Post Office Reorganization

[SassyLady]

Looks like one government agency is starting to see the light.


Postal Service proposes cutting 120,000 jobs, pulling out of health-care planBy Joe Davidson (http://www.washingtonpost.com/joe-davidson/2011/03/02/ABXUQ7M_page.html), Thursday, August 11, 3:01 PMSEATTLE — The financially strapped U.S. Postal Service is proposing to cut its workforce by 20 percent and to withdraw from the federal health and retirement plans because it believes it could provide benefits at a lower cost.
The layoffs would be achieved in part by breaking labor agreements, a proposal that drew swift fire from postal unions. The plan would require congressional approval but, if successful, could be precedent-setting, with possible ripple effects throughout government. It would also deliver a major blow to the nation’s labor movement.
In a notice informing employees of its proposals — with the headline “Financial crisis calls for significant actions” — the Postal Service said, “We will be insolvent next month due to significant declines in mail volume and retiree health benefit pre-funding costs imposed by Congress.”
During the past four years, the service lost $20 billion, including $8.5 billion in fiscal 2010. Over that period, mail volume dropped by 20 percent.
The USPS plan is described in two draft documents obtained by The Washington Post. A “Workforce Optimization” paper (http://www.washingtonpost.com/r/2010-2019/WashingtonPost/2011/08/11/National-Politics/Graphics/WhitePaperRIF.pdf)acknowledges its “extraordinary request” to break its labor contracts.
“However, exceptional circumstances require exceptional remedies,” the document says.
“The Postal Service is facing dire economic challenges that threaten its very existence. . . . If the Postal Service was a private sector business, it would have filed for bankruptcy and utilized the reorganization process to restructure its labor agreements to reflect the new financial reality,” the document continues.
In a white paper on health and retirement benefits (http://www.washingtonpost.com/r/2010-2019/WashingtonPost/2011/08/11/National-Politics/Graphics/WhitePaperHBRetire.pdf), the USPS said it was imperative to rein in health benefit and pension costs, which are a third of its labor expenses.
For health insurance plans, the paper said, the Postal Service wanted to withdraw its 480,000 pensioners and 600,000 active employees from the Federal Employees Health Benefits Program “and place them in a new, Postal Service administered” program.
Almost identical language is used for the Civil Service Retirement System and the Federal Employees Retirement System.
The USPS said the programs do not meet “the private sector comparability standard,” a statement that could be translated as meaning that government plans are too generous and too costly.


http://www.washingtonpost.com/politics/usps-proposes-cutting-120000-jobs-pulling-out-of-health-care-plan/2011/08/11/gIQAZxIM9I_print.html

(http://www.washingtonpost.com/politics/usps-proposes-cutting-120000-jobs-pulling-out-of-health-care-plan/2011/08/11/gIQAZxIM9I_print.html)

[Kathianne]

The USPS is going Wisconsin Walker! Interesting the announcement came the day after the recall loss by Democrats. Some agencies, some other states are seeing the stories of schools having more cash and know they will not be seeing new referendums pass; so it's time to make the adjustments necessary.

Costs need to be cut, not just there but throughout government. Seems to me that this would be one of those times that unions can decide to be part of the solution or not. In any case, the handwriting is on the wall. They will cause pain and eventually that pain will be shared with the citizenry. All of us have become used to the government taking care of so much. However, that which is unsustainable, will not be sustained.

The sooner the reality of what needs to be done is accepted, the sooner there will be recovery. Putting it off will only make things worse.

[ConHog]

if the government were smart (and they aren't) they would get out of the post office completely. Private industry could run things so much more effectively.

[Kathianne]

if the government were smart (and they aren't) they would get out of the post office completely. Private industry could run things so much more effectively.

Nah the post office has gone the way of pony express. Most of it's junk mail, which is the only thing really left. It's the same with dead tree newspapers, who wants to read what one read overnight or heard on the news?

[fj1200]

if the government were smart (and they aren't) they would get out of the post office completely. Private industry could run things so much more effectively.

But it is constitutional:


To establish Post Offices and Post Roads (http://www.usconstitution.net/glossary.html#POSTROAD);

[ConHog]

But it is constitutional:

Of course it is, but just like with individuals, just because the government CAN do something, does not necessarily mean it SHOULD do it.

[fj1200]

Of course it is, but just like with individuals, just because the government CAN do something, does not necessarily mean it SHOULD do it.

The FFs thought it SHOULD so it is not so easy to say that it CAN'T. But you're right, there is a better way.

[KartRacerBoy]

The FFs thought it SHOULD so it is not so easy to say that it CAN'T. But you're right, there is a better way.

I think since the PO is getting used less and less and has such trouble matching revenues to cost, they should either try increasing revenues or, after the economy is recovering nicely, then cut jobs/costs. I think it is counterproductive to do it in the midst of this economic crisis, but then I'm a Keynsian, not an Uncle Milty Supply Sider.

I can see elimination in the future, though, but I don't think physical mail/package carriers can do the job yet. When society gets more generally electronically connected at all income levels, I can see elimination of the PO as viable.

