The U.S. Postal Service will be announcing its final fiscal 2013 financial results next Friday, according to a Federal Register notice today, and as usual, the only suspense will lie in the exact amount of red ink. If there’s a silver lining, it’s that last year’s loss will be nowhere near 2012’s monster figure of $15.9 billion.
That was a fluke, caused in large part because the Postal Service’s books reflected the cost of two skipped payments for future retiree health benefits. (Congress had pushed the deadline for the 2011 payment into 2012.) For 2013, the final number is likely to be in the range of $6 billion.
But as FedLine has noted before, even modest improvements in the Postal Service’s financial performance lessen the political heat on Congress to move on the long-term restructuring legislation that USPS leaders desperately want. Those odds, never good to start with, continue to fade.
The House of Representatives, for example, has yet to take up a postal overhaul bill sponsored by Rep. Darrell Issa,, R-Calif., almost four months after the measure came out of committee. This week, the Senate Homeland Security and Governmental Affairs Committee had initially planned to take up a competing measure sponsored by Sen. Tom Carper, D-Del., according to a draft agenda obtained by FedLine, but then dropped it from consideration, apparently because of a lack of consensus.
As the year winds to a close, lawmakers’ attention is likely to be consumed by budget negotiations aimed at heading off another partial government shutdown early next year. And with congressional mid-term elections coming next year, the prospects for legislative action–absent a full-blown, can’t-pay-the-bills crisis–will be even slimmer.
If a smidgen of suspense lingered earlier today about whether much of the government would shut down tomorrow, there was never the slightest doubt that the U.S. Postal Service would skip a legally required retiree health care payment for the third straight year.
Pretty much ever since the Postal Service defaulted on the 2012 payment, USPS leaders have been warning they would miss the $5.6 billion obligation due by midnight tonight; in another 15 minutes or so, the agency will officially be in default. Unlike past years, however, when an anxious Congress either cut the amount of the annual installment or pushed back the deadline, this year’s no-show routine now seems . . . routine.
But Sens. Tom Carper, D-Del., and Tom Coburn, R-Okla., sponsors of a Senate bill that would give the Postal Service some relief on the “prepayment” requirement, put out a joint statement calling the default a reminder of the agency’s broader financial woes. After holding two hearings on the bill earlier this month, Carper said, “I hope to move our bipartisan legislation swiftly through our committee and onto the Senate floor for a vote as soon as possible.”
The current pre-funding schedule is laid out in the 2006 Postal Accountability and Enhancement Act. According to numbers included in a Government Accountability Office report, the agency has made $17.9 billion in required payments and-as of tomorrow–will have defaulted on $16.7 billion worth.
The sound you heard from the U.S. Postal Service this morning was the other shoe dropping in the wake of its its failed attempt to end Saturday mail delivery earlier this year. The “exigent” rate increase proposed today would raise about $2 billion per year, or roughly the same amount that cutting Saturday delivery was supposed to save.
Much of the added revenue would come from a hike in the price of a first-class stamp from 46 cents to 49 cents. The proposal would also increase the charge for additional letter ounces from 20 cents to 21 cents, raise postcard prices by a penny to 34 cents, and push the cost of an international letter to $1.15.
After the Postal Service dropped the planned Saturday delivery cuts in April, its board told agency officials both to try to renegotiate existing labor contracts and study possibilities for raising more money. The first idea predictably went nowhere with postal unions and managerial groups. So the only option is the rate increase announced today that would take effect Jan. 26 if—and this is a mighty big question mark—the Postal Regulatory Commission approves.
In a letter cited in the USPS news release, board Chairman Mickey Barnett laid the blame on Congress for failing to pass legislation that would put the Postal Service back on a secure long-term financial footing.
“Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges,” said Barnett in the letter. “However, if these financial challenges were alleviated by the timely enactment of laws that close a $20 billion budget gap, the Postal Service would reconsider its pricing strategy. We are encouraged by the recent introduction of comprehensive postal reform legislation in Congress, and despite an uncertain legislative process, we are hopeful that legislation can be enacted this year.”
