NATIONAL

ASSOCIATION OF POSTAL SUPERVISORS

NAPS Assessment of S. 1789, The 21st Century Postal Service Act of 2011 Introduced by Sen. Joe Lieberman (I-CT) and Sen. Susan Collins (R-ME)
SUMMARY: We believe S. 1789 represents a more favorable approach toward comprehensive postal reform than H.R. 2309, the primary measure under consideration in the House of Representatives. At the same time, S. 1789 should be strengthened in several respects. The bill should be strengthened to require the Postal Service to pursue maximum implementation of rightsizing approaches not unilateral closures of mail processing facilities. The Postal Service should be required to develop a plan to right-size the staffing levels of all mail processing facilities and maintain service standards. The Postal Regulatory Commission should have the authority to review those plans and prevent the closure or consolidation of mail processing facilities if it finds that the Postal Services review process is flawed, or that service will be substantially and adversely impacted. Congress should also assure that the Postal Service has a sufficient transitional plan to deliver timely and satisfactory service as it right-sizes its workforce. These steps will assure the preservation of mail service at current levels and the continued employment of thousands of American workers, including military veterans. During the current financial crisis facing the Postal Service, Congress should suspend the retiree health prefunding requirement until the Postal Service is financially stable enough to satisfy prefunding. Prefunding, once it begins again, should proceed under a more reasonable realignment schedule, as contemplated under S. 1789. NAPS believes that the Postal Regulatory Commission should possess greater authority to prevent post office closures when universal service and the community in which the post office is located would substantially suffer. The Postal Service also should be required to do more to ensure the security of the mail when converting door delivery to mail receptacles on street corners and in areas that are not well protected from vandalism and theft.

It is vital that the Postal Service look at ways to generate new revenue as aggressively as it is pursuing efficiencies in mail processing and delivery. Congress should establish a blue ribbon commission composed of entrepreneurs, representatives of labor and small businesses to provide recommendations on how the postal service can generate new revenue to succeed in the 21st Century.

In our role representing over 30,000 current and retired postal supervisors, managers and postmasters, we understand the problems that the Postal Service faces, as well as the need for improvement in the internal operations of the Postal Service. Our members manage and direct the processing and delivery of over 170 billion pieces of mail per year. Legislative improvement to the Postal Services finances requires the realignment of its payments and revenues. Pursuit of these strategic changes will provide short-term and long- term stability for the Postal Service. Here are our thoughts on the major provisions of S. 1789: First Class Mail Overnight Delivery to Local Service Areas and Mail Processing Plant Downsizing The Postal Service currently plans to close 250 mail processing facilities throughout the country, reducing the number of facilities by approximately 50%. The Postal Services plan would move processing responsibilities from closed facilities to other remaining facilities to reduce operating costs. Achievement of these goals relies upon the lowering of current service standards by eliminating overnight service commitment for First Class Mail. Forty percent of all First Class Mail is delivered overnight in virtually every part of the country. For example, mail that originates in Alexandria, Virginia mailed on a Monday is currently delivered throughout the Washington D.C. metropolitan area on the following day (Tuesday). The current success rate for this service is over 96%. With the elimination of overnight First Class delivery requirements, this same letter from Alexandria, Virginia mailed to Washington D.C. would not be delivered until Wednesday. The loss of a reliable First Class overnight service level will hurt the entire postal system and all of its customers. The bill does nothing to stop the Postal Services plan to diminish its First Class Mail service standards. It does nothing to bar the closure of the Postal Services mail processing facilities. The bill only requires the Postal Service to complete a study prior to the closure of a processing facility. The study must evaluate the option of downsizing rather than closing the facility. The

