Congress Impedes Postal Overhaul

Legislators demand change, but oppose many Postal Service proposals.

Forty-one years ago Congress told the U.S. Postal Service to start acting like an independent business and pay its own way. Every time the Postal Service tries, something stands in the way: Congress.

Facing annual losses of $18.2 billion by 2015 and a possible default this year, the Postal Service has a five-year plan for profitability. It wants to end Saturday mail delivery, close hundreds of letter-sorting facilities and thousands of post offices and consider breaking union contracts to fire employees. It also wants to set up an independent health plan, raise postal rates and enter lines of business such as delivering wine and liquor.

Each element of the plan has an opponent. Postal worker unions are fighting the closings and job cuts. Direct-mail advertisers and magazine publishers demand Saturday delivery and low rates. Rural constituents -- for whom the post office is their strongest link to the rest of the world -- and their representatives in Congress protest post office closings.

“It’s the politics, but it’s also a belief that perhaps radical surgery is not needed to save the patient,” Rob Atkinson, president of the Information Technology and Innovation Foundation, said about lawmakers’ reluctance to allow bigger cuts. “Tinkering here and there might work, it is hoped, and the hard decisions and hard votes can be avoided. But it’s only delaying the inevitable.”

Today, the service is scheduled to release its plan for what to do with the nation’s smallest post offices. Tomorrow, it will release financial results for the first three months of this year.

Congress is “not focusing on the Postal Service at all” and instead is concentrating on the November election, said Maurice McTigue, vice president of George Mason University’s Mercatus Center, a public-policy institute in Arlington, Virginia. Because of that, he said, “the solutions they’re coming up with won’t help at all.”

If Congress doesn’t let the service make the cuts it wants or restructure, postal management will be coming back to lawmakers after the election for more relief, said McTigue, a former member of New Zealand’s parliament who helped overhaul that country’s post office.

 

Postal Overhaul Measure

Senators who voted for an overhaul bill, which passed 62-37 last month, maintained that the prohibitions are reasonable to give the organization’s employees and customers time to adjust.

“Our bill doesn’t prevent the Postal Service from making changes or streamlining operations, but it ensures that it rolls out changes in a deliberate and responsible manner,” Senator Scott Brown, a Massachusetts Republican who co-sponsored the Senate bill, said the day before it passed.

The U.S. Constitution gives Congress the power to establish post offices, and federal law promises mail delivery to every address. When the nation was founded, mail was the sole way to communicate absent face-to-face conversation. In 1971, the Postal Service was stripped of its Cabinet status and reborn as a self-funded government entity.

Now, the service, which is allowed to borrow only from the U.S. Treasury, has hinted that a taxpayer bailout may be necessary if it’s not allowed to make changes.

The service was self-sufficient until the U.S. recession coincided with a shift to electronic communications. Mail volume declined as digital commerce and correspondence increased. First-class mail volume has fallen 25 percent since 2006 and 4.5 percent in the six months ending March 30, according to the Postal Service.

Its mandate to serve even the most unprofitable customers -- including mail recipients on the floor of the Grand Canyon in Arizona -- hasn’t eased, even as Congress has increased other funding requirements.

In a February cost-cutting plan, the service highlighted the U.K.’s Royal Mail, where the government assumed $16 billion in pension liabilities; Germany’s Deutsche Post, where the workforce was cut in half; Belgium’s Bpost, where 40 percent of employees were replaced by part-time workers; and Canada Post, which cut its delivery to five days a week.

 

Health Benefits

Postal workers’ unions including the American Postal Workers Union and the National Association of Letter Carriers say deep cuts aren’t necessary. They blame the Postal Service’s losses on a 2006 congressional mandate that the organization pre-fund 100 percent of its projected health benefits liabilities to ease concerns of a potential taxpayer bailout. The Postal Service is seeking a reprieve from $11.1 billion in those payments due in a few months.

The Postal Service drafted its own medical plan, saying a priority is health care costs, which consume 20 cents of every revenue dollar. Democratic and Republican lawmakers are skeptical whether the plan would be more affordable and concerned that losing the service’s more than 1 million employees and retirees would increase costs for other government workers.

The Senate measure didn’t grant a new health plan and would make it more difficult for the service to close facilities soon enough to staunch its financial crisis. The bill’s passage capped more than five months of debate about how to prevent closings of as many as 3,700 post offices the Postal Service has deemed inefficient or redundant.

Some of the same lawmakers calling for quick action on postal legislation are asking Postmaster General Patrick Donahoe to extend a facility-closing moratorium they helped broker, which is set to expire May 15. The service wants to save $2.5 billion a year by closing mail-processing plants and $200 million annually in labor and operations costs by closing up to 12 percent of post offices.

“You have announced your intent to close hundreds of post offices and processing facilities beginning May 15,” four senators wrote to Donahoe in an April 30 letter. “However, as last week’s debate demonstrated, there is considerable concern in the Senate that this approach will unnecessarily degrade the infrastructure, which is one of the Postal Service’s most important assets.”

Senators signing the letter included Brown. He won election with backing from the Tea Party, which supports cuts in government spending.

 

‘Just a Process’

“It’s just a process one goes through,” Donahoe said of the letter in an interview after a May 4 postal board meeting in Washington. “There are many different opinions.”

The U.S. House, which hasn’t scheduled debate on its postal overhaul bill, drafted a measure that would create an independent commission to oversee closings modeled on the Defense Department’s base realignment process. Even if the commission -- which would reduce the congressional role in closing facilities -- wins House passage, analysts say its enactment is improbable this year.

Representative Darrell Issa, the California Republican who sponsored the House overhaul bill, called the Senate measure a “special-interest spending binge” that would require the Postal Service to keep excess facilities open and would delay its financial collapse “for two years, at best, when reforms will only be more painful.”

The House measure would create a control board that could oversee operations in the event of a Postal Service default, a provision Donahoe has said he’s “very uncomfortable with.”

Politics come into play especially in rural post office closings, said Atkinson, who served on presidential advisory commissions during the Clinton and George W. Bush administrations and founded the group he now leads that studies innovation policy.

“Rural members don’t want to alienate the few but vocal constituents who’d be inconvenienced by post office closings,” he said.

The Senate bill would block the Postal Service from ending Saturday mail delivery for at least two years. The service has estimated $2.7 billion a year would be saved by that cut.

“It’s an election year, so they’re trying to delay the pain here,” said Elaine Kamarck, a Harvard University lecturer who led government modernization efforts during President Bill Clinton’s administration and who the Postal Service commissioned for a 2009 report on its business model. “It would be pretty easy for some challenger to go out and start drumming up complaints about their post offices being closed.” “There is going to be job loss,” she said. “The job loss is going to be fairly difficult, and so Congress is trying to just sort of delay the inevitable.”

 

 

Bloomberg News

 

Page 1 of 4

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Comments