Archive for Wednesday, February 6, 2013

U.S. Postal Service to cut Saturday mail delivery to trim costs

February 6, 2013


— The financially struggling U.S. Postal Service said Wednesday it will stop delivering mail on Saturdays but continue to disburse packages six days a week, an apparent end-run around an unaccommodating Congress.

The service expects the Saturday mail cutback to begin the week of Aug. 5 and to save about $2 billion annually, said Postmaster General and CEO Patrick R. Donahoe.

“Our financial condition is urgent,” Donahoe told a press conference.

The move accentuates one of the agency’s strong points — package delivery has increased by 14 percent since 2010, officials say, while the delivery of letters and other mail has declined with the increasing use of email and other Internet services.

Under the new plan, mail would be delivered to homes and businesses only from Monday through Friday, but would still be delivered to post office boxes on Saturdays. Post offices now open on Saturdays would remain open on Saturdays.

Over the past several years, the Postal Service has advocated shifting to a five-day delivery schedule for mail and packages — and it repeatedly but unsuccessfully appealed to Congress to approve the move. Though an independent agency, the service gets no tax dollars for its day-to-day operations but is subject to congressional control.

Congress has included a ban on five-day delivery in its appropriations bill. But because the federal government is now operating under a temporary spending measure, rather than an appropriations bill, Donahoe says it’s the agency’s interpretation that it can make the change itself.

“This is not like a ‘gotcha’ or anything like that,” he said. The agency is essentially asking Congress not to reimpose the ban when the spending measure expires on March 27 and he said he would work with Congress on the issue.

The agency clearly thinks it has a majority of the American public on its side regarding the change.

Postal Service market research and other research indicated that nearly 7 in 10 Americans support the switch to five-day delivery as a way for the Postal Service to reduce costs, the agency said.

“The Postal Service is advancing an important new approach to delivery that reflects the strong growth of our package business and responds to the financial realities resulting from America’s changing mailing habits,” Donahoe said. “We developed this approach by working with our customers to understand their delivery needs and by identifying creative ways to generate significant cost savings.”

But the president of the National Association of Letter Carriers, Fredric Rolando, said the end of Saturday mail delivery is “a disastrous idea that would have a profoundly negative effect on the Postal Service and on millions of customers,” particularly businesses, rural communities, the elderly, the disabled and others who depend on Saturday delivery for commerce and communication.

He said the maneuver by Donahoe to make the change “flouts the will of Congress, as expressed annually over the past 30 years in legislation that mandates six-day delivery.”

House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., and Senate Homeland Security and Governmental Affairs Ranking Member Tom Coburn M.D., R-Okla., said in a joint statement that they had sent a letter to leaders of the House and Senate in support of the elimination of Saturday mail.

They called it “common-sense reform”

Others agreed the Postal Service had little choice.

“If the Congress of the United States refuses to take action to save the U.S. Postal Service, then the Postal Service will have to take action on its own,” said corporate communications expert James S. O’Rourke, professor of management at the University of Notre Dame.

He said other action will be needed as well, such as shuttering smaller rural post offices and restructuring employee health care and pension costs.

“It’s unclear whether the USPS has the legislative authority to take such actions on its own, but the alternative is the status quo until it is completely cash starved,” O’Rourke said in a statement.

The Postal Service made the announcement Wednesday, more than six months before the switch, to give residential and business customers time to plan and adjust, officials said.

Donahoe said the change would mean a combination of employee reassignment and attrition and is expected to achieve cost savings of approximately $2 billion annually when fully implemented.

The agency in November reported an annual loss of a record $15.9 billion for the last budget year and forecast more red ink in 2013, capping a tumultuous year in which it was forced to default on billions in retiree health benefit prepayments to avert bankruptcy.

The financial losses for the fiscal year ending Sept. 30 were more than triple the $5.1 billion loss in the previous year. Having reached its borrowing limit, the mail agency is operating with little cash on hand.

The agency’s biggest problem — and the majority of the red ink in 2012 — was not due to reduced mail flow but rather to mounting mandatory costs for future retiree health benefits, which made up $11.1 billion of the losses. Without that and other related labor expenses, the mail agency sustained an operating loss of $2.4 billion, lower than the previous year.