Of course, that rationale will be cold comfort to the mailing industry trade groups who have already re-united to kill the proposal just as they blocked a similar effort back in 2010. The issue is likely to dominate tomorrow’s previously scheduled hearing on postal issues before the Senate Homeland Security and Governmental Affairs Committee.
The proposed increase is likely to dominate
What might the future hold for the humble postal stamp? The financially challenged U.S. Postal Service is paying a New York consulting firm named Faith Popcorn’s BrainReserve more than a half-million dollars to find out.
“Who will be buying stamps in 2019, 2024 and 2034? What will they be used for?,” reads the company’s description of the $566,000 task order awarded last month. “How can we embed innovation and new thinking into stamps, to engage America’s coming generations and the [USPS’s] existing and new customers?”
After starting the job early last month, BrainReserve–whose website touts its consulting specialty as “applied futurism”–is supposed to finish up work by mid-October, the statement indicates. Faith Popcorn, the company’s CEO, is billing the Postal Service at an hourly rate of $836. Labor fees for other BrainReserve staff involved in the project range from $91 to $334 per hour.
According to the description, a copy of which was obtained by Federal Times, BrainReserve is to devise strategies both to slow the “predictable decline” in stamp use and to “reinvent and reimagine” stamp relevance to promote growth. While sales of the adhesive-backed paper squares and rectangles have been steadily waning as Americans turn to the Internet to pay bills and stay in touch, they still garner $8 billion annually for the Postal Service, the company says.
“This is a complex, multi-dimensional issue,” it concludes. “The methodology requires in-depth investigation, analysis and ideation in order to Trend-correct the current decline in USPS Stamp volume and begin to structure powerful mechanisms for growth.”
A BrainReserve employee referred questions to the Postal Service, where spokeswoman Toni DeLancey said the firm was hired in January under a competitively awarded indefinite-delivery/indefinite-quantity contract to support product innovation and brand management. BrainReserve, which had not previously done business with the Postal Service, was founded in 1974 and has worked for American Express, Campbell Soup Co. and other Fortune 500 firms, DeLancey said in an email.
It is “important to note,” she added, that BrainReserve’s “statements of work” for this and other assignments are not USPS documents. The “terms and conditions of any task order awarded may be different from what is reflected in these documents.” Nagisa Manabe, the Postal Service executive vice-president in charge of sales and marketing, was not available for an interview late last week.
The stamp project is one of five task orders that BrainReserve has so far received, DeLancey said. Another is an almost $1.1 million endeavor to explore the possibility of using letter carriers to provide paid home visitation services to the elderly and ill. Those services could include a daily personal visit and regular checks to make sure that customers are using medical devices or taking prescribed medications, according to the company statement of work for that task order.
Since its founding, the Postal Service has connected people, often going beyond the call of duty to provide “caring personal connections in times of crisis,” the document adds. The home visit concept “builds upon and formalizes this powerful aspect of the USPS heritage.”
At the National Rural Letter Carriers’ Association, one of two unions representing the workers who would play a central role in any such visitation program, a spokesman said the group is not currently involved in the project, but would “very much” like to be. Efforts to get comment from the National Association of Letter Carriers were unsuccessful.
For anyone who’s interested, you can check out the statements of work for the two task orders here.
Some 15,600 U.S. Postal Service managers. supervisors and postmasters are getting notice this week that they qualify for the mail carrier’s latest early retirement offer. The offer applies to eligible field employees covered by the Executive and Administrative Schedule, USPS spokeswoman Patricia Licata said in reply to emailed questions from Federal Times. That figure (15,580, to be exact) represents about one-third of the 42,239 field EAS employees on the rolls as of last week. For the Postal Service as a whole, the ranks of the EAS workforce numbered 50,346, excluding the USPS inspector general’s office and the Postal Inspection Service.
Those who accept may opt to leave by the end of December or the end of January. The decision deadline is Nov. 29. The “voluntary early retirement” offer does not extend to Postal Career Executive Service members, Licata said, contrary to earlier assertions by the National Association of Postal Supervisors.
