from USPS Links: Jan. 28, 2009 / Click here to see a video of the PMG’s opening statement
PMG Jack Potter today told a U.S. Senate subcommittee that worsening conditions in the economy now point to a further 12-15 billion mailpiece decline and a net financial loss of $6 billion or more in FY 2009.
Potter also proposed changes in current law to give the USPS Board of Governors the flexibility to reduce the number of mail delivery days each week. Click here to read Potter’s formal statement to the Senate subcommittee.
“We have stretched the limits of our system as they have never been stretched before,” Potter said in his formal statement to the Senate panel. He pointed to a cumulative $20 billion in cost reductions since 2002 and the elimination of 120,000 jobs through attrition. He noted, however, that volume is outpacing the speed at which the Postal Service can adjust operations. “No one knows at what point mail volume will bottom out,” he said.
Among further cost-cutting actions already taken or under way, Potter cited:
- An indefinite suspension in the facilities construction.
- Salary freezes for officers and executives at 2008 levels.
- A reduction in staffing at Headquarters.
- Reductions in staffing at the nine Area Offices.
- Early retirements — USPS has accepted more than 14,000 to date.
- Reduced travel budgets.
- Consolidation of duplicative mail processing operations.
Potter also noted that USPS continues to pursue revenue growth by vigorously enhancing its shipping service, delivering record on-time performance with its mailing services and investing in modern technology and web services. Nevertheless, he said structural changes in customer mailing behavior, robust competition in all markets and the worsening economy have placed USPS in a grave financial situation. “If current trends continue,” Potter said, “USPS could experience a net loss of $6 billion or more this fiscal year.” The maximum loss the Postal Service can absorb under current law is $5 billion.
Potter said it was now time to consider options that have not been on the table up to now. He said he would work with union leadership to “create needed levels of workforce flexibility” to ensure USPS viability and to protect jobs. He also said worsening economic conditions may make it necessary to “temporarily reduce mail delivery to only five days a week.”
Potter called for legislative change to reduce the crippling cost burden imposed by the Postal Act of 2006 that requires USPS to prefund future retiree health benefits in addition to paying for current benefits. Last year, the combined $7.4 billion cost accounted for nearly 10 percent of the USPS operating budget. Without this requirement, USPS would have posted positive net income in 2008 instead of a $2.8 billion loss.
Potter said the intent of the law is sound, but that the aggressive payment schedule was unsustainable in light of the growing deterioration in the U.S. economy and the mail. He noted that the change would not diminish USPS responsibility for funding employee health benefits, and it would not increase health benefit premiums for current and future retirees. He also said the change would not affect benefits.
2 COMMENTS::
Burris' Respponse: Postmaster General's Testimony Offers Little Insight
Burrus Update #03-09, Jan. 29, 2009
The long-awaited announcement about the Postal Service’s plans regarding the dramatic decline in mail volume and revenue was presented on Jan. 28 to the Senate subcommittee with jurisdiction over postal affairs, when Postmaster General John E. Potter explained the crisis facing the USPS, and outlined management’s proposed response.
As previously reported to the APWU membership, postal volume has dropped precipitously, and, unless Congress provides legislative relief and the economy recovers, the Postal Service will become unsustainable in the near future.
In testimony before the Federal Workforce, Postal Service and the District of Columbia Subcommittee, the PMG once again cited electronic communications as a central factor in the decline of mail volume — an excuse that has run its course: Postal officials should be prohibited from offering this lame explanation ever again.
Let the record show that mail volume has not declined primarily because of electronic communication. In the 235-year history of the Postal Service, the years with the highest volume were 2005, 2006, and 2007, with 2006 being the highest. Didn’t the Internet and e-mail communication exist during those years? The facts indicate that they are not the principal causes of the steep decline of mail volume at this time.
Certainly, if these modes of communication had not been invented, postal volume would have expanded significantly more than it did, but the same can be said of the development of the telegraph, the telephone, and the fax machine.
The cause of the Postal Service’s current crisis is simple: “It’s the economy, stupid.”
Legislative Relief
The PMG’s testimony was intended to lay the foundation for an appeal to Congress for relief from the “crippling cost burden imposed by ‘Postal Reform legislation’ requiring that we prefund the employer premium for the health benefits of future retirees.” The Postal Accountability and Enhancement Act of 2006 requires the pre-funding of this liability through annual payments ranging from $5.4 billion to $5.8 billion over the 10-year period from 2007 through 2016.
Potter warned that without near-term relief from this stifling obligation, the United States Postal Service will be unable to survive in its present form.
I concur with the PMG’s conclusion that achieving relief from the unfunded healthcare liability is crucial to the survival of the Postal Service. Amending the Postal Accountability and Enhancement Act in order to reduce the USPS payments for retiree healthcare is essential. Unfortunately, this aspect of Potter’s testimony received scant attention from the press.
The options are to include this legislative relief in the stimulus bill currently being considered by Congress, or through separate legislation. Each alternative presents problems, but we must find a way to see that it is provided. The Postal Service must have time to develop long-term solutions to the serious financial deficits.
The solutions must include the elimination of “worksharing” discounts and contracts that duplicate work performed by postal employees.
A recent announcement by Pitney Bowes demonstrates how excessive worksharing discounts deprive the USPS of needed revenue. The mailing industry powerhouse, which “pre-sorts” mail that is ultimately given to the Postal Service for delivery, has opened a new mail facility in Corona, CA, which is expected to process 750 million pieces of mail annually. The 84,000 square-foot worksharing facility will employ approximately 100 workers. Clearly, Pitney Bowes believes worksharing will be profitable for them, but what about for the USPS? The plant will duplicate work that could be performed by postal employees in facilities that already exist.