The health payments are a requirement imposed by Congress in 2006 that the post office set aside $55 billion in an account to cover future medical costs for retirees. The idea was to put $5.5 billion a year into the account for 10 years. That’s $5.5 billion the post office doesn’t have.

No other government agency is required to make such a payment for future medical benefits. Postal authorities wanted Congress to address the issue last year, but lawmakers finished their session without getting it done. So officials are moving ahead to accelerate their own plan for cost-cutting.

The Postal Service is in the midst of a major restructuring throughout its retail, delivery and mail processing operations. Since 2006, it has cut annual costs by about $15 billion, reduced the size of its career workforce by 193,000 or by 28 percent, and has consolidated more than 200 mail processing locations, officials say.


deec 5 years, 2 months ago

The future retirement costs extend out 75 years. The post office is being required to pre-fund health benefits for employees who are not yet born. This GOP-backed legislation is clearly meant to destroy the unions and render the post office vulnerable to privatization.

Cant_have_it_both_ways 5 years, 2 months ago

And what is wrong with the Post office at least breaking even? None of us could run our families that way.

Brendon Allen 5 years, 2 months ago

Think his/her point is not that he/she disagrees with cutting sat delivery but the fact that they have to fund future benefits so far out which no other gov agency that I am aware of (not that the post office is even an agency) that has such a requirement. Hence it appears there are ulterior motives to why they would do this, such as making it look as unprofitable as possible which could allow things like privatization to look like the only thing that could be done. Has nothing to do with breaking even in fact it distorts what breaking even means. Would be nice if the GOP did the same thing for SS and Medicare funding...

Cant_have_it_both_ways 5 years, 2 months ago

Please clean your glasses, the GOP does not want the post office to fail any more than the LIbs. It is all about getting value and if the PO is operating at a $25 million a day loss, competent people would do what they have to, to fix it.

chootspa 5 years, 2 months ago

The used to be making money. They weren't operating at a loss when they weren't mandated to pre-pay their pensions for 75 years. Why is it exactly that they need to pay for pensions for employees that haven't even been born yet? That happened in 2006, thanks to Republican-sponsored legislation.

Remind me, who was president in 2006?

average 5 years, 2 months ago

A) They'd be roughly breaking even under the accounting rules of every other company in the country.

B) They aren't allowed, by Congressional mandate, to do the other obvious option. And that is to raise rates substantially (which would reduce volumes, but they wouldn't be losing money on every letter). 46 US cents won't buy you a first-class domestic stamp in Peru, Mexico, Brazil, or Turkey, let alone most tiny European countries where a letter is roughly a dollar.

notajayhawk 5 years, 2 months ago

"A) They'd be roughly breaking even under the accounting rules of every other company in the country."

From the article: "Without that and other related labor expenses, the mail agency sustained an operating loss of $2.4 billion..." That's a pretty "rough" definition of "breaking even."

chootspa 5 years, 2 months ago

If you want the post office to run like a business, stop legislating what they can and cannot do. For instance, they're not allow to offer notary or fax services. They're mandated to be open on Saturdays. They have to pre-fund their pensions for 75 years.

You wouldn't do that to UPS or FedEx, so quit complaining that the post office runs into problems when you do it to them.

orbit 5 years, 2 months ago

Would you break even if you had a 30 year mortgage that you had to pay off in four years? Didn't think so...see, you really can't have it both ways

Alyosha 5 years, 2 months ago

Why would you think running a service mandated by the Constitution should be like how you run your family?

That makes zero sense.

gccs14r 5 years, 2 months ago

I agree that the GOP wants to kill the postal service and hand it over to private companies, but they didn't ask anyone if they actually want it. To my knowledge, no private company wants the headache of daily residential delivery and pickup. Certainly no private company wants that responsibility for the chance to earn a measly 45 cents.

The Postal Service was efficient and profitable until this pre-funded healthcare mandate.

notajayhawk 5 years, 2 months ago

"The Postal Service was efficient and profitable until this pre-funded healthcare mandate."

