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Senate offers $6.9bn rebate to cut USPS staff by 100,000

Wednesday, November 2nd, 2011

Leading figures on postal reform in the US Senate today unveiled the first major bipartisan proposal to rescue the US Postal Service from its current threat of financial collapse.

Headline measures within the bill include a $6.9bn pension surplus rebate – part of which is to be used as incentive money to cut the workforce by 100,000 – along with a restructuring of staff healthcare prefunding arrangements and reforms to the workers’ compensation system.

The so-called 21st Century Postal Service Act would prevent the Postal Service from eliminating Saturday deliveries for two years, after which a Postal Regulatory Committee review would assess whether enough efficiency improvements have been made to justify the further need to cut costs by moving to five day per week delivery.

Other measures include allowing USPS to offer non-postal products are in the public interest and do not compete unfairly with the private sector, and a number of measures as USPS looks to reduce the size of its infrastructure, including powers for USPS to discontinue doorstep delivery and added requirements for closing post offices and processing facilities.

Independent Senator Joseph Lieberman, Democrat Senator Tom Carper and Republican Senators Susan Collins and Scott Brown expressed the hope to pass the law by the end of this year.

Lieberman, the chair of the Senate Homeland Security and Government Affairs Committee, conceded that the proposals would not be supported by everyone, but said without them, “the Postal Service is not going to make it”.

“We must act quickly to prevent a Postal Service collapse and all the awful effects it would have on the economy and all the people involved,” he said, and highlighted the 8m Americans employed in the mail industry including USPS and reliant customers and suppliers.

Lieberman warned: “This is a national problem and we are not going to solve it by playing partisan politics or by a rigid policy on any issue.”

Pension and healthcare

The 21st Century Postal Service Act would seek to give USPS a $6.9bn rebate from its federal pension fund overpayment, with about $1.7bn of that money to be used to provide incentives to persuade about 100,000 postal workers to leave the Postal Service or retire.

Incentive payments would be capped at the $25,000 mark, along similar lines to federal buy-outs, and could take the form of service credits for those not quite at retirement age.

The remaining rebate funds could be used for various purposes, but a priority would be to pay off USPS debts, which are currently around the $15bn mark.

The bill would also seek to restructure USPS payments towards its unfunded future retiree healthcare benefit liabilities, reducing its pre-funding obligation from a 100% level to an 80% level that would be more in line with private industry and reducing its current payments, which are around $5.5bn a year.

Along with the restructuring of the existing prefunding mechanism, the legislation would allow USPS to negotiate with the unions to set up an alternative healthcare plan for workers, independent of the federal system, in order to save money.

With supposedly 2,000 postal workers above the age of 70 yet still receiving disability compensation benefits instead of lower-cost pension payments, the proposed Act would also reform the system so workers can be switched to retirement plans instead of workers compensation.

Senator Carper said: “At the end of the day, if 100,000 people retire from the Postal Service, it saves $8bn a year.”

Saturday delivery

With the issue of Saturday delivery remaining controversial in many sectors of US society, with no real consensus among Congressmen, mailers, or the general public, the Senate proposal seeks to set aside the issue for two years.

The bill would prohibit a move to five-day delivery for “at least” two years. Even then, the Postal Regulatory Commission would have to decide that three conditions have been met for the USPS plan to move forward.

These conditions are that remedies are planned for members of the public who would be adversely affected by the loss of Saturday deliveries, that USPS has done everything in its power to reduce service costs and increase revenue to solve its financial problems, and that after all these efficiency measures have been undertaken USPS still needs to drop a day’s delivery per week in order to remain sustainable.

Senator Collins said today that a significant portion of society was reliant on Saturday deliveries, from the newspaper industry to elderly people requiring medical supplies.

“What we want to do is ensure that slashing Saturday service is truly the last resort, and not the first option,” she said of the proposals. “There is also the concern that an immediate end to Saturday delivery would cause more businesses to leave the Postal Service, leading to a death spiral in the mail volumes.”

Innovation

While much of the proposals from the US Senate are concerning the cutting of costs, there are a few measures included that would seek to increase revenues.

Firstly, it would have to prove to US regulators it has done everything possible to raise revenues if it ever wants to cut delivery to five days per week.

On a more positive note, the Senate bill would seek to allow USPS more freedom to move into non-postal products – assuming such products would make good use of the Postal Service network, respond to public demand and avoid undercutting the private sector.

The Postal Regulatory Commission would decide whether such prerequisites have been satisfied by USPS product proposals.

USPS would also be allowed to start shipping alcoholic beverages, as its private sector rivals are allowed to do, and would allow the Postal Service to provide services on behalf of state or local governments, as it already does for federal agencies.

With the new freedom, Senator Carper said today he wanted to see more innovative products along the lines of the USPS flat-rate box services and its innovative partnerships with FedEx and UPS. He also mentioned the prospect of USPS getting into digital mail services through a virtual mailbox service.

“These are the kind of ideas that the Postal Service needs to pursue if it is to attract new business going forward,” he said.

Connecting with the House

Responding to questions from the press today, the Senators conceded that their proposals were different to the Republican-led proposals currently making their way to the floor of the House of Representatives.

Lieberman stressed that the $6.9bn rebate to the USPS so denounced by House Republicans “is not a bailout”.

The Republican Senator Susan Collins said House Republican opposition to possible USPS rebates was largely about the $50-75bn surplus claimed by USPS in its civil service fund, which is denied by the Obama Administration and GAO.

She said that with the recent GAO report ruling out a rebate of the $50bn surplus, the issue was now “off the table”.

Commenting on the differences from the House proposals, Collins said: “We had a very constructive meeting with House staff last week. Our House counterparts have taken a different approach, but they recognise that the system has to change.”

Senator Carper said he was not sure Congress needed to set up commissions to take charge of USPS cutbacks, or force aggregations of labour agreements, as House Republicans propose.

“While our goals are the same, I think the ways they would get there are somewhat different from us,” he said. “While we may disagree in some cases on how to get where we want to get with the Postal Service being viable and stable and productive in the 21st century, at the end of the day we’ll figure out how to agree on the particulars as well.”

Lieberman added that allowing the $50bn rebate would have only been a temporary help for USPS, perhaps even masking deeper problems in the Postal Service.

He said: “What we have done in this bill is to require them, encourage them and in some sense facilitate , enable them with new authorities to make the fundamental changes that the Postal Service has to make to survive in this century.”

Source: James Cartledge, Post&Parcel

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