Summary: In offering the early-out program in 1992 , Postmaster General Marvin Runyon had hoped that 30,000 managers would retire. Instead, approximately 33,000 mail handlers, clerks and letter carriers took the offer .”For fiscal year 1992 the Service’s cost for the restructuring as reported in its audited financial statements totaled $1.01 billion. About $886 million of this represents retirement incentive payments (6 months salary) to employees. In total, about 48,000 employees took advantage of the special option retirement. By February 1993, the Service had in effect reduced the total work force, including career and non-career employees as well as overtime hours, by only about 7,300 employees, compared to a year earlier in February 1992.”

Below are excerpts from GAO Testimony Before the Committee on Post Office and Civil Service U.S. House of Representatives on the Postal Service’s 1992 Early Out
OPERATIONS ISSUES

GAO’s testimony focused partly s on the Postal Service’s (1) restructuring that largely took place from August to November of 1992.
Postal Service data show that the restructuring eliminated about 27,000 overhead positions and resulted in thousands of retirements, many of which were in non-overhead positions, without adversely affecting customer service in the short term.

The Service took steps to minimize adverse effects on postal employees during the restructuring. It offered employees earlyout opportunities and monetary retirement incentives. Assistance was also available for placing employees whose jobs were abolished. Even so, issues remain to be resolved; some employees have challenged Service personnel actions.The Service placed a high priority on maintaining service during the restructuring period, using 26 percent more overtime and about 35,312 (40 percent) more non-career employees than a year earlier. In aggregate, work hours increased by an equivalent of 1,115 employees from September 1992 to February 1993, compared to a year earlier.

Although the restructuring cost the Service slightly over a billion dollars, which was written off in 1992, it expects to save about $800 million in 1993 and $1.4 billion annually beginning in 1994.

GAO noted that savings from the restructuring could be reduced or offset by increased overtime and increased use of non-career employees. While automation can help the Service control labor cost, the ultimate impact is not yet clear. By February 1993, the total work force, including overtime hours, was only about 7,300 employees less than a year earlier in February 1992.

POSTAL SERVICE RESTRUCTURING AND ITS IMPACT

Soon after taking office in July 1992, Postmaster General Runyon announced plans for a top-down restructuring of the Postal Service. This was part of a broader strategy designed to make the Service more competitive, accountable, and credible. The restructuring was largely carried out over a 120-day period between August and November 1992. It was aimed at eliminating 30,000 overhead positions occupied by employees who were not directly involved in the processing and delivery of mail. As the restructuring began, Members of Congress, mailers, and employee groups expressed considerable concern about a possible adverse impact on mail service, particularly during the impending holiday season.

At the Committee’s request, we reviewed the Service’s data pertaining to the effects of the restructuring on (1) customer service, (2) employees, and (3) operating costs. It is important to recognize that a relatively short period of time has elapsed since the restructuring and, as a result, only limited data are available to demonstrate its effects to date.

Further, the Service took several steps to maintain service including using more overtime and hiring more non-career employees. In aggregate, the Service used the equivalent of 1,115 more employees during the period from September 11, 1992, to February 5, 1993, compared to a year earlier.

 In mid-March 1993, the Service was still considering abolishing additional overhead positions. Many employees in non-overhead positions, such as clerks, city carriers, postmasters, and mailhandlers, retired from the Service during this period. The Service extended the retirement incentive to these employees as part of a plan to free up positions that could be filled by (1) employees who occupied positions that were abolished and either were not eligible or chose not to retire or (2) new non-career employees. In total, about 48,000 employees took advantage of the special option retirement.

Some Employee Issues Remain Unresolved

In early March 1993, the Service had about 4,000 employees who had left overhead positions and were yet to be placed. Many of these employees were located in the New York and Chicago areas where relatively few non-union job vacancies existed. Service officials said they would try to place the employees into jobs within their commuting areas before directing employees to relocate to other cities. In some areas, the Service is offering employees union jobs in accordance with applicable pay, seniority, and other provisions of labor contracts.

The Service is also faced with resolving certain employee appeals and litigation surrounding the restructuring. According to a Merit System Protection Board official, that agency had received 66 appeals of personnel decisions relating to the restructuring.

As of March 23, 1993, 15 of the 66 appeals had either been withdrawn or dismissed and the remaining were still under consideration.

In January 1993, the National Association of Postmasters of the United States, which represents approximately 40,000 active and retired postmasters, requested a court injunction to prohibit the Service from filling postmaster positions unless established procedures for competitively filling the positions are followed.

About 5,000 postmasters retired, and the Service filled some of these positions with employees who had occupied abolished overhead positions. As of March 15, 1993, a decision on the case was pending.

Cost Savings Anticipated

For fiscal year 1992 the Service’s cost for the restructuring as reported in its audited financial statements totaled $1.01 billion. This amount was written off in fiscal year 1992 as a one-time, extraordinary expense. About $886 million of this represents retirement incentive payments to employees.

For fiscal year 1993 the Service estimated that the restructuring will save $800 million in operating cost and $1.4 billion management structure and automated data systems.

— Strong employee response to processing and delivery demands of the holiday season. Service-wide, employees worked 26 percent more overtime between September 1992 and February 1993 than during the comparable prior year’s period. In addition, about 3,000 employees, who were to retire by November 20, 1992, delayed their retirement by a month or longer.

— Use of non-career employees to replace career employees who retired during the restructuring. In February 1993, the Service had 35,312 (40 percent) more non-career employees than during February 1992.

In aggregate, work hours increased by an equivalent of 1,115 employees from September 19, 1992, through February 5, 1993, compared to a year earlier.

Steps Taken to Minimize Employee Impact

Our review of postal records as well as discussions with postal and union officials revealed that the Service took several steps designed to both ensure the timely reduction of the work force and minimize the adverse effects on postal employees.

— An early-out option was offered to permit most employees to retire at age 50 with at least 20 years of service or any age with at least 25 years of service.
— A monetary incentive was offered to encourage eligible employees to retire. This incentive was a lump-sum payment equal to 6 months of pay.
— The Postmaster General made a commitment that there would be no layoffs as a result of restructuring.
— A policy was established that provided that employees taking lower-paying, non-union jobs in the Service would retain their current grade and pay indefinitely.
— And, finally, the Service provided training, counseling, and job placement to assist employees in finding jobs within and outside the Service. This assistance is available through a national career management firm working with the Service under contract at 13 transition centers located at headquarters and field installations.
From August 1992 to mid-March 1993, 27,275 overhead positions were abolished. This represents about 3.7 percent of the August labor hour costs. For example, we estimated that work hour savings in 1991 in the functions most directly affected by automation amounted to about $138 million. But the work in those functions cost $627 million more than the year before because of wage and benefit increases. Additionally, the total work hours in the Service increased in 1991 although the volume of mail declined.

Nevertheless, the work in those functions affected by automation cost $583 million more than the previous year because of wage and benefit increases.
During the period September 19, 1992, through February 5, 1993, total work hours remained about the same as last year even though about 27,275 positions were abolished. By February 1993, the Service had in effect reduced the total work force, including career and non-career employees as well as overtime hours, by only about 7,300 employees, compared to a year earlier in February 1992.  As part of the restructuring, the Service did replace some career employees retiring from nonoverhead positions with non-career employees.