[ConHog]

I think since the PO is getting used less and less and has such trouble matching revenues to cost, they should either try increasing revenues or, after the economy is recovering nicely, then cut jobs/costs. I think it is counterproductive to do it in the midst of this economic crisis, but then I'm a Keynsian, not an Uncle Milty Supply Sider.

I can see elimination in the future, though, but I don't think physical mail/package carriers can do the job yet. When society gets more generally electronically connected at all income levels, I can see elimination of the PO as viable.

What they SHOULD do immediately, at a minimum is go to 5 day deliveries. Nothing is so important as to need to be delivered on Saturday anymore.

[KartRacerBoy]

What they SHOULD do immediately, at a minimum is go to 5 day deliveries. Nothing is so important as to need to be delivered on Saturday anymore.

Yup.

[fj1200]

I imagine they can do much of the downsizing through attrition.

[KartRacerBoy]

I imagine they can do much of the downsizing through attrition.

I saw this story in the newspaper (actual paper one!) but only skimmed it. I surmised that the job cuts would be in a single year. 120,000 jobs in a single year would be crazy in this economy. I must be wrong. So how long are the cuts to be spread out over?

[fj1200]

I saw this story in the newspaper (actual paper one!) but only skimmed it. I surmised that the job cuts would be in a single year. 120,000 jobs in a single year would be crazy in this economy. I must be wrong. So how long are the cuts to be spread out over?

A little more:


The Postal Service has reduced its workforce by 212,000 positions in the past 10 years and recently announced it is considering the closing of 3,700 post offices. It also has asked Congress to allow it to deliver mail five days a week instead of six and to change a requirement that it pre-fund retiree health benefits.

The USPS said it needs to reduce its workforce by 120,000 career positions by 2015, from a total of about 563,400, on top of the 100,000 it expects by attrition. Some of the 120,000 could come through buyouts and other programs, but a significant number would probably result from layoffs if Congress allows the agency to circumvent union contracts.

[KartRacerBoy]

Thanks fj, for searching for my lazy ass!

And now I'm going to go outside and violate doctors orders and cut my damn 10" high lawn. What's a little CHF between me and my lawnmower. Oh, and my wife who refuses to cut my 10" high lawn...

REally, it is 10" high. This is NOT going to be fun. I wish those postal workers were being laid off right now. Maybe I could hire them CHEAP :laugh:

[SassyLady]

Our office is transitioning into a completely paperless office and one of the first things we've started cutting back on is mail. We are scanning and emailing, or faxing as much as possible. Technology is creating havoc on the Post Office.

[Insein]

Interesting read here

http://seekingalpha.com/article/260635-could-ups-and-fedex-replace-the-postal-service


Could UPS and FedEx Replace the Postal Service?

34 comments (http://www.debatepolicy.com/#comments_header) | by: Tim Galginaitis March 29, 2011 | includes: FDX (http://www.debatepolicy.com/symbol/fdx), UPS (http://www.debatepolicy.com/symbol/ups)

On March 2, the Government Accountability Office (GAO) released a report (http://www.gao.gov/products/GAO-11-428T) detailing the "modernization and restructuring needed to address [the] financial challenges" of the United States Postal Service (the USPS). During the course of its research, the GAO determined the "USPS's financial condition has reached a tipping point" and that the challenges noted "continue to threaten USPS's financial viability."
Given the demonstrated success of the private parcel services, including the United Parcel Service (UPS (http://seekingalpha.com/symbol/ups)) and FedEx (FDX (http://seekingalpha.com/symbol/fdx)), one must ask the question: Could the USPS be replaced by a private company?

A Brief History of the USPS
The US Postal Service, established under its current name and organization in 1971, is one of very few government agencies (such as the Defense Department, Congressional houses, etc.) to be authorized by the U.S. Constitution, in this case Article I, Section 8, Clause 7 (http://www.archives.gov/exhibits/charters/constitution_transcript.html), which explains the government's right "to establish post offices and post roads." While the USPS was reorganized in 1971 under the Postal Reorganization Act of 1971 as an independent agency, operating under its own financial authority, the USPS is currently borrowing money from the U.S. Treasury to finance its increasing debt load.

USPS Financial Data vs. UPS and FedEx
The GAO states in its report that "if [the USPS] borrows $3 billion in fiscal year 2011 ... USPS will reach its $15 billion statutory debt limit." Total debt for the USPS, versus private companies UPS and FedEx, are detailed below:

<TBODY>
Fiscal Year


USPS

UPS

FDX



2006

2.1

17.7

11.1



2007

4.2

26.8

11.3



2008

7.2

25.1

11.1



2009

10.2

24.1

10.6



2010

12.0

25.5

11.0


</TBODY>

However, GAO continues by stating that "mail volumes [revenues] have generally been decreasing as customers have increasingly shifted to electronic communications and payment alternatives." When debt loads are put into context with the following income data, the situation becomes more precarious.