Platitudes
Beyond relief from the obligation to pre-fund the retiree healthcare liability, the platitudes in Potter’s testimony revealed little about plans that have a chance of preventing a disaster. The PMG boasted of work-hour reductions that have paralleled the unprecedented deficits. But the crisis persists despite this massive decline in work hours, so it’s clear that disrupting the lives of hundreds of thousands of employees is not a solution to the Postal Service’s fiscal woes.
The other initiative under consideration is the possibility of a reduction in the number of delivery days from six per week to five. This proposal is the first cousin to work-hour reduction schemes, and if adopted, would not arrest the financial slide. The impact on APWU-represented employees would be to eliminate the possibility of moving to letter-carrier vacancies when our members are identified as “excess.” If mail processing also is curtailed for a day, a proportional reduction in APWU-represented assignments also would occur.
The American public would lose one day of mail service, which would stretch to three days when the additional day is combined with Sunday and a Monday holiday. Such delays will drive essential mail to private carriers, who will continue to deliver seven days a week.
Layoffs
The reduction of the employee complement through layoffs was not presented to the congressional subcommittee by the Postmaster General and does not appear to be under consideration at this time.
Contractual protections against layoffs require management to engage in a detailed process that includes severance pay for employees who volunteer to retire early. These requirements would make it extremely expensive to layoff employees, so, while layoffs were feared, this possibility no longer seems to represent a threat.
But the elimination of layoffs as a near-term option offers very little reassurance to the remaining part-time employees and those on light duty. The hours of these employees are being reduced to a level that is tantamount to a layoff. Area and District managers have issued orders to limit the hours of these employees to levels that cannot support a family — or an individual. The contractual limits on the use of casual employees to the detriment of PTFs or light-duty employees should be strictly enforced.
I find great comfort in knowing that the PTFs who were converted to full time as a component of the 2006 Collective Bargaining Agreement now enjoy the eight-hour guarantee, and are not suffering a serious reduction in their work hours.
The Postmaster General’s testimony has removed the cloud of impending layoffs, but it offered little comfort that there are realistic plans to reduce the impact of the current crisis on postal employees and the Postal Service as a whole.
William Burrus
President
NALC Response: NALC President: Five-Day Delivery Not The Best Economic Solution For USPS
President William H. Young has released a statement in response to media reports that Postmaster General Jack Potter is seeking to curtail the Postal Service to five-day delivery. “The continued appearance of letter carriers delivering the mail to the doorstep of every home and business and bank and credit card company six days a week is absolutely essential to economic recovery.” In his statement, Young makes the case for an alternative economic solution: H.R. 22.
On January 29, 2009, NALC President William H. Young urged letter carriers across the country to remain steadfast in the face of media speculation that the U.S. Postal Service plans to eliminate one day of delivery service. He issued the following statement:
There are no plans to eliminate six-day delivery. NALC is working with the Postal Service and other postal organizations on a common-sense approach to overcoming the economic crisis. Neither the American public, nor the postal industry, nor the key leaders of Congress, nor the NALC support any reduction in service.
Making the reduction of days of delivery THE answer is a red herring that the media has misleadingly laid at the doorstep of Jack Potter, the postmaster general. While Potter asked Congress for the flexibility to temporarily and selectively reduce the frequency of delivery if conditions worsen dramatically, he made it absolutely clear that eliminating a day of delivery was the last thing he wants to do. As NALC has done, Potter called on Congress to enact sensible financial reforms to
correct the schedule for pre-funding retiree health benefits. That would protect retiree benefits while freeing up current funds to help the Postal Service overcome the devastating effects the financial meltdown has had on the U.S. economy.
The United States Postal Service is a critical part of the country’s financial infrastructure. In a time of national financial crisis – with tens of millions of citizens under distress, millions of jobs disappearing, millions of homes being foreclosed, retail enterprises shutting their doors, factories closing – the very last thing this nation needs is to fracture the service that binds the nation together. The continued appearance of letter carriers delivering the mail to the doorstep of every
home and business and bank and credit card company six days a week is absolutely essential to economic recovery.
Existing law requires USPS to do something no other agency of the federal government, no state or municipal government, and no private company in the Fortune 500 (or as far as we know, anywhere) is required to do: to pre-fund its retiree health obligations. Not only that, it requires that it pre-fund 80 percent of these costs over the next eight years – even though the very few companies that voluntarily pre-fund these benefits amortize them over 30, 40 or 50 years. While it certainly makes sense to gradually pre-fund such long-term obligations, it makes no sense to maintain
such an onerous schedule.
In 2006, Congress mandated pre-funding to the tune of $5.5 billion to $5.7 billion per year over the next 10 years. It has already paid $32.6 billion into a special fund for this purpose. On top of this, USPS pays about $2 billion per year for its share of current retiree health premiums. To avoid unnecessary service cuts, Congress should enact H.R. 22, a bipartisan bill that will allow USPS to pay for its current retirees’ health premiums out of the existing retiree health fund. Such a
change would save USPS $2 billion a year while it continues to build up its retiree health fund for the future. Indeed, if H.R. 22 were enacted, USPS would still be pre-funding its future retiree health obligations at a greater rate than any company in America.
NALC will vigorously resist any legislative attempt to slash the number of days of delivery. NALC members should consult upcoming Bulletins and future issues of The Postal Record for the latest information on this important issue.
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