The article states they would have lost 2.4 billion dollars without the mandate and other "related labor expenses". In what universe is a 2.4 billion dollar loss "efficient and profitable"?

just_another_bozo_on_this_bus 5 years, 2 months ago

Making money is not the purpose of any government.

(This post was responding to a quickly disappeared phantom poster.)

Brendon Allen 5 years, 2 months ago

No just making money for those in government especially when their "service" ends...

just_another_bozo_on_this_bus 5 years, 2 months ago

True enough-- and the revolving door is busiest in the armament/war/security industries and on Wall Street.

jafs 5 years, 2 months ago

Something I read said that the feds are actually using that money that's supposed to go for future retiree benefits for other spending as well.

The way the federal government has operated re: the post office is shameful.

No tax money is allowed to go towards it, but it's under government control? Requiring ridiculous amounts of pre-funded retiree benefits that are then spent on other things?

Requiring them to continue to operate in such a way so that they can't possibly break even?

One might think they're trying to kill it off, huh?

thebigspoon 5 years, 2 months ago

My Dad was a rural carrier here and passed away in 1971. There was talk of this when he was a carrier so this isn't something the Post Office just came up with. One of the reasons it hasn't happened sooner is the Letter Carriers Union...

Cant_have_it_both_ways 5 years, 2 months ago

Getting mail is nice, but once or twice a week would be plenty. The companies that bill you for your services would just need to adjust their mailings or lengthen the time that they bill you and payment is accepted.

deec 5 years, 2 months ago

A lot of people in rural areas rely on the post office for daily newspapers and prescription medicine. Older folks in small towns still use the mail to send greeting cards and pay bills.

Lisa Medsker 5 years, 2 months ago

Exactly. My parents REFUSE to use the internet or phone for any financial transactions. Checks only.

deec 5 years, 2 months ago

The post office has been planning to privatize since at least 2002. The health benefits law is designed to bankrupt the post office to facilitate its privatization. The overpaid benefit funds are held in government bonds to camouflage part of the deficit, just as social security funds are being used. Of course the GOP wants to bankrupt the post office so they can turn it over to their corporate masters at fire sale prices.

"At the other end of the spectrum of options is the possibility of complete transformation of the Postal Service into a shareholder-owned, value-maximizing company. In addition to giving Postal Service managers a full range of private sector managerial tools, this model would place Postal Service managers under the supervision of a Board of Directors representing “residual claimants” (private shareholders) who have “real money” at stake."

junkremovalsandiego 5 years, 2 months ago

This is should have been done years ago. The is a good step for our government to start treating bad programs like businesses instead of money pits. embrace change instead of holding on to old ways.

orbit 5 years, 2 months ago

Yes, those bad, bad people with pensions and benefits! No one should have those! Why do you hate Unions so much? Don't you realize that Unions are the single most important reason why an American middle class exists?

Alyosha 5 years, 2 months ago

FedEX wholly disagrees with you. They use the USPS for 30% of their ground shipments.

FedEX couldn't be as profitable as they are without the USPS.

Laurie L Folsom 5 years, 2 months ago

Fed Ex, UPS and DHL could care less about privatizing the USPS.

Currently all three private companies drop off packages that are not profitable for them to delivery at...wait for it...the closest Post Office. It is USPS carriers that deliver the private companies' packages to some of the most remote (not profitable) locations. Remote can be defined by these companies as further than 20 miles of their next stop.

I hear complaints about the price of stamps increasing, but what will happen to prices if private companies are the only ones to offer flat mail delivery? For pennies I can guarantee a letter will arrive 100s of miles from me within days. This is only possible because of the scale of an organization like the US Postal Service.

CRAH50 5 years, 2 months ago

For those same pennies, letters and packages follow people who move for a year, if they file COA forms — at no extra cost. The private delivery companies don't do that. The PO also doesn't leave packages on your porch when you're on vacation (if you've asked for a hold, and yes they sometimes mess up).

notajayhawk 5 years, 2 months ago

"It is USPS carriers that deliver the private companies' packages to some of the most remote (not profitable) locations."

And the fact that the Post Office partners with those companies, assuming the unprofitable end of the process, only goes to demonstrate why they're a losing proposition.

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