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The Postal Service's proposal to drop a day of delivery

is not the solution to its financial problems

 

he Postal Service laid out a wide-ranging—some would say radical—plan in March for coping with its current economic problems and future business challenges. It featured headline-grabbing initiatives, such as eliminating Saturday mail delivery, and more mundane, nuts-and-bolts proposals, like streamlining the regulatory process.

The NALC supports many of the plan’s recommendations and goals, especially relief from the burden of accelerated pre-funding of retiree health care and recovery of CSRS pension fund overcharges.

 

But other aspects—particularly cutting service back to five days a week—are foolhardy and the union will fight them with all our might.

 

Five reasons to oppose 5-day:

 

1. It’s penny-wise and pound-foolish.

Saturday delivery is the Postal Service’s key strategic advantage over its private competitors, UPS and FedEx. Giving away our most important comparative advantage in the one area of the postal market that is likely to grow when the economy recovers—e-commerce package delivery—would be very risky. Over time, the loss of revenue would outweigh the short-term savings.

 

2. It will drive customers away.

Slower service—letters mailed on Friday nights would not be picked up until Monday morning or Monday afternoon—and less frequent delivery is likely to accelerate the shift to electronic invoicing and electronic bill paying. Booming businesses like mail order prescriptions would be threatened. Reduced service would also threaten one of the fastest growing segments of the mail—Parcel Select—as UPS, FedEx and other consolidators would reconsider their use of last-mile delivery services by USPS letter carriers.

 

3. It would prompt the emergence of new competitors.

If the Postal Service doesn’t deliver on Saturdays, other companies will step in to fill the void. Within days of the Postal Service’s March 2 announcement, multiple press accounts quoted executives from niche delivery firms welcoming the news. Many companies would view the Postal Service’s exit from Saturday delivery as a business opportunity. Once established, competitors will demand a “level playing field” and ask Congress to open the nation’s mailboxes to their services, making it impossible to enforce the monopoly and maintain affordable universal service.

 

4. It would set a bad precedent.

If the language requiring six-day delivery were repealed, there would be no legal barrier to prevent the Postal Service from reducing delivery days further, from 5-day to 4- or 3-day delivery. Indeed, Business Week magazine called on the Postal Service to shift immediately to 3-day delivery within days of the Postal Service’s announcement of its action plan. That would not only destroy half our jobs, but also likely lead to a death spiral for the Postal Service—less service leading to less mail volume leading to less service, and so on.

 

5. It’s not necessary.

The Postal Service has hidden financial strengths, with fully funded pension plans and, if the accounting is done properly, fully funded retiree health benefits. If we can convince Congress and the administration to fairly allocate pension costs and correct the $75 billion error made by the OPM when it established our retiree health fund, eliminating Saturday delivery would not be necessary.

 

Postmaster General Jack Potter acknowledged as much at a March 18 hearing before a Senate Appropriations subcommittee. “If that [recovering the $75 billion and applying it to future retiree health care] were to happen,” he said, “we wouldn’t have to go to six-, to five-day delivery.” Click here to watch video of the hearing on c-span.org. (The link opens a new browser window or tab.) The exchange above begins around the 49:30 mark.

 

IMPORTANT NOTE: The NALC's proposal will not threaten anyone's retiree health benefits. The law mandates the provision of these benefits even if the Postal Service's retiree health fund had no assets. The retiree health fund is designed to make sure that postage ratepayers reimburse the U.S. Treasury for future health benefits. But USPS is being massively overcharged for these costs and there are excess postal pension assets in the civil service retirement fund that should be used to cover retiree health costs in the future. The reforms we support will save the Postal Service billions and protect every postal employees' retiree health benefits.

 

It's payback time

 

 

  IG Williams

In a special report, the USPS Office of Inspector General strengthens the case NALC has made over the past three years that the Office of Personnel Management badly miscalculated the postal surplus in the Civil Service Retirement Fund. The OIG’s investigative research unit report shows USPS was overcharged an astounding $75 billion for pension liabilities that should have been paid for by the U.S. Treasury, since they relate to service performed before USPS was created in 1971. This means the onerous prefunding schedule included in the 2006 Postal Accountability and Enhancement Act is grossly inflated, since OPM shortchanged the Postal Service Retiree Health Fund in 2007, when the agency transferred the surplus into the fund. Fact Sheet

 

"The Postal Service has been overcharged $75 billion for its pension obligations," said USPS Inspector General David Williams in April in The Federal Times. "Fixing these overcharges will allow the Postal Service to address its real challenges and implement its plan at a safer pace. The Postal Service and its employees deserve justice in this matter and the ability to fix the real problems."

 

Click here to read more.

 

Likely to do more harm than good

 

As NALC President Rolando made clear to reporters who called for the union’s reaction to the USPS plan and in letters to the editors of both The Washington Post and The New York Times, the NALC agrees with and can support much of the USPS plan. Many of the actions make sense—so long as the NALC and the Postal Service work together through the collective bargaining process. But cutting service is and penny-wise and pound-foolish, likely to do more harm than good. That was the message of the letter Rolando sent to every letter carrier in America on March 17. Click here to read President Rolando's letter.

 

NALC statement on the PRC report on the postal pension surplus in CSRS

 

Fredric V. Rolando, President of the National Association of Letter Carriers, issued the following statement in response to a report issued by the Postal Regulatory Commission entitled "Civil Service Retirement System Cost and Benefit Allocation Principles" that was transmitted to the U.S. Postal Service on June 29, 2010:

 

"Today the PRC’s report confirmed that the Postal Service has been overcharged by at least $50-$55 billion for pension costs related to service preformed by the taxpayer-supported Post Office Department before 1971.  Congress now has all the evidence it needs to quickly correct this error in the accounting within the Civil Service Retirement System. The report supports a broadly shared conclusion in the postal industry that the Postal Service has massively over-funded its pension liabilities and that the surplus funds in the CSRS postal account could be used to meet its obligations to pre-fund its future retiree health benefits."    

 

"Given that the $5.5 billion annual cost of pre-funding retiree health costs – not the recession and not the Internet – is responsible for the Postal Service’s recent financial losses, we call on Congress and the Obama administration to act this year on legislation to relieve the Postal Service of this unfair burden."

 

The PRC report, which was prepared by an actuarial consultant in response to a request from the USPS after the USPS Office of Inspector General (OIG) concluded in a January 2010 report that the Postal Service was overcharged for CSRS pensions by $75 billion, also concluded that the "pure service-based allocation" method used by the OIG is "within the range of ‘fair and equitable’ options."  

 

"This is great news for letter carriers and the Postal Service," President Rolando said, "we expect both Republicans and Democrats to work with the Obama administration to reward the Postal Service and its employees for all the hard work in recent years to fully fund all of its retirement obligations while providing the most affordable and high quality postal services in the world – despite the challenges of adapting to the most challenging economic times in generations."