Rep. Darrell Issa, chairman of the House Oversight and Government Reform Committee, has just released a “discussion draft” of a bill intended to put the U.S. Postal Service on a more stable, long-term financial footing.
The bill, which has not yet been introduced, bears some resemblance to the measure that the California Republican unsuccessfully pushed in the 2011-2012 session of Congress. It would, for example, temporarily replace the USPS board of governors with a presidentially appointed panel of five outside executives who would have the power to shake up the agency’s top management and take any steps necessary under the law to “ensure the long-term solvency” of the Postal Service, according to a summary provided by Issa’s office.
The measure would also allow an end to Saturday mail delivery while requiring continued package delivery, which, of course, is what Postmaster General Pat Donahoe wants to do anyway.
But the draft drops the idea of setting up the equivalent of a BRAC commission to close post offices and mail processing plants. It would provide some significant relief from the current requirement for the Postal Service to “pre-pay” about $5.5 billion annually for future retiree health care and would also channel projected pension surpluses toward those retiree health care benefits.
While Issa looks forward to a “robust” discussion of the draft bill, he has no timetable for introducing it, spokesman Ali Ahmad said. The Postal Service, which was cool towards Issa’s previous bill, is reviewing the draft, a spokesman said. But there is no sign that release of the proposed bill will end the stalemate over how best to fix the mail carrier. Despite plenty of lip service to bipartisanship, lawmakers remain deeply divided (largely along partisan lines) over how much more deeply labor costs should be cut, whether to let the Postal Service create its own health insurance plan and other issues. No comprehensive legislation has so far been introduced in the Senate, although Tom Carper, D-Del., chairman of the Senate Homeland Security and Governmental Affairs Committee said this week that he still hopes to come to agreement with the panel’s top Republican, Tom Coburn of Oklahoma. In the House, Issa’s draft drew a guarded reception from the oversight committee’s top Democrat, Elijah Cummings of Maryland.
“Although I appreciate the chairman’s efforts to focus attention on the financial challenges facing the Postal Service, I have serious reservations about some of this bill’s provisions,” Cummings said in a statement. “I continue to believe that any bill Congress considers should be a bipartisan, comprehensive solution that solves the Postal Service’s immediate financial problems and puts the Postal Service on sound financial footing.”
[This post has been updated and expanded.]
Under orders from his board, Postmaster General Pat Donahoe is gamely trying to reopen pay talks with employee organizations after the collapse of efforts to end Saturday mail delivery.
Good luck with that.
The U.S. Postal Service’s “untenable” financial position “demands urgent action to ensure the near-term viability of our great institution,” Donahoe said in a Tuesday letter to Louis Atkins, president of the National Association of Postal Supervisors. (NAPS provided the letter to FedLine with permission to post it online.)
“In light of these extraordinary circumstances, I request your cooperation in reopening consultations concerning the pay and benefits of the dedicated employees you represent,” Donahoe said in the letter. “I fully understand the significance of this request and would not make it; however, the financial challenges confronting the organization and all who depend upon its very survival make it necessary.”
The USPS board of governors told Donahoe last week to take that unprecedented step after dropping plans to go to five-day-a-week mail delivery this August. In a statement, the board said its goal is to lower total workforce costs and find other ways to make economies. Similar letters went out this week to the two postmaster groups and the Postal Service’s four unions.
“What I‘d like to do is sit down–before we do anything–as a group and have a session where we kick around some ideas,” Donahoe said at a Wednesday congressional hearing. “There may be some opportunities in there we should look at.”
But after years of cutbacks and downsizing, employee groups aren’t feeling very receptive. At least three of the four postal unions are so far objecting to a return to the bargaining table. And NAPS’ executive board has already decided that reopening pay consultations is not in members’ best interest, the association said yesterday in a politely worded news release. Last year’s round resulted in a third straight year without a salary increase for executive and administrative schedule (EAS) employees, the release said, adding that supervisors, managers and postmasters must pay more for health insurance.
Finally, hiring freezes stemming from the Postal Service’s financial crisis have left the mail carrier understaffed by as many as 5,000 supervisory and managerial positions, the release says. “Our members have performed admirably under these trying conditions, moving the mail every day throughout the country and have given back more than their fair share.”
For anyone with a background in appropriations law and a little time on their hands, FedLine has obtained a copy of the legal opinion that the U.S. Postal Service is using to justify its decision to end Saturday mail delivery this August.
