A tough fiscal lesson, right there in the mail
- Article by: ERIC WIEFFERING
- Star Tribune
- May 28, 2011 - 2:07 PM
The Seeger Square Post Office on St. Paul's East Side has been slated for closing three or four times in the last 10 years. Each time, residents, business customers and elected officials have mounted a successful campaign to keep the money-losing operation open.
It is a heartwarming tale of a community rallying to preserve a cherished neighborhood institution. But it also serves as a parable of sorts for how we often respond to a looming crisis.
We agree there are big problems.
We acknowledge that sacrifices will be needed to solve those problems.
We reject options that personally affect us.
The U.S. Postal Service lost more than $8.5 billion last year, its fourth consecutive year of losses. This year, total debt is expected to reach the statutory limit of $15 billion and, barring an intercession from Congress, the USPS will likely miss a scheduled $5 billion payment to its employees' health and retirement benefits plan.
Now, I can hear the anti-government chorus already beginning to swell: Typical mismanaged government agency, let's put it out of its misery, Federal Express can make money, etc.
But here's the thing. The USPS is not a government agency. It was spun off as an "independent establishment of the executive branch of the Government of the United States" in 1971. Apart from about $3 billion in "start-up" money, the USPS receives no taxpayer support. It had $67 billion in revenue last year, and it files annual and quarterly reports with the Securities and Exchange Commission, like any publicly traded company does.
Another thing you may not know: Sweeping economic, demographic and technological trends have completely upended the USPS business model. Volume for its most profitable product or service, first-class mail, has plunged 25 percent in the past decade. But the number of delivery points -- households and businesses that carriers are required by law to serve -- is up almost 11 percent.
For the most part, the USPS has responded to these challenges aggressively and thoughtfully. In the past five years, it has eliminated more than 112,000 jobs and trimmed billions from its operating expenses, no small feat when you consider that 75 percent of its 672,000 employees are unionized.
Postal workers have made sacrifices, too. Just last week, the American Postal Workers Union ratified a four-year contract that will save the USPS $3.8 billion, partly through a two-year wage freeze for the union's 205,000 members. The union also agreed to increased scheduling flexibility, higher health care premiums and more use of non-unionized workers.
In other words, the lack of will to fix things doesn't lie with USPS workers or managers. Instead, it rests with Congress, regulators and us.
While nominally an independent business expected to be self-supporting, federal statutes and regulations keep the USPS firmly under Washington's thumb. Most of its board of directors are political appointees. The same goes for the Postal Regulatory Commission (PRC), which oversees rate increases, service standards and other matters.
Unlike Federal Express or UPS, the postal service is required to deliver everywhere and charge the same rate for first-class mail no matter where it's going. Price increases on first-class stamps are capped at the rate of inflation.
But the real killing blow came in 2006, when Congress required the USPS to fully fund health and retirement benefits of current and future retirees. No other federal agency or private company has a similar obligation. Between 2007 and 2010, the USPS pumped $38 billion into the fund, and it's required to add more than $5 billion annually between now and 2016.
The USPS is seeking more leeway from Congress to address its financial crisis. Last year, it filed for an emergency rate increase of 5.6 percent. The PRC opposed that measure, and the USPS filed an appeal in federal court. Last week, the court sent the matter back to the PRC, saying it had erred in its interpretation of the statute.
The USPS also would like to eliminate mail delivery on Saturday, but it's facing strong opposition from elected officials, small communities and businesses. Meanwhile, cities around the country, including an unspecified number in Minnesota, are again receiving notice that their local post office may be closed.
Given the decline in mail volume and its dire financial circumstances, closing hundreds if not thousands of 27,000-plus post offices would seem to be a rational way to cut costs.
Good luck. Congress prohibits closing post offices solely because they lose money, making proposed closings subject to lengthy review and community and political input. So, while $8 billion in revenue has evaporated since 2008, the postal service has managed to close only 150 post offices since then.
If we can't agree on shared sacrifices on behalf of the mail, what's the likelihood that we will find the will to save or preserve Medicare and Social Security, where the stakes and consequences will be much higher?
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