5 steps to revive a valuable public institution–and why it matters.
By David Morris /On The Commons
In July 2011 the United States Postal Service (USPS) management announced it would rapidly close 3600 local post offices and eventually as many as 15,000. And shutter half the nation’s mail processing centers.
A frenzy of grassroots activity erupted as citizens in hundreds of towns mobilized to save a treasured institution that plays a key and sometimes a defining role in their communities. Only when Congress appeared ready to impose a six month moratorium on closures and consolidations that December did USPS management agree to a voluntarily moratorium of the same length.
That moratorium ended in May 2012. Rather than proceed with closings, management embraced a devilishly clever new strategy. Instead of closing 3600 it would slash the hours of 13,000 post offices. That could be accomplished very quickly because reduction in hours, unlike outright closures, requires little if any justification while appeals are very limited.
Germany circa 1940 would have envied the efficiency of the USPS’s blitzkrieg against itself and America’s rural communities. By November 2013, almost 8,000 post offices already have seen hours whacked.
As required USPS held community meetings but they went not to listen but to dictate. As the web site Save The Post Office (the go-to source of information about the ongoing assault on the post office) observes, “The decision to reduce the hours was made almost a year ago and what the new hours will be comes as an announcement, not a matter for discussion. There’s no need for a lot of talk about the options because there aren’t any.”
When communities ask the postal service management for the data upon which it made the decision they are invariably rebuffed. Postal management considers it none of their business.
A reduction in hours doesn’t generate the same level of outrage as a closure but its impact on a community may, even in the short run, be almost as negative. The building remains open but its value to the community is dramatically diminished. Hours may be cut in half. A part time inexperienced non-career employee replaces a full time experienced career postmaster.
At a meeting in Great Capacon, West Virginia small business owners talked about how the abundant knowledge of the current postmaster, Rick Dunn, helped them cut costs and improve service. One resident offered another measure of Dunn’s value, relating how he had called in a wellness check on a senior he hadn’t seen in a few days. It turned out the man needed medical attention. Dunn may have saved his life.
A reduction in hours may set up a slippery slope to full closure because the postal service reviews the workload and revenues of individual post offices annually. As one resident in Greenwood, Virginia reasonably inquired, “How in the world can our revenue increase if they’re reducing the hours that our window can perform retail sales?”
The post office does not have to disappear. Here are five steps toward reviving and strengthening this valuable public institution.
1. Declare an immediate 2-year moratorium on any further post office closings or reduction in hours. This will give the country time to catch its breath and implement steps 2 through 5.
2. Require that a genuine analysis of the costs to the community occurs before a closure or reduction in hours is implemented and the information be easily and transparently available to the communities targeted.
3. Create a genuine appeals process. Currently communities can appeal to the Postal Regulatory Commission, an independent regulatory agency, but the process is cumbersome and only a very, very small percentage of appeals are successful. But the PRC cannot overturn a USPS determination but only send it back to the USPS for further review.
4. Approve the current USPS request for a 3-cent increase in the price of a first class stamp. This 5.7 percent increase would generate $2.3 billion, more than would likely be saved by reducing hours, closing post offices and mail processing centers combined. And the United States would still boast by far the lowest priced mail delivery of any developed country. When it comes to price increases we should compare the way the USPS monopoly of first class mail compares to the cable tv companies virtual monopoly of tv. Between 1995 and 2012 for example, cable prices rose by 176 percent while the price of a first class stamp rose by only 42 percent. If the current request is approved the price of a letter will still have risen by less than the rate of inflation while cable rates have increased by more than triple that rate.
5. Eliminate the 2006 Congressional requirement that USPS prefund 100 percent of retirement health benefits over 10 years at a cost of about $5.5 billion a year. No other public agency or private company does this. For more background on how this bizarre situation came about, see here. In brief, in 2003 the USPS discovered a $70 billion surplus in its pension fund. But under federal accounting, allowing the USPS to tap that surplus would increase the federal deficit. So Congress made the surplus disappear by requiring the USPS to prepay health benefits, an artificially imposed expense that has accounted for virtually the entire USPS deficit.
