From the National Association Of Postal Supervisors

January 2011

The Business Case for Continuing Six-Day Delivery

Since March, 2010 the Postal Service has promoted several cost-saving measures, including reducing the number of delivery days from the current six-days per week to a five-day delivery structure.  The National Association of Postal Supervisors believes that the Postal Service must develop new ways to become more profitable, but a reduction in delivery days is not the appropriate answer to the Postal Service’s problems.  Better options are available.

The start of five-day delivery for the Postal Service should be the last resort, not the first.  Five-day delivery is rife with devastating outcomes for postal customers and the Postal Service itself.  The better course lies in Congressional action that restructures the Postal Service’s pension and health benefits payment obligations.  Such actions will restore the Postal Service’s financial stability and remove the need for five-day delivery.

The Postal Service Faces Dire Financial Challenges

Congress has annually mandated a six-day delivery schedule since 1983.  At first glance, one would conclude that reducing a postal delivery day is a promising way to cut costs, as it could save the Postal Service at least $3 billion a year, according to former Postmaster General John E. Potter in testimony before a House subcommittee in 2010.

Those savings are tempting in light of the Postal Service’s financial situation.  In September, 2010 the Postal Service ended the fiscal year with an $8.5 billion net loss.   It faces continued losses in the current year, along with serious questions over its liquidity, including whether it will have enough cash to meet current obligations by the end of this fiscal year, in September, 2011.  Chief among those obligations is the requirement imposed on the Postal Service by the Postal Accountability and Enhancement Act of 2006 to pre-fund retiree health benefits with payments of approximately $5.6 billion each year through 2016.

Correction of Postal Pension Overpayments Would Restore the Postal Service’s Health

Over the course of the last four decades, the Postal Service’s financial condition has eroded primarily due to the overpayment of its actual pension obligations.  These pension overpayments have worsened the Postal Service’s financial condition far more than recent changes in the economy or reductions in mail volume due to the substitution of electronic communication.  The Postal Service’s Inspector General reported in 2010 that the U.S. Postal Service, since 1971, has overpaid its pension obligations to the Civil Service Retirement System (CSRS) by as much as $75 billion.  The Inspector General found that the actuarial methods used to determine CSRS pension costs for postal employees have been inequitably split between the Postal Service and the federal government since 1971 when the Postal Service was created.  The Inspector General also found that the Postal Service has overpaid roughly $6.8 billion into the Federal Employees Retirement System (FERS).

In light of these profound accounting and payment errors and the Postal Service’s perilous financial condition, common sense suggests taking the $ 75 billion that the Postal Service overpaid to the Civil Service Retirement System and its nearly $7 billion surplus in the Federal Employees Retirement System, and crediting those amounts to the Postal Service.  This would be more than enough to cover the liabilities the Postal Service faces for its future retiree health benefits.

In fact, in the last Congress, Sen. Tom Carper (D-DE), Sen. Susan Collins (R-ME), and Rep. Stephen Lynch (D-MA) each introduced measures (respectively S. 3831, S. 4000, and H.R. 5746) to set in motion a process to direct the Office of Personnel Management to correct the methodology for calculating Postal Service obligations to these pension funds and to transfer the overpaid amounts to the Postal Service for its use in satisfying its future retiree health benefit obligations.  But the three measures did not advance, in part because of concerns by some that transferring funds from the CSRS to the Postal Service would diminish financial assets held by the Civil Service Retirement and Disability Fund, thereby indirectly increasing the federal deficit.  (Note, however, that these amortization-related payments would not “score” for budgetary-recognition purposes.)

Correction of Postal Pension Overpayments Should Not Increase the Deficit

We remain unconvinced that an intergovernmental transfer of funds from the federal treasury to the Postal Service – an independent establishment within the federal government – will increase the federal deficit.  This transfer of funds is intended not to expand federal spending, but only to right an administrative wrong.  Fair dealing between components of the federal government should not permit incorrect and unjustified payments in the billions of dollars by one federal component – in this case, the Postal Service – to the federal treasury, as directed over the course of decades by other federal components, first the Civil Service Commission and then the Office of Personnel Management.  Moreover, these payments by the Postal Service were originally provided by postage ratepayers to fund benefits for postal employees, not non-postal federal employees.  Fairness to the Postal Service and its ratepayers mandates the transfer of these overpaid funds.

This colossal and continuing accounting mistake carried out by executive branch authorities beckons immediate correction by the Congress.   Resolution of this error through the restoration and transfer of the correct amount of funds back to the Postal Service will provide sufficient assets to return the Postal Service to financial stability.  It will satisfy the Postal Service’s greatest financial obligation, the prefunding of its future retiree health benefits through 2016, as required by the 2006 postal law. It will also remove the otherwise pressing need to pursue deep cuts in service, including the realignment of the current six-day delivery schedule.  That is why we regard the proposed move to five-day delivery as a last resort, not the first.

