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The forgone conclusion that the United States Postal Service must contract in order to survive is the result of bad legislation intended to gut the agency

by Roberta Adams on February 20, 2013 · 2 comments

 

Certain issues are so fundamentally rooted in our values as citizens that a hint of unfairness should spark our indignation and prompt vigorous protest. Such a situation has surfaced in the slow-motion dismantling of a revered American institution, the United States Postal Service (USPS). The routine explanations for a weakened postal system are offered over airwaves, in the print media and especially by the powerful United States legislators who have crafted a doomsday scenario for USPS. We are told the increased use of e-mail and the popularity of online payments have contributed to a decline in first-class mail and tanking USPS revenues.

It is true that a reduction in mail volume has negatively impacted the financial health of the USPS. However, specialized services such as in-station purchases of commemorative stamps, greeting cards, tape and packing envelopes have brought in additional monies. Post offices will soon sell a specialized clothing line. Moreover, the USPS has demonstrated its capacity to adapt in a competitive market with the private delivery services, Fedex and UPS. The USPS package delivery system has become increasingly profitable and figures importantly in the agency’s total earnings. Although we are informed that Saturday mail delivery services by USPS will be discontinued within the next six months, package deliveries are exempted from this change. While post offices and staff have been reduced, delivery points have been added due to improved package-based revenues.

The largest threat that USPS faces to its long-term viability stems from a 2006 mandate known as the Postal Accountability and Enhancement Act (PAEA), which was pushed through by “small government” legislators. This legislation has been responsible for a systematic destabilizing of USPS by requiring the agency to pre-fund benefits for Postal Service employees 75 years in advance. These payments are being made within 10 years. Grave damage has been inflicted on USPS operations through this fiscal havoc wielded by a congressional act. In fiscal year 2009, USPS revenues declined from $75 billion to $68 billion, which required Congress to reduce the pre-funded retiree benefits for that year. Although the Postal Service is a federal agency, it was established to be revenue-neutral, with the provision that “Postal rates shall be established to apportion the costs of all postal operations to all users of the mail on a fair and equitable bais” (Title 39, Section 101.1). The Postal Service does not pay taxes and is eligible to obtain loans at discounted rates. Congress allocates approximately $96 million annually for postage-free mailings extended to the blind and disabled. Absentee ballots sent to United States citizens overseas are also subsidized in this stipend. In all other ways, USPS must function as a private business.

The pre-funding of pension and employee health and retirement benefits is imposed at a higher rate for USPS than any private corporation currently in business. Standard & Poor’s benchmarking of industry pension funding by 500 companies in 2008-2009 (S&P 500) set pre-funded pension levels at 80 percent and retiree health benefits among the Fortune 1000 companies to be 30 percent. USPS exceeded both industry standards during the specified time period, resulting in a transfer of over 55 billion dollars in extra payments into funds that were comfortably endowed. Furthermore, the health care inflation rate of 5 percent (industry standard) was not applied to postal office health benefits; USPS was assigned a 7 percent inflation rate to use in its funding calculations. A significant dilemma in managing daily postal operations under tough fiscal constraints has resulted from a forced over-allocation of USPS revenues into its benefits plans. We should also keep in mind USPS has never defaulted on payment of either pension fund obligations or employee health benefits, unlike the bankrupted Enron Corporation, which was once viewed favorably by the same legislators devising the aforementioned fiscal punishment of USPS.

The USPS announcement about discontinuation of Saturday mail deliveries was issued after much debate on postal legislation to reverse the agency’s looming deficits. The United States House of Representatives proposed legislation in 2012 (H.R. 2309), which stipulated overpayments of benefits plans already paid out by USPS could be transferred, but only to help downsize postal operations (the bill has not been enacted). The United States Senate’s 2012 legislation (S1789) did pass, and attempted a different outcome by including a provision to slow post office closings. More importantly, the 10-year fast track funding of benefits plans by USPS for the next 75 years would be stretched over 40 years. It is uncertain whether this essential funding change may ever be applied, or if it will occur too late. A House/Senate reconciliation of a final bill must first occur. It strains all credibility to think that legislation impacting USPS operations could make more than a perfunctory chip in the mountainous debt facing the agency without the revised funding provisions as included in the Senate legislation.

Those who have followed the destructive effects of the USPS funding mandates can’t help but wonder why more isn’t done to stop the fiscal unraveling of USPS. Legislators who support the current funding formula for USPS, insist the agency’s dwindling revenues will create future problems in funding benefits plans, thereby necessitating large advance payments now. This prediction can unfortunately be realized if excessive funds are allocated for future use at the expense of strengthening current business and revenues. Realistically, how many Fortune 500 companies would perform as well as they currently do with the same choke hold of fiscal restrictions as applied to USPS?