A Public Institution Begins to Act Like a Private Business
The wholesale reduction in hours is only the latest attack in the war against the post office as a public institution The war began in 1970 when the United States Post Office Department was transferred out of government and became the United States Postal Service, an independent quasi public corporation, a hybrid invested by law with a public purpose but expected to act like a business. To spur business-like thinking, Congress eliminated almost all taxpayer subsidies.
Almost immediately the private began to take precedence over the public. The postal service management tried to close thousands of local post offices. In the mid 1970s Congress expressed its disapproval by imposing its first moratorium.
In 1976 the postal service introduced “workshare discounts” for companies that presorted first class mail, later extended to periodicals and standard mail. This saved companies money but outsourced post office jobs. According to a 2010 report from the Office of Inspector General, worksharing has come “to dominate the Postal Service’s business.” Today some 82 percent of mail is workshared. Private businesses receive $15 billion in discounts each year. As Save Our Post Office points out, that’s the equivalent of 180,000 jobs transferred to private sector. Or more accurately, about 200,000 middle class jobs replaced largely by private sector jobs with lower pay and fewer benefits.
Along the way, the postal service has dramatically reduced the skill and experience level of its work force. In 2012 alone the number of career employees fell by 45,000 while the number of non-career employees rose by 25,000.
Its zeal for internal cost cutting has often led the USPS to lose sight of its public purpose. When deciding whether to close a post office, for example, management only looks at internal savings (and often exaggerates these.) It doesn’t look at the additional costs imposed on the communities it serves, such as the increased out of pocket costs from having to drive hundreds and even thousands of miles more a year to more distant post offices. Nor is the even greater qualitative impact taken into account. The closure of a rural post office can eliminate what for many is the last remaining gathering place for people to connect and learn about local goings on.
When the USPS undertook to close 50 percent of all mail processing centers it predicted significant savings but ignored the even more significant costs to the community and the nation. In 2012 the closings led the postal service to lower its delivery time standards for first class mail delivery. For nearby communities the impact is even greater. The Bullard Banner News in Texas complains, “After the nearest USPS plant closed in June, the weekly paper’s route to local mailboxes now detours through a plant 120 miles away.” In Cape Girardeau, Missouri not only are newspapers late but water bills and thus shutoffs are up. Half the subscribers to some West Virginia newspapers aren’t receiving them on time.
USPS’s recent proposal to eliminate Saturday delivery constitutes the latest step in shrinking the once great postal service. Once again public outcry forced it to step back. But everyone knows the proposal is still on the table.
Many argue that in 2013 the post office is a vestigial organ, on oversized and increasingly obsolete behemoth. Certainly email and texting eroded the volume of first class mail, although the postal service still delivers almost 80 billion first class letters a year. Overlooked is that the online purchasing has dramatically increased the number of package deliveries.
The hundreds of billion of dollars the post office invested in constructing an infrastructure that connects to every business and resident gives the USPS a huge competitive advantage in package delivery. But the USPS is prohibited from extracting the full value from this advantage. It does charge Fedex and UPS to deliver their packages the last mile but much less than it would if it were a private business with the sole universal delivery network.
The postal service currently delivers package the last mile on about a third of Fedex’s ground shipments (Parcel Select). A UPS customer can return merchandise by dropping it in any mailbox or post office (Parcel Return). In 2012 the volume of Parcel Select and Parcel Return packages rose by almost 20 percent. The USPS share of small packaging shipping is about l4 percent, far below Fedex’s 34 percent or UPS 52 percent.
If the USPS were to close down its universal infrastructure, the private sector would not step in and recreate it. Mark Jamison, a former postmaster and consistent source of informed analysis at Save Our Post Office observes, “Absent a public infrastructure like the postal service network, it’s likely that both of these private sector firms (Fedex and UPS) would either refuse to serve many areas of the country or they would use their powers as an oligopoly to control prices.”
The American people created the post office. The American people can still save the post office. But we need to do something right now. Time is running out.