Moreover, we see for a host of reasons, perilous problems for the Postal Service should five-day delivery become a reality. These problems involve the precedent that would be set by the potential loss of exclusive access by the Postal Service to mailboxes, the disastrous consequences of delay to mailers and customers in the delivery of time-sensitive parcels and mail, and the vicious downward spiral in mail volume that likely would come about as users of the mail begin to resort to other means of delivery.

Precedent Will Be Set by the Loss of Exclusive Access to Mailboxes by the Postal Service

The Postal Service has a little known, but highly protected privilege that gives it the exclusive right of access to customer mailboxes. The United States Congress originally passed the Private Express Statute in 1792, to “establish Post Offices and Post Roads.”   The Private Express Statute created a governmental monopoly for the carriage and delivery of letter mail, and ensured that this monopoly can be enforced.  The Private Express Statute, found in 18 U.S.C. § 1693–1696 and 39 U.S.C. § 601–606, is implemented under Title 39 of the Code of Federal Regulations Parts 310 and 320. These provisions generally forbid all carriage and delivery of letter mail by private organizations.  The Private Express Statute only applies to letters and not other mailable items such as parcels or periodicals.

Were the Congress to abandon six-day delivery, the likely and ultimate outcome would be attempts to either relax or eliminate the provisions providing exclusive access to mailboxes, initially just for Saturday’s, but eventually for other days as well.  Ultimately, we would see a total end to the Postal Service’s exclusive ability to deliver to the mailboxes of all the homes and businesses across the country.
What would happen if anyone could place items, flyers or other material in your mailbox? First, you would be besieged with unsolicited papers, paraphernalia and solicitations that would be delivered directly to your door slot, doorway or curb-side mailbox by some unregulated stranger who could be hired by-the-day without any background checks.  These “carriers” may even possess a criminal background.  The individual from the Unknown Delivery Company would not have had a required background check or assurance of a clean criminal record, something mandated of all postal employees. In addition, their work would not be monitored regularly by postal management.

If the Unknown Delivery Company was short a few delivery people on a given day, depending on where they needed help, they could simply go to one of many storefront businesses that provide workers who show up each morning looking for a day’s pay or, like here in the Washington, D.C. suburbs, a company could merely stop by any street corner where you can easily find an undocumented worker willing and able to deliver mail, or do about anything else, just to get a day’s pay.

Did you know that the Postal Service carries and delivers millions of dollars worth of prescription medicine to addresses throughout the country every day? The sanctity of the mail is something that we all take for granted.  But all that peace of mind could be lost with the relaxation of the Private Express Statute. If someone other than you and your letter carrier can get into your mailbox, you’d better make sure that you get to your mailbox at the same time your mail is delivered or you might not get it at all.

The Postal Service also has exclusive access to office building mailrooms and locked boxes in apartment buildings.  Postal letter carriers tend to know when you are away at work or are gone on vacation. This type of information shouldn’t become known to others.

Delay in the Delivery of Time-Sensitive Parcels and Mail Could Be Disastrous

The cycle of collecting, processing and delivering mail is similar to a scheduled bus or train route. There is an origin and a destination. The trip can be as short as a couple of city blocks or as far as from Hawaii to Bangor, Maine. With the mail, all along the way are intermediate stopping points — processing facilities, as they are known in the postal world — that make up the infrastructure of today’s Postal Service. The transportation infrastructure of the mail must run every day on a precise schedule in order for mail to move from one point to another in accordance with established delivery standards that are in place throughout the country.

In the five-day model with the elimination of Saturday delivery, the routing of the mail would be interrupted every weekend.  In 2011, with seven Monday holidays, there will be seven times when mail will not be delivered from Friday until the following Tuesday. That can equate to extended delays in delivering time-sensitive mail, like prescription medicine, which so many of our elderly rely upon for their health.

Major drug store chains use the mail for most of their mail-order prescription services that are paid through health insurance plans.  The Veteran’s Administration uses the mail to deliver virtually all prescription medicine. The interruptions in the transportation cycle that would no doubt occur with the loss of a delivery day would be disastrous to customers who rely on the mail for their health care needs. Should there be a need to have delivery on Saturdays without the Postal Service providing this service, additional surcharges would be collected by the Postal Service’s competitors (they already have them) and those costs would be passed on to the customer.

The business community would also be adversely impacted by a reduction in delivery days. Although surveys taken of customers by the Postal Service appear to point to support for the five-day plan, the business community that provides over 80% of mail volume into the postal system is not as enamored with the plan as we may be led to believe.  When the public is offered the survey choice – between a postage rate increase and a reduction to five delivery days – the preference for dispensing with a delivery day is understandable.