We cannot overlook the possibility that events are being played out exactly as they are intended; i.e., not every legislator or political figure harbors a nostalgic sentiment for USPS. Yet, the Ponemon Institute which conducts independent research, ranked the Postal Service as the fourth most trusted company (this is the seventh year USPS was ranked in the survey’s top 10). Should we ignore the large campaign contributions made by Fedex and UPS to Congressional legislators, who have the power to orchestrate preferential outcomes through regulatory changes, or create insurmountable disadvantages that may never be overcome? Perhaps not. There are fiscal watch-dogs in Congress who oppose corporate regulations because they are seen as interfering with free enterprise. Yet these legislators deny USPS more flexibility to utilize revenues even though the process may save the agency. Private entities are granted tax breaks as “job creators.” Government agencies, including USPS, are not always seen as the valued employers they are, even when large staff reductions occur.

Perhaps there is no serious intention to rescue the ailing USPS from flat-lining. Senator Darrell Issa recently issued his endorsement of the USPS plan to stop Saturday deliveries. This unprecedented shrinking of services hardly merits congratulatory words. The United States Postmaster General, Patrick Donahoe, recently implied that downsizing of postal operations was the inevitable future course for his agency. How hopeful can we be for the future of USPS when the agency’s top brass has gone over to the dark side?

Some Fedex and UPS deliveries are contracted out to USPS, particularly in rural areas. These locations require greater time investments by private delivery services to incorporate into daily routes and are therefore omitted. What will become of these rural area deliveries if the financial health of the USPS is further impaired? It is possible that more remote rural areas may receive greater reductions in USPS services than the more easily accessed urban and suburban areas. What will become of the USPS jobs that are held by rural residents, and how severely will potential cutbacks impact the local areas? While legislators beseech the President to remove regulations viewed as deterrents to hiring, why aren’t the regulations imposed on USPS by these same legislators seen as deterrents to jobs preservation? USPS is also the biggest employer of veterans, who will suffer if postal operations are gutted. How will mass reductions of veteran jobs from USPS be perceived, when juxtaposed against the political support declared for veterans?

Rural constituents have supported some of the legislators who are now engineering the demise of USPS. Have these same legislators thought about their methods of delivering campaign materials and legislative update newsletters in order to keep their rural voters connected? Have legislators calculated a potential loss of these rural voters by mortally wounding the USPS in favor of advancing a free enterprise system for delivery providers? Some legislators understand the negative effects of disappearing postal services from rural life, as evidenced by the Senate group led by New York’s Senator Kirsten Gillibrand to restore Saturday mail delivery services.

While the changes to USPS have been festering for several years without much public conversation, there is growing recognition that we may soon be forced to accept compressed postal services or the privatized version of an extinct USPS. It is time to ask whether it is acceptable to witness the destruction of USPS, when it serves as a lifeline to communities that center news sharing and social interactions around their post offices.

Perhaps a heightened awareness of the precipitous edge that USPS straddles will move our collective conscience to declare “Enough!” and effect a positive outcome. Or the USPS products now sold at post offices to boost revenues may become coveted souvenirs of a defunct institution, commanding prices which were never before possible.

 

Roberta Adams is a former grants writer for youth programs at Cornell Cooperative Extension of Rensselaer County and former editor of Aging Trends, a monthly newsletter for seniors distributed by Rensselaer County’s Department for Aging. She is retired from The Research Foundation of State University of New York and worked as a grants assistant in the Department of Sponsored Programs.

{ 2 comments }

capeziosa February 22, 2013 at 10:34 am

Has anyone else noticed how terrible the postal service is here in Albany? Terribly inefficient anyway. Ever since moving here two and a half years ago my boyfriend and I have suspected that we actually have two people delivering our mail – sometimes mail even comes twice a day, once between 9-5 as expected and again late in the evening. Our daytime mail comes somewhat regularly and delivers a consistent trickle of mail, mostly addressed to me. Our covert evening deliveries however seem to hoard several weeks worth of mail, addressed mostly to my boyfriend until there’s so much of it it doesn’t fit in the box. We’ve gotten three weeks worth of a weekly magazine on one day. Is this a sign of cutbacks that have already hit the post office, or a sign that that this institution is not worth funding?

ClearAirTurbulence March 1, 2013 at 3:02 am

A well written article – great job Roberta!

Americans are so spoiled. Our daily post and USPS is the best in the world and has been since its inception. We’ll all feel the pain when it is gone.

The problems that Capeziosa has had are more than likely the result of the massive cuts, for which the rank and file, and middle-level management have tried to absorb.