The gist: The long-standing congressional ban on curtailing six-day delivery doesn’t apply at present because the federal government is operating under a stopgap continuing resolution. And even if did apply, lawmakers don’t have to continue the ban when that resolution expires March 27, Postal Service lawyers write in the nine-page opinion.
The underlying reasoning is complicated enough that even Postmaster General Pat Donahoe had trouble explaining it at the Feb. 6 news conference announcing the planned delivery change. You can read the opinion for yourself here.
But while USPS attorneys say the agency is not flouting Congress’s will, the legal niceties may be lost on some lawmakers. “You said you’re satisfied that you have legal authority–I’m not,” Sen. Mark Pryor, D-Ark., told Donahoe at a hearing last week of the Senate Homeland Security and Governmental Affairs committee. “And I’m not sure the committee is,” Pryor added.
Sen. Carl Levin, D-Mich., also wasn’t satisfied. Despite “what’s in the law, your lawyer apparently is saying that you can cancel that sixth day,” he said. And while Donahoe pleaded with lawmakers to stay out of the way, Levin suggested that the agency might actually need additional congressional oversight of its contracts with Federal Express and UPS.
“Every contract in this Postal Service is competed,” Donahoe responded.
“That’s fine,” Levin said, “But it’s also the American way that there be some congressional oversight of your contracts.”
Lest anyone forget, Postmaster General Pat Donahoe remains keenly interested in creating a stand-alone health insurance plan for about 1.1 million U.S. Postal Service employees and retirees.
The latest reminder came at last week’s Senate hearing on the USPS’s financial crisis. Although lawmakers’ attention was predictably focused on the agency’s decision to end Saturday mail delivery, Donahoe also stressed the urgency of pulling out of the Federal Employees Health Benefits Program.
“An astonishing 20 cents of every revenue dollar the Postal Service takes in must go toward health care costs,” Donahoe said in prepared testimony. “By moving away from the federal system, nearly all of our employees and retirees would reap the benefits of getting equivalent or better healthcare coverage and paying less for it.”
Creation of a new health plan was a major stumbling block in contract talks with the National Association of Letter Carriers; although labor and management couldn’t reach a deal, a joint task force will keep discussing the issue, according to an arbitration panel’s recent decision.
But the Postal Service hasn’t furnished many details about what it has in mind. And employees may understandably be skeptical of any promises to provide comparable (or better) benefits at lower cost. Fortunately, the USPS inspector general took a look at the subject last year that fleshes out some specifics.
The inspector general’s report, whose conclusions drew a vigorous dissent from Postal Service management, can be read here. It’s of course possible that the USPS human resources team has since made changes to their plan; if so, however, those changes haven’t been made public.
In the meantime, here are a few takeaways from the IG’s review. By the Postal Service’s reckoning, creation of a stand-alone plan would save $52 billion. (The original total was $62.1 billion, but the agency then dropped the idea of freezing its contributions for retiree health insurance, according to the report.) Although the IG doesn’t say over what period of time those savings would occur, the key is requiring employees and retirees to move to Medicare, the taxpayer-funded medical benefits program for people aged 65 and older.
That step alone would save some $37 billion; for older employees and retirees, the Postal Service’s health plan (whatever it turns out to be) would become the back-up insurer to Medicare. The Postal Service would also be freed of much, if not all, of the obligation to set aside billions of dollars now for future retiree care.
But from the employee/retiree perspective, there’s one immediate concern. By law, anyone eligible for Medicare Part B (which covers things like doctors’ visits and lab tests) is supposed to sign up after turning 65 or else face a 10 percent, per year, enrollment penalty.
According to the IG, there were about 88,000 USPS retirees over 65 who hadn’t signed up. Those folks would thus face late-enrollment penalties totaling $53 million per year, or an average of $625 per person. The Postal Service needs to settle that issue, the inspector general said, either by ensuring that the penalties will be waived or by deciding who’s going to foot the bill.
USPS workers and retirees could also pay more under another proposed change that would require anyone retiring after the end of this year to pay a standard deductible before the Postal Service picks up any cost not covered by Medicare. But the Postal Service would also expand coverage options from the two currently offered by the FEHBP to four. In some instances, employees could pay less than they do now. (Check out p. 11 of the IG report for a side-by-side comparison.)
The overall goal here is simple. The Postal Service, like any other money-losing enterprise, is trying to tamp down costs wherever it can. And postal workers generally pay less for their health benefits than other federal employees.