Even with the consideration of the growth of electronic diversion of bill payment, millions of dollars in bill payments are still received through the mail by businesses.   An elimination of a delivery day would result in significant shrinkage in short-term interest realized when businesses process their payments quickly from customers who use the mails to pay their bills. Conversely, customers who are paying their bills through the mail will see an increase in late fees when the delivery cycle is extended as a result of the loss of a delivery day and their mail is received a day later by their creditors.
Local newspapers, who rely on the Postal Service to deliver their weekly editions, particularly on Saturday, would suffer without Saturday delivery and many grocery stores that rely on Saturday delivery to advertise their latest sales to attract customers for weekend shopping would have to alter their advertising campaigns.

Nor is a cut in delivery days justified simply because of a decline in letter-writing or a corresponding increase in e-mail and text messages.  In fact, huge numbers of jobs are reliant upon the mail.  It is estimated that over 7.5 million people derive their livelihood directly from the mail — from paper companies, printers, publishers and graphics designers to mailing preparation houses, software designers, clerks, carriers and postal personnel.   The consequences of a reduction in delivery days would be significant.

The Postal Service is the linchpin of a $1 trillion mailing industry that employs approximately 7.5 million Americans in fields as diverse as direct mail, printing, catalog production, paper manufacturing, and financial services.

While the use of technology has reduced personal communications through the mail, it has also brought other types of business to the Postal Service. There are new businesses that do not rely on brick and mortar storefronts in this country and around the world. These businesses are computer based, and they rely on mail services to deliver products that they sell over the internet.

Five-Day Delivery Will Contribute to a Vicious Downward Cycle in Mail Volume
These fast-growing segments of the business community will continue to rely heavily on delivery services, like the Postal Service, to deliver their products in a timely manner.   If they grow to not rely on the Postal Service, beginning with the unavailability of Saturday delivery, they will resort to other delivery competitors who supply Saturday delivery, even at higher costs, ultimately contributing to lower mail volume incurring further revenue losses for the Postal Service.

The National Association of Postal Supervisors represents thousands of men and women who work in the Postal Service as employees and managers. We know how the mail works. We also know how tinkering with a system that binds a nation together could end up as a disservice to all citizens regardless of where they live; in rural America or the inner city. Changes in today’s delivery systems could cost everyone not just in dollars but also in the way commerce, communications and merchandise are received by every business and every customer in this nation.

It’s said that you get what you pay for. The best postal system in the world also remains the best bargain compared to other countries. We have illustrated several of the ramifications that would ensue should the Congress rush to adopt the position of the Postal Service to eliminate a delivery day. The reductions in service would find a way to touch virtually every citizen and business in the country.

Congress Should Focus on Restructuring the Postal Pension Obligations, Not Six-Day Delivery

We firmly believe that it is far wiser for the Congress to direct its attention toward correcting the overcharges associated with the Postal Service’s CSRS and FERS pension obligations, as recommended by the Office of Inspector General of the Postal Service, than directing cuts in postal delivery days.  Correction of the CSRS and FERS overcharges would provide funds in the billions of dollars sufficient to improve the Postal Service’s financial position and return it from the brink of bankruptcy as well as satisfy its future retiree health benefit obligations as mandated by the Postal Accountability and Enhancement Act of 2006.

The Postal Service faces a challenging future, one that requires it to operate in as business-like a fashion as much as possible.  Operational changes and reductions in service will continue to be necessary to bring costs in line with revenue projections.  Cessation of the Postal Service’s pension overpayments to both CSRS and FERS – through legislative restructuring its pension and retiree health benefit payments – will provide the most immediate, responsible and comprehensive course of action.  Again, we reiterate, reducing delivery days should be the last resort, not the first.

National Association of Postal Supervisors
January, 2011

For further information on this subject contact:    James F. Killackey III
Executive Vice President
National Association of Postal Supervisors
703-836-9660, naps.jk at naps.org
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Statement of Postmaster General/CEO John E. Potter before the Committee on Oversight and Government Reform, U.S. House of Representatives, April 15, 2010.
U.S. Postal Service, Media Release dated November 12, 2010.

Postal Accountability and Enhancement Act, Public Law 109-435, December 20, 2006.

Office of Inspector General, U.S. Postal Service, The Postal Service’s Share of CSRS Pension Responsibility (Report Number RARC-WP-10-001, dated January 20, 2010).

Office of Inspector General, U.S. Postal Service, Management Advisory – Federal Employees Retirement System Overfunding (Report Number FT-MA-10-001, dated August 16, 2010).

Sen. Susan Collins, Press Release dated December 2, 2010.