<TBODY>
Fiscal Year

USPS

UPS

FDX




[I]Revenue

Earnings

Revenue

Earnings

Revenue

Earnings



2006

72.8

0.9

47.5

4.2

32.2

1.8



2007

75.0

(5.1)

49.7

.38

35.2

2.0



2008

75.0

(2.8)

51.5

3.0

37.9

1.1



2009

68.1

(3.8)

45.3

2.2

35.4

.09



2010

67.1

(8.5)

49.5

3.4

34.7

1.1


</TBODY>

While not spectacular, both UPS and FDX have demonstrated a continued ability to generate profits, both in good and bad economic climates.
Finally, while the GAO concedes that the USPS has made significant strides in reducing overall expenses, it maintains that "USPS has had difficulty significantly reducing its compensation and benefits costs." The GAO specifically cites employee compensation and benefits as being particularly burdensome on the organization, stating that wages and benefits comprise roughly 80% of all costs to the USPS. Wages and benefits at UPS and FDX, by comparison, comprise about 58% and 42% of total expenses, respectively.

GAO Recommendations
Among the many recommendations made by the GAO, it continually revisits the idea of reducing the overall number of delivery days from six to five, essentially ceasing Saturday delivery. Private delivery firms such as UPS and FDX charge extra for delivery on Saturday, whereas the USPS charges the same rate regardless of when the package is delivered.

Where Could UPS and FDX Step In?
GAO poses a question as to whether the USPS can "realign its retail networks ... moving retail services to alternative commercial locations." It further asks if USPS should engage in "nonpostal areas where there are private sector providers." GAO also outlines the modernization needed by the USPS to streamline its operations, citing examples of foreign postal services that successfully implemented modernization initiatives. However, GAO concedes that these modernization efforts could take "10 to 20 years," based on experiences of foreign postal services.
Private industry already has the modernized and streamlined infrastructure that the USPS requires. The USPS could either partner with these organizations during its modernization effort to ensure no disruption of service occurs, or further reorganize as a private entity (for which the legal precedent already exists by virtue of the Postal Reorganization Act of 1971) under these private delivery services in order to effectively modernize its distribution network.
Is that likely? Probably not. The USPS is so deeply woven into the fabric of the United States that divesting its operations to a private entity would create a very dangerous precedent for government operations. Additionally, the USPS is accredited to carry certain kinds of government material that cannot be shipped via other commercial means, which may be difficult to certify and validate for a private corporation.
Nevertheless, the question begs asking: If UPS and FedEx can perform shipping economically, what's to stop them from expanding their networks to include areas currently serviced by the USPS?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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I'm not sure that Fedex and UPS alone could handle the additional workload but they certainly have an infrastructure that makes a profit. Its a model that the USPS should try to mimic. The pensions and health benefits, as mentioned, are the problem. It's going to be extremely difficult to get the unions to go along with any plan that significantly decreases the amount of benefits the employees are receiving. Something needs to be done though. They can't operate in the red forever.

[ConHog]

How much mail would the average person receive if junk mail were eliminated? My family is completely electronic when it comes to banking and bill paying for example. I suspect most are. Even our bank statements are emailed to us now.

The Post Office is a relic as an organization. I'd shut it down tomorrow.

[KartRacerBoy]

How much mail would the average person receive if junk mail were eliminated? My family is completely electronic when it comes to banking and bill paying for example. I suspect most are. Even our bank statements are emailed to us now.

The Post Office is a relic as an organization. I'd shut it down tomorrow.

How old are your parents? My mother is 79 and dad is 84. Both are computer illiterate and frankly afraid of new technology. Neither is dumb. Mom went to Bryn Mawr, has a masters, and stepdad has a Phd. I think there are many old folks in their position. There are also plenty of people below the poverty level that can't afford internet access. Perhaps private carriers could replace govt mail service but at what cost? I agree that the mail system is passe, but I think we need a slower, smoother transition than just going cold turkey.

[ConHog]

How old are your parents? My mother is 79 and dad is 84. Both are computer illiterate. I think there are many old folks in their position. There are also plenty of people below the poverty level that can't afford internet access. Perhaps private carriers could replace govt mail service but at what cost? I agree that the mail system is passe, but I think we need a slower, smoother transition than just going cold turkey.

My parents are 58. Little younger than yours. My mom is pretty good with a computer. Dad however, well he owns an automotive repair shop and FINALLY put a computer in last october, he'd never turned one on before. Since I've retired from the military I've been helping him learn how to use one and switching him over to electronic everything. Now we do all his ordering online, we have him set up on QuickBooks, we have email and a website, we pay all his bills online; and we are using the computer and the internet to help diagnose vehicles more quickly and accurately. He's not proficient with it yet, and he hates it, but he knows that he has to adapt, and he is learning it, most people would if they needed to.

As for the cost, well frankly I would be okay with them charging sales tax on internet sales and using that money to make sure that no part of the country is without internet access. I doubt that there are many areas left that don't have internet access anyway. As for people being too poor. Well it seems to me that people ALWAYS find money for what's important to them. So if smokes and beer are more important to you then making sure you have internet so you can pay your bills, well they are probably more important to you than stamps are currently.