But because congressional approval is required, the Postal Service’s plans need political traction that so far appears to be lacking. At a September 2011 congressional hearing, for example, Office of Personnel Management Director John Berry was notably unenthusiastic about letting the Postal Service leave the FEHBP. A fuller analysis of the potential effects was needed, Berry said, adding that he thought postal employees were “well-served” by the status quo.
In last year’s report, the inspector general recommended that USPS officials lay out to affected employees and retirees, as well as the government, “all potential cost increases, cost savings and cost shifts that would result from a transition to a Postal Service-proposed alternative health care plan.”
In their strongly worded response attached to the report, postal executives both disputed key findings and objected to what they called its “negative tone.” The Postal Service, for example, has proposed relief from the Medicare late enrollment penalties, they wrote. A draft of the report, they added, “totally ignores the fact that total costs will decrease substantially and that out-of-pocket costs for most employees and retirees will decrease.”
The Postal Service has yet, however, to make the kind of detailed disclosure urged by the IG. Until it does, a tough sales job lies ahead.
In announcing plans to end Saturday mail delivery, Postmaster General Pat Donahoe himself posed the key question yesterday: “Is this legal?”
Donahoe’s answer, naturally, was yes, hinging on a rather complicated analysis of the impact of congressional spending legislation (more about that in a moment).
Official U.S. Postal Service talking points obtained by Federal Times offer a more straightforward explanation: USPS leaders are under orders from the agency’s board to accelerate cost-cutting measures; they believe they have the authority to go to five-day mail delivery on their own; and they are hoping that Congress won’t take any action to stop them.
“The biggest driver of this change is our obligation, consistent with the requirements of Title 39 of the United States Code, to take the responsible steps necessary to ensure our financial stability so that we can provide efficient, reliable and affordable mail delivery service to the American people,” according to the talking points, marked “For Internal Use Only.”
“Given our worsening financial situation, the strong public support for this change, and the plan to maintain six-day package delivery, it is anticipated that most members of Congress understand the urgent need to implement this change.”
At the moment, that hope appears to be debatable.
Reaction to yesterday’s announcement has broken mostly along party lines, with Republican lawmakers supportive and Democrats opposed.
In a news release today, Senate Majority Leader Harry Reid, D-Nev., accused Donahoe of using “flawed legal guidance” to circumvent Congress’s authority and warned that the postmaster general has damaged his reputation with congressional leaders and complicated prospects for comprehensive postal legislation. More encouraging, from the Postal Service’s perspective, was the reaction from House Minority Whip Steny Hoyer, D-Md., who called on Congress to “get serious about comprehensive reform” to put the mail carrier on a long-term path to financial stability. (House Speaker John Boehner, R-Ohio, and Senate Minority Leader Mitch McConnell, R-Ky., have thus far not weighed in.)
For Capitol Hill critics, the flash point is their belief that the Postal Service is doing an end run around a long-standing legislative ban on reducing six-day mail delivery.
For almost 30 years, that prohibition has been folded into annual appropriations bills. But yesterday, Donahoe suggested that the continuing resolution now in effect offers an opening. Although the Postal Service gets no taxpayer dollars for operating expenses, it does receive a relatively small amount of money for providing free mail to the blind and for overseas voting purposes. Because that money is reimbursement for services already provided—not to fund operations going forward–the prohibition against mail delivery is non-binding, Donahoe indicated.
Left unanswered is why—if this interpretation holds good for any appropriations bill—the Postal Service hadn’t already moved to end Saturday delivery rather than waiting for Congress to drop the prohibition. The unstated answer, perhaps, is that the Postal Service has now been waiting for years, and lawmakers still haven’t acted. In addition, there’s an argument that by continuing to drop off packages on Saturday, the Postal Service really isn’t defying Congress, but simply changing the classes of mail that are delivered.
USPS officials have declined to release the legal analysis that undergirds Donahoe’s position. In a In an email, USPS spokesman Dave Partenheimer also would not comment on the talking points, which he called “documents meant for internal audiences.”
“To be clear, we believe we have authority under current law to make this change,” Partenheimer added. “Also, if there is any question, the continuing resolution expires March 27. We will urge Congress not to take any action to prevent this delivery schedule change.”
But in a letter, Reps. Gerald Connolly, D-Va., and Sam Graves, R-Mo., have asked Donahoe to “immediately” supply the legal justification for the Saturday cutback, as well as all documents related to the decision.
