Politics, Union Clout Work Against Postal Service Reform

Published May 4, 2012

Unless Congress decides otherwise, the money-losing United States Postal Service will see significant reforms start to take place May 15. Those reforms, which are due for slow phase-in, could ultimately include the closure of 3,700 post offices and the layoff or reassignment of 4,500 employees.

But these cuts are a public relations headache. By way of sidestepping or watering them, the U.S. Senate in late April passed S. 1789 by a 62-37 margin. The bill would delay for at least two years the closure and consolidation of 100 mail processing plants across the nation, the jobs cuts, and the termination of Saturday delivery service. It would shrink the Postal Service workforce by up to 100,000 via a $7 billion early retirement option.

Sen. John McCain (R-Ariz.) said of the Senate bill, “This of course kicks the can down the road.”

‘Wholly Unacceptable’

Many on the House side agree. In a statement, Rep. Darrell Issa (R-Calif.) called the Senate bill “wholly unacceptable.”

Issa’s been fighting the Postal Service’s bloated budget and debt problems for months in his role as chairman of the Oversight and Government Reform Committee.

Even postal worker unions show little enthusiasm for the Senate plan — though if push came to shove, labor representatives would rather see that version reach fruition than what Issa is proposing in the House. Issa is calling for reform that puts the Postal Service on a five-day delivery schedule and bans no-layoff clauses from union contracts.

“We are vehemently in opposition to the proposal Darrell Issa put out,” said Sally Davidow, spokesperson for the American Postal Workers Union. “We think the Senate bill is a starting point. It doesn’t solve all the problems but it’s a place to start.”

Pension Pre-Funding Requirement

Davidow places the blame for the Postal Service’s fiscal situation squarely at the feet of a 2006 law that requires the Postal Service to pre-fund employee pensions. She says the Senate bill would be easier to stomach if it included provisions overturning that mandate.

“The Postal Service actually has to pay money into the fund,” she said, adding the payment costs $5.5 billion a year. “It’s a manufactured crisis. It’s a 100 percent pre-funding requirement and no other government agency has to do that. The Senate bill cuts this requirement to 80 percent pre-funded … but it really just nibbled around it. We would like to see it cut. That would certainly be the goal.”

The pre-funding requirement, however, came as a solution to the Postal Service’s already mushrooming debt, and is hardly a causal factor, say others.

‘Oversized, Overly Compensated’

“No one credibly blames the 2006 pension pre-funding requirement as cause for the USPS debt. In fact, a large portion of the pension pre-funding payment never occurred. Congress allows the USPS to delay payment,” said Christopher Prandoni of Americans for Tax Reform. “The major force impelling USPS debt is simply the oversized and overly compensated union workforce.”

More than 85 percent of Postal Service workers have collective bargaining agreements, many of which contain no-layoff guarantees, Prandoni said. The positions are high-paying, he noted.

“In 2009, USPS employees made [on average] $79,000 in total compensation. That is $18,000 more than the private sector worker,” he said. “This union premium of 20 percent more in annual compensation explains why around 80 percent of USPS costs are labor-related. Similarly, as the USPS saw a drop in mail volume … the Postal Service unions fight layoffs tooth and nail, leaving the government entity with too many employees who are paid too much.”

The USPS has lost $25 billion in the past five years, according to the Government Accountability Office.

Postmaster General Patrick Donahoe also warns of more losses in coming years, to the tune of $21 billion by 2016, and $5 billion in 2012 alone. An estimated “80 percent of its locations” lose money, the Heritage Foundation finds.

Cheryl Chumley ([email protected]) writes from Northern Virginia.