USPS could close 1,000 branches

“USPS is studying roughly 1,000 of its 37,000 post offices for possible closure — the latest cost-cutting step from an agency scrambling to deal with a projected $7bn deficit this year and larger losses in 2010”, The Federal Times reports. The article continues:

The agency started its review earlier this year with approximately 3,200 post offices, and decided about 1,000 of them are “candidates for further review.”

Postal managers say they will consider several factors in deciding whether to close those facilities: mail volume, proximity to other post offices and the potential savings in labour and utility costs.

Post offices generate about 71% of the Postal Service’s revenues each year; the rest comes through alternative channels, particularly the Postal Service’s Web site.

“Each year more and more postal transactions are now accomplished online,” said Jordan Small, the Postal Service’s acting vice president for network operations. “We consider this a success … [but we need] to determine if there is, indeed, excess capacity in the network.”

The post office review is one recommendation from the Government Accountability Office, which last week added the Postal Service to its high-risk list, indicating the need for “broad-based transformation.” GAO analysts say they are deeply concerned about the agency’s finances. Postal officials say they will probably post another $7 billion deficit next year — even after slashing $8bn in costs.

“The Postal Service urgently needs to restructure,” said Phillip Herr, GAO’s director of physical infrastructure issues. “With regard to delivery operations, the Postal Service has more than 350,000 carriers, and delivery services represent the largest cost segment.”

Closing post offices is just one part of fixing the postal network, though, according to Herr. The Postal Service also needs to close some of its mail processing facilities, many of which have excess capacity. That’s particularly a problem at facilities that handle first-class mail; those facilities, on average, are operating at 50% of their capacity.

The Postal Service has been able to close only one of its 400 processing facilities so far, according to Herr, who testified at a 30 July hearing of the House Oversight and Government Reform subcommittee on the federal workforce, the Postal Service and the District of Columbia.

Congress encouraged the Postal Service to consolidate facilities when it passed the 2006 Postal Accountability and Enhancement Act. But lawmakers are less supportive when the facilities being closed are in their districts: Several congressmen at last week’s hearing asked postal managers about the fate of their local post offices.

Representatives from several major unions also criticised the post office closures.

“Station and branch closings and five-day delivery schemes will unquestionably have a negative effect on the postal monopoly,” said William Burrus, president of the American Postal Workers Union. “These are acts of surrender — when the outcome of the battle is still in doubt.”

And the Postal Regulatory Commission, the independent entity that oversees the Postal Service and approves postal rates, said a recent study found little public support for closing post offices.

“Access to the Postal Service is a critical aspect of universal service,” said John Waller, the director of accountability and compliance at PRC. “[We found] a continued need for the current level of access to postal facilities and services.”

Postal officials are hopeful they can overcome congressional opposition this year, especially with GAO pushing the agency to consolidate its facilities.

Several members of Congress have floated the idea of a commission for post office closures, similar to the Base Realignment and Closure commissions that determine the fate of Defense Department facilities.

Rep. Stephen Lynch, D-Mass., the subcommittee chairman, agreed the Postal Service needs to rethink its network.

“I think it’s possible. We’ve got 37,000 post offices out there, and it’s possible that some of them are too close to each other,” Lynch said. “I don’t know where the Postal Service turns if they can’t right-size their system based on cost.”

Most experts agree the agency needs to cut its labour costs, which account for roughly 80% of its annual expenses.

The Postal Service has reduced delivery costs by consolidating postal routes over the last 12 months. Postal managers eliminated about 2,500 city routes, saving $1bn over the next two years, and reduced the “mail count” that determines pay for rural mail carriers.

Union leaders say post office closures could mean even more work for mail carriers, many of whom are working longer routes to cover for the routes eliminated during the adjustment.

“With lower volumes come more deliveries per route, and longer hours on the street,” said Fred Rolando, president of the National Association of Letter Carriers, which represents city carriers.

Don Cantriel, the president of the National Rural Letter Carriers Association, said closing rural post offices could force his employees to drive longer distances — and reduce the number of customers who spend money in post offices.

“If the Postal Service were to consolidate the operations of retail stations and branches into nearby postal facilities, that will only compound what has, over the last several years, become a real and troublesome problem,” Cantriel said.

The Postal Service is trying to reduce its labour costs without layoffs — many employees are protected by “no-layoff clauses” in their collective bargaining agreement. But so far the agency has had limited success. The latest round of early retirement offers, offered to nearly 150,000 employees earlier this year, yielded just 2,505 retirements.

The Postal Service is under a hiring freeze, and managers are hoping a wave of attrition over the next few years will reduce the workforce. Roughly 160,000 postal employees are eligible for retirement this year; that number will grow to 300,000 by 2013.

Managers say they can reduce costs further by reducing reliance on temporary employees, many of whom work far more hours than guaranteed in their contracts.

“There is a cushion available through the temporary workforce and attrition to make sure there is not a dramatic effect on our employees,” Small said. “[But] I can’t say or guarantee that there wouldn’t be layoffs.”

Union leaders say too many cuts will hurt the Postal Service’s ability to compete once the recession ends and mail volume stabilises. But experts in the mailing industry say volume is unlikely to return to its previous levels.

“When the economy comes back, mail will not follow,” said Art Sackler, the executive director of the National Postal Policy Council. “First-class [mail], which is the most lucrative for the Postal Service, will continue its decline, albeit at a slower rate.”

That means the Postal Service will have to find new sources of revenue. Rolando said the Postal Service should aggressively pursue “vote-by-mail” initiatives, which allow citizens to cast their votes via the mail, and business from e-commerce retailers. Lynch suggested scanning mail received at post office boxes and making it available to customers online — for a fee.

Several congressmen also raised the possibility of appropriations for the Postal Service, which has been self-funded since 1971. Rep. Jason Chaffetz, R-Utah, the subcommittee’s ranking member, said he would be willing to consider appropriations because of the constitutional mandate for mail service.

“I’m not necessarily out of hand opposed to supplementing,” Chaffetz said.
But Lynch said he wasn’t sure that idea would catch on with the government already spending billions to bail out banks and automakers.

“Otherwise we’re going to have a big bailout. And I don’t know if the taxpayers, and the nation, will entertain another bailout,” Lynch said. “We are on the verge of a collapse.”