And although USPS executives don’t think they’re under any legal obligation to do so, they’re going to ask the Postal Regulatory Commission to update its 2011 advisory opinion on an earlier, more expansive plan to eliminate virtually all Saturday delivery.
In that opinion, the commission found that the Postal Service had significantly overstated the projected $3.1 billion annual savings from that proposal. Because the Postal Service has only provided a “broad outline” of its newly revamped schedule change, a commission spokeswoman said in a news release this week, the five-member oversight panel “is currently unable to evaluate how the new plan differs from the previous proposal.”
[This post has been expanded and updated.]
The U.S. Postal Service is reporting some temporary upper-management turnover stemming from its chief information officer’s illness.
Because of a “serious health issue,” Ellis Burgoyne won’t be returning full-time to his job as CIO before October, Postmaster General Pat Donahoe wrote in a June 20 memo included in a filing today with the Postal Regulatory Commission. In the meantime, Chief Financial Officer Joe Corbett has taken over as acting CIO, while Steve Masse—previously vice president for finance and operations—is subbing for Corbett as acting CFO, according to the filing. Taking Masse’s place: Cynthia Sanchez-Hernandez, who has served as headquarters finance manager.
And for those who may be wondering about the transferability of a CFO’s skill set to an information technology portfolio, Donahoe has this to say:
“I have great faith in Joe’s executive ability and I believe he will be able to maintain the excellent momentum Ellis has built within his group as CIO. Also, I believe strongly in the value of broadening the management experiences of our executives, and this move creates such an opportunity for Joe.”
Letter-writing and phone calls haven’t worked; conventional lobbying hasn’t worked. So, starting this morning, 10 active and retired U.S. Postal Service employees are resorting to a more dramatic tactic: A hunger strike intended to prod lawmakers into dropping a requirement for the beleaguered mail carrier to “pre-fund” a retiree health care benefits fund.
“We’re trying to turn up the heat on Congress, which is stuck on stupid,” Jamie Partridge, a recently retired city letter carrier from Oregon who’s participating in the strike, said in a phone interview from outside a House office building.
After a news conference this morning with Rep. Dennis Kucinich, D-Ohio, the group plans a march on the Capitol tomorrow and on Thursday afternoon will take its grievances directly to USPS headquarters at 475 L’Enfant Plaza. The four-day fast is part of a broader effort by a labor-backed organization called Communities and Postal Workers United, which is also seeking a refund on surplus USPS pension contributions. Just for the Federal Employees Retirement System, that excess amounted to $11.4 billion as of the end of last September, according to a recently updated tally by the Postal Service’s inspector general.
Of course, USPS leaders are also pushing for relief from the pre-funding mandate contained in the 2006 Postal Accountability and Enhancement Act, not to mention a refund on the surplus pension contributions. Under that act, the Postal Service has to pay about $5.5 billion into the health care fund at the end of each September to ensure coverage for future retirees. The pros and cons of this debate have been repeatedly rehashed, so FedLine won’t go into them here. Suffice it to say that the Postal Service no longer has the wherewithal to meet the requirement.
Last year, Congress averted what would have been at least a symbolically embarrassing default by deferring the September 2011 payment until this August. But with that new deadline barely a month away, the Postal Service appears no more able to cover the expense. Besides which, this September’s payment is looming. Anyone got $11 billion to spare?
Postal workers have a separate bone to pick, however, with Postmaster General Pat Donahoe, who has launched a two-pronged cost-cutting drive that will eliminate tens of thousands of jobs in the next couple of years.
Starting next week, the Postal Service plans to begin closing or consolidating several dozen mail processing plants as part of a longer-term push that could eventually halve the size of its network. At the same time, postal officials intend to cut customer service “window” hours at about 13,000 low-traffic post offices, and eventually replace most of the full-time postmasters in those offices with part-timers.
By Donahoe’s telling, steadily sinking mail volume leaves him no choice. But Partridge said the postmaster general could instead refuse to make the payments into the retiree health care and pension funds as a way of avoiding cuts “that are going to send the Postal Service into a death spiral.”
What lies ahead for the U.S. Postal Service if nothing is done to brake its financial slide? Postmaster General Pat Donahoe tossed out an attention-getting benchmark today.