In an announcement posted on an internal employee website late last week, the Postal Service linked the offer to new mail processing plant rankings accompanied by changes to EAS staffing criteria. The “change process” could include a reduction-in-force, the announcement said.
The early-out “is only being offered to lessen the impact on employees who are potentially being impacted by organizational change,” Licata said. Asked whether the Postal Service has a target for the number of takers, she said that “employees make individual determinations to either accept or decline VER offers.”
Under the standard federal package, employees can retire early if they are at least 50 years old with a minimum of 20 years’ service or at any age with at least 25 years’ service. The offer does not include a financial incentive, aka “buyout.”
Two federal employee unions, along with the National Active and Retired Federal Employees Association, are wading into the fight over postal legislation.
In a joint letter to members of a Senate committee released yesterday, NARFE, the American Federation of Government Employees, and the National Treasury Employees Union objected to provisions in a Senate bill pertaining to the federal workers’ compensation program and the U.S. Postal Service’s hopes of revamping its participation in the Federal Employees Health Benefits Program.
You can read the letter here; whatever the merits of the arguments, it’s safe to say that the opposition of three organizations that normally don’t focus on postal issues is likely to lengthen the already long odds of any major postal legislation winning congressional approval this year.
The bill was introduced last month by Sens. Tom Carper, D-Del., and Tom Coburn, R-Okla. Carper chairs the Senate Homeland Security and Governmental Affairs Committee, which has jurisdiction over the Postal Service; Coburn is its top Republican.
“As I’ve said before, our bill isn’t perfect and I expect it to improve as our conversations continue,” Carper said in a statement. “It is my hope that in the coming weeks, Congress, the Obama administration and stakeholders can come together to enhance this plan in order to save the Postal Service before it’s too late.”
To that end, the committee plans two hearings later this month, Carper said in the statement. While a committee spokeswoman wouldn’t comment on specific dates, FedLine is told by one source that the sessions are tentatively scheduled for Sept. 19 and Sept. 26. Possible witnesses include Postmaster General Pat Donahoe; Postal Regulatory Commission Chairwoman Ruth Goldway; officials from the Government Accountability Office and USPS inspector general; and union and mailing industry representatives.
The Postal Service’s Inspector General’s office is launching a review of conference spending at the agency.
The office said that conferences can be an effective method of communication or they can be abused. Agencies have made great strides to reduce those costs by promoting teleconferencing and reducing the number of meetings, the office said in an Aug. 21 announcement.
“We are conducting research to determine if the Postal Service properly accounted for and evaluated Postal Service initiatives to reduce meeting and conference costs,” the announcement said.
The inspector general’s office is also asking attendees at recent Postal Service conferences and events to report if they thought costs could have been reduced and if the amenities provided were appropriate.
Scrutiny of conference spending has increased since an April 2012 inspector general report that detailed a 2010 General Services Administration conference that cost $823,000 and forced out the agency’s top leaders. The Veterans Affairs Department and the IRS have also come under fire for excessive conference spending.
News that the U.S. Postal Service’s financial picture is improving (although it’s all relative when you still post a $740 million quarterly loss) reminded FedLine of a recent inspector general’s report looking at one roaring success: political mail.
This will come as no surprise to anyone who had to empty a mailbox in a battleground state, but last year’s general election was a huge winner for the USPS bottom line. In comparison with the 2008 election season, revenue from a torrent of candidate and other political mailings more than doubled to $508 million, far beyond the initial goal. This was not happenstance, as the Postal Service had assembled a sales team charged precisely with growing that market.
While USPS officials earlier this year turned down Federal Times’ request for an interview with team leaders, the inspector general offers some details on how they did it and concludes that there’s still more money to be made. A couple of key factors last year were:
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Only days after it was introduced, a proposed Senate overhaul of the U.S. Postal Service is taking its lumps from both organized labor and the mailing industry.
“This bill is fatally flawed,” Cliff Guffey, president of the American Postal Workers Union, said in a Friday statement denouncing the legislation as a betrayal of USPS employees.