bill also guarantees the opportunity for public comment and requires the Postal Service to identify and document the important factors have been considered prior to closure. The Postal Service plans to dismantle much of its mail processing network will impact thousands of postal employees, including large numbers of veterans and disabled veterans. Approximately 25% of the Postal Service's 590,000 employees are veterans of our armed forces. Many of these veterans are employed at Postal service mail processing facilities. Although veteran preference protections insulate veterans in many postal workforce realignment situations, there are limitations on the bumping rights of veterans under reduction-in-force (RIF) procedures, which will apply to the closure of mail processing facilities. Veterans do not have the same 'bumping rights that are afforded when a facility remains open and positions are reduced. Furthermore, the Postal Services contractual commitments to the American Postal Workers Union will complicate the relocation of displaced postal employees. The current contractual agreement between the American Postal Workers and the Postal Service, effective from 2011 through 2015, places significant restrictions on the reassignment of employees impacted by a facility closure or consolidation where the movement of jobs is over 50 miles. The closure of up to 250 processing facilities will impact thousands of employees who are subject to the provisions (Article 12, Section 5) of the national agreement between the Postal Service and APWU. The reassignment process will be time-consuming and expensive, requiring the payment of travel pay and commuting expenses for as much as six months following the closure. NAPS Position: Closing nearly one-half of the current network will increase delivery times for local mail and mail that currently is delivered within two days as well as three days. NAPS believes that the Postal service plan will accelerate the loss of mail volume, as service will be slowed by one or more days for all types of First Class Mail. This will contribute to a death spiral with disastrous consequences for the Postal Service. NAPS believes that the Postal Service should develop a plan to downsize the current facilities and maintain the current network with fewer and more widely dispersed closures to continue to provide overnight delivery of First Class Mail. Through the development of a plan to right- size the staffing levels of current processing facilities, the Postal Service could maintain service standards, assure the continued employment of thousands of American workers, including military veterans, and avoid the problems that will be encountered in relocating thousands of clerical employees in compliance with the National Agreement with APWU. S. 1789 should be strengthened to require the Postal Service to pursue maximum implementation of rightsizing approaches not closures. Maintenance of processing facilities at lower operational and workforce levels will sustain more jobs, assure satisfaction of current
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service standards and achieve savings. The Postal Regulatory Commission should have the authority to prevent the closure or consolidation of facilities if it finds that the Postal Services review process is flawed, or that service performance will be adversely impacted. Postal Workforce Rightsizing The bill would give the Postmaster General access to the money the Postal Service has overpaid into the FERS pension fund estimated at $10B -- and use it to offer buyouts or retirement incentives to reduce the active postal workforce by 100,000 or more employees over the next several years. The incentives could include either a cash buyout of up to $25,000 (the cap for federal worker buyouts) or credited service years toward retirement annuity: up to one year for CSRS employees and up to two for FERS employees. Any funds remaining after the Postal Service has completed this incentive program may be used to repay debt and meet obligations related to workers compensation, pensions, and retiree health. USPS has estimated that reducing its workforce by 100,000 would save up to $8 billion annually. NAPS Position: We support the use of buyouts and retirement incentives to promote sensible right-sizing of the postal workforce. The use of excess FERS funds to finance incentives to assist the Postal Service in reducing its overall staffing levels makes sense. Congress needs to assure that the Postal Service has a sufficient transitional plan to assure timely and efficient delivery service. The capability of the Postal Service to trim 100,000 or more employees without jeopardizing service standards is questionable; already postal operations are understaffed and there is high overtime usage where staffing is not balanced. Prefunding Future Retiree Health Benefits Health Care Savings The bill would maintain the costly requirement that the Postal Service pre-fund 75 years worth of future retiree health benefits in just 10 years. No other agency or company in America is required to pre-fund its benefits, especially on such an aggressive schedule. This mandate costs USPS between $5.4 and $5.8 billion per year, and it accounts for 100 percent of the Postal Services $20 billion debt. Without it, the USPS would still have significant borrowing authority with the United States Treasury to ride out tough economic times. The bill would realign the pre-funding obligation by establishing a 40-year amortized payment schedule. It would also reduce the pre-funding goal to 80%.

