in relocating thousands of clerical employees in compliance with the National Agreement with APWU. S. 1789 should be strengthened to require the Postal Service to pursue maximum implementation of rightsizing approaches not closures. Maintenance of processing facilities at lower operational and workforce levels will sustain more jobs, assure satisfac-
tion of current service standards and achieve savings. The Postal Regulatory Commission should have the authority to prevent the closure or consolidation of facilities if it finds that the Postal Services review process is flawed, or that service performance will be adversely impacted. 5. Authorize the Postal Service to Offer New Business Products NAPS supports the broad conferral of authority to the Postal Service to grow its business. NAPS believes the Postal Service needs to look as aggressively at ways to generate new revenue as it is pursuing efficiencies in mail processing and delivery. In many respects, this can be best accomplished through public-private and intergovernmental partnerships. The Senate bill (S. 1789) is helpful in authorizing the Postal Service to offer non-postal products or services if the Postal Regulatory Commission has determined that the products and services: make use of USPSs processing, transportation, delivery, retail network, or technology; are consistent with the public interest and a demonstrated demand for the Postal Service to offer them; do not create unfair competition with the private sector; and have the potential to improve the Postal Services financial condition. The bill also would also allow the Postal Service to offer services on behalf of state and local governments as it does today on behalf of federal agencies, and to ship wine and beer like its private-sector competitors do. But Congress should go further. Numerous ways exist for leveraging the Postal Services presence in every community to generate new sales. The Postal Service could: provide notary services, internet services; issue state licenses (drivers licenses, hunting licenses, fishing licenses); contract with state and local agencies to provide services; and follow the practices of foreign postal services in responding to the shift toward electronic mail by offering a variety of hybrid communication services, including banking. NAPS supports focused, intensive effort to assist the Postal Service in reinventing its business model. NAPS believes Congress should establish a blue ribbon commission composed of entrepreneurs, representatives of labor and small businesses to provide recommendations on how the Postal Service can generate new revenue to succeed in the 21st Century.
Install a high-five average salary calculation for annuities, replacing the current high-three calculation Use the less generous chained CPI measurement to calculate retiree COLAs Convert the FEHBP to a premium support system Repeal use of unused sick leave for retirement These proposals will destroy the value of attractive compensation packages that federal and postal workers receive. A key ingredient in attracting and retaining a high-quality workforce lies in providing competitive compensation, including good retirement and health care benefits. Cutting retirement and health care benefits will
10
11
12
National Association of Postal Supervisors 1727 King Street, Suite 400 Alexandria, VA 22314 703-836-9660 (phone) 703-836-9665 (fax) napshq@naps.org (email) www.naps.org