The Association for Postal Commerce, which represents business mail users, has some “significant issues” with the measure, such as its idea for widening the Postal Service’s discretion in applying an inflation-adjusted cap on rate increases for standard mail and other areas where it dominates the market, the group’s president, Gene Del Polito, said in a phone interview Monday.
Sens. Tom Carper, D-Del., and Tom Coburn, R-Okla., introduced the bill Thursday as lawmakers were leaving town for their customary August break, meaning that no action will be possible until next month at the earliest. The two are the chairman and top Republican, respectively, on the Senate committee that oversees the Postal Service. Their bill came after months of discussion; a joint news release makes clear that both believe there’s still a ways to go.
“This bill isn’t perfect and will certainly change as Dr. Coburn and I hear from colleagues and stakeholders, including postal employees and customers,” Carper said. More pointedly, Coburn described the bill as a “rough draft of an agreement subject to change.“
But dialogue takes time and, with time running out for action, that tentative note underscores the growing odds that Congress will once again fail to approve any kind of comprehensive postal fix.
For one thing, the Senate bill differs significantly from the measure approved last month by the House Oversight and Government Reform Committee; for another, the Postal Service is doing a bit better than expected this year.
How much better will become clearer this Friday when the mail carrier releases its third-quarter financial results. But as Federal Times has previously reported, Postmaster General Pat Donahoe said last month that projected losses—originally pegged at $7.6 billion in fiscal 2013—will be closer to $6 billion. That may be relatively good news from a balance-sheet standpoint, but politically it means less pressure on Congress to move. And next year is a mid-term election year, meaning that lawmakers will even be less inclined to take the kind of tough votes that any serious postal overhaul is sure to demand.
Among other features, the Carper/Coburn bill would:
Require the Postal Service to continue Saturday mail delivery for at least one year while pressing the agency to replace door-to-door delivery with cluster boxes or curbside delivery when cheaper.
Require the Office of Personnel Management to recalculate the Postal Service’s pension obligations based on assumptions tailored to USPS employees rather than the federal workforce as a whole. Long story short, this step would likely reduce the amount that the Postal Service would have to pay into the two main federal pension programs and thus free up money for other purposes.
Revamp the federal workers’ compensation program.
The mailing industry is regrouping for battle over the possibility of an emergency rate increase request from the U.S. Postal Service.
After lying dormant for the last 2-1/2 years, the Affordable Mail Alliance, made up of nine trade groups and companies, issued a news release yesterday stating that the USPS Board of Governors “is set to decide on the matter imminently.”
The board, which is scheduled to meet in closed session next Tuesday, ordered postal management to study the possibility of an “exigent” rate increase earlier this spring after abandoning plans to end Saturday mail delivery.
At this point, no decision has been made on whether to pursue that route, USPS spokeswoman Katina Fields said in an email. Although the board and postal management know that raising prices affects mail volumes, Fields said, “we must consider ALL options to cut costs and increase revenue.” Among the items on the agenda for next Tuesday’s meeting is “Pricing.”
Under a 2006 law, the Postal Service can cumulatively raise rates in accord with the annual inflation rate without much hassle. Seeking an exigent increase entails a full-blown Postal Regulatory Commission proceeding at which the Postal Service has to make the case that extraordinary circumstances warrant a larger increase.
When the Postal Service last tried that option in July 2010, it cited the recession’s impact on revenue as a reason for seeking the 5.6 percent boost. But it encountered a fierce backlash from the mailing industry and members of Congress; the commission unanimously squelched the request four months later.
If postal leaders decide to try again, they face the argument that higher prices will hasten a customer exodus. “You’re going to exacerbate the disappearance of mail,” Tony Conway, executive director of the Alliance of Nonprofit Mailers, said in a phone interview today, adding that many of his members are still in shaky financial condition themselves. In yesterday’s release, the Affordable Mail Alliance–which includes Conway’s group–said the result “will be more jobs lost in the private sector in order to maintain an overbuilt postal system, and even less revenue to the Postal Service as mailers flee.”
But despite aggressive cost-cutting efforts since 2010, Fields said, the Postal Service’s financial outlook has worsened because of the continued decline of first-class mail volume and Congress’s failure to pass “comprehensive postal reform legislation.”