Postal Service’s enormous deficit must be addressed

By LizaBéar  |  In Jacques Tati’s satirical comedy “Jour de fête” (1949), the village postman who delivers mail on his bicycle is dazzled by the speed and efficiency of the U.S. Postal Service, shown as a movie-within-a-movie in a tent at the county fair. He could scarcely have anticipated the dire financial straits in which the once-exemplary, well-equipped U.S.P.S. — the only delivery service reaching every address in the country  — now finds itself.

Last month, U.S.P.S., which receives no tax dollars, reported a $3.2 billion deficit for January through March 2012, up from $2.2 billion for the same period a year ago.

John Dennie, who worked for 14 years as a letter carrier and for 14 years as a mail handler on Staten Island, explained the often-overlooked reason for the deficit, usually attributed to the growth of electronic communication.

“The reason for the deficits that the post office has been running since 2006,” said Dennie, “is the Postal Accountability and Enhancement Act (PAEA) passed by Congress in 2006, which, in part, restricted the Postal Service’s ability to compete with FedEx and UPS.”

FedEx and UPS are both members of a powerful corporate lobbying group, the American Legislative Exchange Council, or ALEC, founded in 1973. PAEA passed on a voice vote, with no record of who voted for or against it.

“But the most egregious part of PAEA,” Dennie said, “was the requirement that the Postal Service prefund its retirement benefits 75 years into the future in a 10-year window to the tune of about $5.5 billion a year.”

Over all, first-class mail continues to diminish. However, for business mail, bulk mail, parcel post and all other classes of mail, 2005, 2006 and 2007 were the highest years ever in volume.

Minus the prefunding obligation, U.S.P.S. would have accumulated a surplus of $611 million during the four-year period since the prefunding requirement was implemented.

Not all postal services are suffering. And U.S.P.S. is exploring new revenue streams, such as the popular Every Door Direct Mail, according to District Manager William Schnaars.

Designed to overhaul the Postal Service, the 21st Century Postal Service Act (S 1789), which passed the Senate in April, only partially addresses U.S.P.S.’s predicament.

“Supposedly, it changes the amortization schedule from 10 years to 40 years on the prefunding,” Dennie said. “It also calls for another $11 billion refund for overpayments made by the Postal Service to the Treasury for U.S.P.S.’s two different pension systems — Civil Service Retirement System and the Federal Employee Retirement System. According to most actuarial studies, they overpaid into both of those funds.”

Currently, S1789 is languishing in the House.

“If 1789 was passed by the House in its present form and went on to become law, it would refund $11 billion of the pension overpayments, to be used for early-retirement incentives, so that when the post office closes facilities they’ll be able to reduce their employee complement.

“Right now, the unions have a no-layoff clause in their contract. So if they close or consolidate a facility, those employees still have a job.

As for the bill’s plan of “cutting the hours of 13,000 rural post offices instead of closing them,” Dennie said, “That’s skirting the law. Title 39 US Code Section 404B states that you can’t close a rural post office solely for revenue reasons.”

Presumably impatient with the snail’s pace of the legislation’s progress through Congress, on May 17, U.S.P.S. announced the proposed consolidation of 140 of its 461 mail-processing centers. In New York City, the Staten Island plant is the only one on the hit list, the Bronx facility having been closed in October 2011. All mail from the Bronx is rerouted to the Morgan facility on Ninth Ave. and 29th St. in Chelsea, with consequent delays in service.

“At 5 o’clock you can see the 7-ton trucks lining up on Ninth Ave.,” said Frank Couget, 35, a shop steward and mail carrier at the Times Square Station Post Office for 12 years.

Other cost-cutting measures are threatened.

“The proposal to eliminate Saturday delivery — S1789 simply delays that for two years,” Dennie said. “And the beginning of these plant closings means the total gutting of the post office’s ability to maintain any kind of service standards. The service standards will be drastically degraded to the point where they’ll drive away the customer base, and they’ll be able to snag the post offices and privatize them.”

But Congressmember Jerry Nadler is determined not to let that happen. He supports restructuring the $5.5 billion annual Retirement Health Benefit prepayment requirement.

“As I strongly believe that the U.S.P.S. is a critical government service for the American public, I am firmly against the privatization of this service,” Nadler stated. “I’ve worked hard to preserve the stations in my district — including those in the Village — and have, fortunately, had a high degree of success.”