In addition, the bill allows the amount of these payments to be reduced if the Postmaster General and postal union representatives are able to reach consensus on a health plan that significantly reduces this liability. NAPS and the two other postal management associations also would have the opportunity play a role in the development of a health plan. NAPS Position: NAPS supports a sensible realignment of the retiree health prefunding obligation so long as the Postal Service can afford to pay for it. Prefunding at the right time under reasonable terms represents a prudent goal for assuring USPS financial security and the availability of future retiree health benefits. This is not the right time in the life of the Postal Service for pre-funding. During the current financial crisis, Congress should suspend the prefunding requirement until the Postal Service is financially stable enough to satisfy prefunding, even at reduced levels. Substantial savings can also be achieved through the creation of a USPS health plan that apply best practices on disease management and wellness care, improved purchasing power for drugs and other medical services and sensible integration of Medicare benefits. Five-Day Delivery The bill would prohibit the Postal Service from implementing its plan to eliminate Saturday delivery for at least two years. The implementation could only move forward if: the Postal Service identifies customers who may be affected disproportionately by five-day delivery and develops remedies; the Postal Service makes full use of its authorities under current law and the new authorities and mandates included in the bill to increase revenue and reduce costs; and after implementing all other savings options, the Postal Service determines that a five-day schedule is still necessary to achieve sustainability. The bill requires the Government Accountability Office to review the Postal Services financial situation, projections, and the adequacy of the savings initiatives already implemented in order to determine whether the implementation of five-day delivery is financially necessary. The bill also requires the Postal Regulatory Commission to render a non-binding advisory opinion on the merits of five-day delivery and the sufficiency of the GAOs review. NAPS Position: NAPS supports an incremental approach toward reducing delivery frequency. All alternative approaches should first be undertaken before Saturday delivery is terminated. NAPS has continually regarded the move to five-day delivery as a last resort not the first. Five-day delivery will reduce mailer and customer service, thereby degrading the quality of overall mail service. The bill helps to assure that the Postal Service makes full use of its authority to generate additional revenue to offset the need to reduce delivery frequency.
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Retail Service Standards The bill would require the Postal Service to develop service standards to guarantee customers a sufficient level of access to retail services, whether at a post office or an alternative to a post office. The Postal Service would be required develop the standard, in consultation with the Postal Regulatory Commission, based on factors such as geography, population, and the availability of transportation. Communities concerned that a proposed closure violates a standard could challenge the proposal before the PRC, but the PRC may only issue a non- binding advisory opinion. NAPS Position: NAPS supports the continuance of retail accessibility for postal customers through a variety of retail options, assuring customer convenience and universal service. Mail service to rural areas is more costly, and Congress needs to decide how to satisfy those costs. NAPS also believes that the Postal Regulatory Commission should possess greater authority to prevent post office closures when universal service and the community in which the post office is located would substantially suffer. Under current law, the Postal Regulatory Commission has the authority only to review a decision to close, but it does not have any binding authority to prevent the closure, even if it finds the closure process was flawed. The recent finding of the PRC that the Postal Services review process for closing post offices was fundamentally flawed demonstrates the need for assuring fairness and greater accountability as a result of PRC review of post office closures. Area and District Offices The bill requires the Postal Service to develop a strategic plan to consolidate area and district offices and create efficiencies. It also requires the Postal Service to consolidate district offices located within 50 miles of each other, as well as those that have lower mail volume work hours. NAPS Position: NAPS supports the consolidation of area and district offices to achieve cost and operational efficiencies. Conversion of Door Delivery Points Under current practices, most postal customers receive delivery at their door. A small but growing number of customers receive delivery at their curb or at centrally-located stations at the end of their block or in a residential building. The bill would authorize the Postal Service,
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where feasible, to deliver to curbside, sidewalk, or centralized mailboxes rather than to door delivery points no later than 2015. This change could achieve cost savings. The bill also requires the Postal Service to report to Congress and the Postal Inspector General on its progress in converting door delivery points. NAPS Position: NAPS has concerns about the conversion of door delivery points. The Postal Service must ensure that the security of the mail is maintained when deploying mail receptacles on street corners and in areas that are not well protected from vandalism and theft. Urban areas may not be ideal locations for the use of cluster boxes due to security concerns for the unattended mail and for customers who have to retrieve their mail from mailboxes housed on city streets. New Products and Services The bill would allow the Postal Service to offer non-postal products or services if the Postal Regulatory Commission has determined that the products and services: make use of USPSs processing, transportation, delivery, retail network, or technology; are consistent with the public interest and a demonstrated demand for the Postal Service to offer them; do not create unfair competition with the private sector; and have the potential to improve the Postal Services financial condition. The bill would also allow the Postal Service to offer services on behalf of state and local governments as it does today on behalf of federal agencies and to ship wine and beer like its private-sector competitors do. NAPS Position: NAPS supports the broad conferral of authority to the Postal Service to grow its business. NAPS believes the Postal Service needs to look as aggressively at ways to generate new revenue as it is pursuing efficiencies in mail processing and delivery. In many respects, this can be best accomplished through public-private and inter-governmental partnerships. Numerous ways exist for leveraging the Postal Services presence in every community and generating sales. The Postal Service could: provide notary services, internet services; issue state licenses (drivers licenses, hunting licenses, fishing licenses); contract with state and local agencies to provide services; ship beer and wine; and follow the practices of foreign postal services in responding to the shift toward electronic mail by offering a variety of hybrid communication services. In reinventing the Postal Services business model, Congress should establish a blue ribbon commission composed of entrepreneurs, representatives of labor and small businesses to
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provide recommendations on how the postal service can generate new revenue to succeed in the 21st Century. Workers Compensation Reforms The bill would set compensation for new enrollees under the Federal Employees Compensation Act (FECA) at 66 2/3 percent of salary at the time of injury until they reach retirement age. At retirement age, compensation would be reduced to 50 percent of salary at the time of injury. Compensation for current workers compensation recipients would not be changed if they are permanently and totally disabled and unable to work. The remaining beneficiaries over retirement age would receive 66 2/3 percent of their salary at the time of injury, starting three years after enactment. Current beneficiaries under retirement age would receive 66 2/3 percent of salary at time of injury starting three years after enactment, and then, upon reaching retirement age, 50 percent of pay at the time of injury. NAPS Position: FECA costs are a significant concern to the Postal Service and postal managers alike. Benefit increases should be based on employee pay adjustments, not the CPI. The right to resume employment should also be expanded from one to three years. For questions or additional information contact: Jay Killackey Executive Vice President National Association of Postal Supervisors naps.jk@naps.org 703-836-9660 Bruce Moyer NAPS Legislative Counsel brumoyer@verizon.net 301-452-1111 January 10, 2012