“This is Greece,” Donahoe told participants at the PostalVision 2020 conference, as he highlighted a slide showing the Postal Service with $92 billion in debt by 2016 (up from about $12 billion last year), assuming that Congress doesn’t act on pleas for relief from the requirement to pump billions of dollars annually into a health care fund for future retirees. Greece, he said, has a debt-to-gross domestic product ratio of 1.6 to one. By 2016, the Postal Service’s debt-to-income ratio would be 1.5 to one.
But Donahoe also rejected the idea that the retiree health care funding requirement is the only root of the mail carrier’s ills. Among other needed prescriptions, he said: Eliminating most Saturday delivery and giving management more day-to-day flexibility. “You cannot operate with 1940 work rules,” he said. Donahoe also reiterated hope for the future of mail as a medium, saying that it represents “the most direct way to get in front of a customer’s eyes.”
Donahoe was this morning’s keynote speaker today at the two-day conference, which aims to provide a big-picture view of what the nation needs out of the Postal Service in the 21st century.
More immediately, the agency has another crisis looming Aug. 1, when it’s supposed to make a $5.5 billion payment into the retiree health care fund. That payment was originally due last September, but lawmakers pushed it back until this summer. The Postal Service appears no more able to cover the full amount now, however, and a similar-sized installment is also due at the end of this September.
“We’ll have to talk to our board and then we’ll go from there,” Donahoe said when asked after his speech what the Postal Service plans to do. That board is scheduled to meet later this week, he added, “and then we’ll make decisions on how we approach it.”
The U.S. Postal Service, an organization inextricably associated with the delivery of lots and lots of paper, is creating a new enterprise focused on the online sphere, according to a memorandum today from Postmaster General Pat Donahoe. The “digital solutions” group is intended “to better explore growth opportunities in the digital space, and to translate those opportunities into new streams of revenue, enhance the value of our current offerings, and improve customer experiences,” Donahoe told Postal Service officers in the memo obtained by Federal Times.
The venture comes as the agency is under pressure from Congress and postal employee unions to explore alternatives to service cutbacks. “We are convinced there is growth potential in this dynamic digital environment,” Donahoe said.
Heading the group will be Paul Vogel, who has been USPS president and chief marketing/sales officer. Vogel, who started with the Postal Service as a clerk and letter carrier in 1969 while working his way through college, later left for consulting work on international business and business strategies, according to his official bio. He returned to the Postal Service two years ago.
“Paul has a great track record of driving successful new initiatives within the Postal Service,” Donahoe wrote. “In addition to his excellent recent service as chief marketing/sales officer, he was instrumental in establishing our transportation partnership with FedEx, he stood up and launched our global business, and he played a vital role in early efforts to realign our operational network.”
The digital solutions group will begin “with a matrixed structure and will grow into a separate business unit over the coming year with the flexibility to explore, pursue and/or create quickly evolving digital technologies,” Donahoe continued. “Paul will be taking us into new waters in a number of ways that should generate a lot of external interest and excitement.”
Replacing Vogel as chief marketing/sales officer will be Coca-Cola executive Nagisa Manabe. At the soft drink giant, Manabe served as vice president of new growth platforms, according to Donahoe’s memo. Before that, she was vice president of marketing for Diageo Guinness USA Inc., part of the company that makes Johnnie Walker whiskey, Smirnoff vodka, and Guinness beer. Manabe “will lead our efforts to frame a new generation of ideas to better promote and grow our organization,” Donahoe said.
U.S. Postal Service leaders gave members of Congress some of what they wanted with today’s announcement that widespread post office closures are off the table. But what about plans to shutter or consolidate almost half of some 460 mail processing plants?
Wait until next Thursday for word on that, Postmaster General Pat Donahoe said at a news conference this morning. That’s two days after the Postal Service’s voluntary freeze on any plant closings expires. Although many lawmakers want that moratorium to be extended, the Postal Service will go forward, Donahoe said in a brief interview after the conference.
Although no wholesale closures are immediately in the works, “we’ll have some consolidations in the summer, the majority after the first of the year.” Donahoe said. “From a fiscally responsible standpoint, we have to move ahead on this. We’ve lost too much [mail] volume and we have to address the infrastructure.”
The final plans, though, are still being hammered out, said Donahoe, who declined to say whether the Postal Service will offer buyouts or early retirement incentives to processing plant workers. The agency has scheduled an announcement for next Thursday, May 17.
Tomorrow, incidentally, the Postal Service will reveal its second quarter financial results covering the three-month period from January through March. Both operating revenues and expenses will show a little improvement, Donahoe said, “but we’re still losing volume.”