On Monday, a group calling itself Communities and Postal Workers United announced plans to begin a hunger strike on June 25 to call attention to what it says is the reason for the service’s financial failings.

“Not the Internet, not private competition, not the recession; Congress is responsible for the postal mess,” Jamie Partridge, a retired letter carrier who plans to travel to Washington from Portland, Oregon, for the hunger strike, said in an e-mailed statement. “Corporate interests, working through their friends in Congress, want to undermine the U.S.P.S. and bust the unions, then privatize it.”

Liza Béar is a New York-based writer and filmmaker

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9 Responses to Postal Service’s enormous deficit must be addressed

  1. An excellent article! Yes, the Internet (E-mails & on-line bill payments), competition, and the economic recession are contributing factors. However, Mr. Dennie is on all fours with his points and is correct. Postal service management seems intent in running the service into the ground with nary an idea how to compete and lack a vision for the future. [An Oregon Congressman has publicly called for the Postmaster General to step down.] Even as far back when (the late) Ted Weiss was a Manhattan Congressman, Weiss considered the post office management as far from brilliant.

    For the record, there are still a few Congressional subsidies; for example, mail for overseas armed services members and reading matter for the blind. And "Junk"/bulk/"standard" class mail still doesn't fully pay its way.

  2. “It also calls for another $1 billion refund for overpayments made by the Postal Service to the Treasury for U.S.P.S.’s two different pension systems — Civil Service Retirement System and the Federal Employee Retirement System. According to most actuarial studies, they overpaid into both of those funds.”

    I believe the overpayments figure is closer to $11 billion, but otherwise a very good article on USPS problems.

  3. The article is right on. I don't blame the Postmaster General, however, for proceeding with plans to consolidate processing plants and shorten hours in some rural facilities. He has to play the hand he was dealt, in the face of continuing Congressional gridlock and inaction.

    • The Postmaster General's plans to reduce the network and cut service will also reduce REVENUE. His plans will not make the post office more sustainable. By cutting the network it will cut efficiency and cause the loss of business. Right now the network is the best in the world and one of USPS's biggest assets, to dismantle it would be to create a death spiral. Donohoe is being counseled by James Miller III, who sits on the Board of Governors, he was one of Reagan's budget directors. All of these plans to destroy the Post Office are being engineered by right wing forces. The S. 1789 passed by the Senate was written by Lieberman and Collins who receive campaign funds from FedEx and UPS. This isn't about "saving" the Post Office, it's about the right wing trying to destroy it.

    • If the Postmaster general was responding to a drop in mail volume to close plants, he would be justified. But this a situation of which came first, the chicken or the egg. The Post master General has cut service over & over again, chasing customers away in every way possible, there by reducing mail volume. The Postmaster General has helped to create this crisis. Closing the plants and delaying mail will make things much, much worse putting the Post office into bankruptcy of which it will never recover.

  4. The reality is that the USPS has been overpaying into the federal retirement systems, by some $50 – 70 Billion into Civil Service (CSRS) and $11 Billion into FERS. This has been documented and agreed to as true, even OPM admitted to that. The PAEA bill mandated that USPS prefund 75 years worth of retiree health care in 10 years. Primarily a budget gimmick. No other entity is required to do that. Without that requirement, the USPS has through cost cutting and attrition, weathered the recession with a true real dollar deficit of around $1 Billion dollars. However, PAEA has mandated the USPS to borrow money from US Treasury to put back into the Treasury to pay for FUTURE retiree health care (people who are not even born yet!). So now we come to the fact of all this talk of losing $25 million dollars a day, due to PAEA. Yet no one wants to talk about the overpayments from Postal ratepayers into the retirement systems. So now I listen to poltiticians talk about bailing out the USPS when in reality USPS has been bailing out the federal government. Whats worse is people listen to this and do not try to get actual facts. I work hard at my job and proud of what I do. My union has agreed to wage freezes and to pay more for our health care. We have dropped over 100,000 career employees in last 4 or 5 years, unlike the federal government. So get real and find out the truth.

  5. Lawrence White

    I use the USPS all the time. It is far preferable to UPS or Fed Ex for many reasons. It seems to me that the right wing in our country wants to destroy every aspect our system that effects the common citizen in a positive way and the USPS is a bull's eye in that regard. I just hope that someday we don't look back and say what a great country we used to have.

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