WASHINGTON, D.C. – The U.S. Postal Service pays 100 percent of health insurance premiums for 835 of its top employees, an expensive perk that occurs at no other federal agency, Senator Susan Collins, Ranking Member of the Senate Homeland Security and Governmental Affairs Committee, confirmed Friday.

The additional information comes one day after Senator Collins released the findings of three investigations of the Postal Service (USPS) by the Postal Inspector General (IG), which she had requested to determine whether the agency could realize additional efficiencies and cost savings in three areas: employee benefits, purchasing policies, and the area and district field office structure.

Upon further questioning of the IG’s office on Friday, Senator Collins learned that as of June 4, 2010, the USPS was paying 100 percent of health benefit premiums for 835 employees. The perk covers employees in the following categories: Postal Career Executives, Executive & Administrative, Other Executives levels, Postal Regulatory Commission, and Office of Inspector General Directors. She also confirmed that no other federal agency pays 100 percent of employee health insurance premiums.

“It is unbelievable to me that the Postal Service – awash in red ink and asking for huge postal rate hikes, service reductions and relief from its financial obligations – is paying the full health care premiums for its top executives,” said Senator Collins, whose committee has oversight jurisdiction of the Postal Service.

The findings of the audits released yesterday illustrated stunning evidence of contract mismanagement, ethical lapses, financial waste, and excessive executive perks that cost the Postal Service more than $800 million a year in unnecessary costs.

Among the disturbing deficiencies uncovered by the IG are that:

* the USPS awarded 359 contracts to former Postal Service executives without competition. In three cases that the IG examined most closely, the former employees were hired at nearly twice their former pay to advise new executives, a practice which the IG found raised serious ethical concerns and hurts employee morale;

* the Postal Service pays 100 percent of its senior executives’ health benefits, a perk that is not provided to comparable employees in any federal agency;

* postal employees participate in many of the same health insurance and life insurance programs as federal employees, yet the Postal Services pays a greater share of the premiums;

* the Postal Service’s contract management did not protect the USPS from waste, fraud, and abuse;

* the Postal Service could not even identify how many contracts were awarded without competition, and the IG found that 35 percent of the no-bid contracts lacked justification; and

* significant savings could be achieved by consolidating the USPS’s area and district field offices.

The Office of Personnel Management has responded to a report issued by the Postal Regulatory Commission that called for changes in the formula used to calculate the USPS’s share of Civil Service pensions. OPM said in essence that while the report, prepared by The Segal Company, was useful, it was too narrowly focused to provide a definitive resolution. More importantly, the OPM argued that it was powerless to modify the funding methodology without explicit instructions from Congress.

Redetermination Provisions

We believe that the implication that OPM has the discretion to make basic changes in the allocation method between the Postal Service and the Treasury goes beyond the intent of, and the authority provided to OPM in, the 2006 Postal Accountability and Enhancement Act. That law included a provision, section 802(c), allowing the Postal Service to appeal to OPM its annual determination ofthe Postal Service CSRS supplemental liability under 5 U.S.C. 8348(h)(1).

Section 802(c) provides in pertinent part:

(A) Request for review.–Notwithstanding any other provision of this section
(including any amendment made by this section), any determination or redetermination made by the Office of Personnel Management under this section (including any amendment made by this section) shall, upon request of the United States Postal Service, be subject to a review by the Postal Regulatory Commission under this subsection.

Our view is that, section 802(c) is intended to permit review of specific calculations made by OPM of the annual supplemental liability determination according to the established Fund allocation methodology. The Segal report is something entirely different, a review of what methodology should be employed generally in evaluating one aspect of Postal Service CSRS obligations. Nevertheless, OPM is providing this response in the manner as would be applicable under section 802(c)(2).

Conclusion

After careful review by counsel, we have concluded that OPM does not have the authority to make a reallocation in the manner suggested in the Segal report. However, if Congress determines that another methodology is more appropriate, OPM will of course comply with any changes in the current law.

OPM Response to PRC Report

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Previous podcasts in the series are at thisweekinpostal.info.

The US Postal Service quietly submitted its August financial estimates to the PRC late Friday afternoon. The service reported a loss of $1.6 billion in August, bringing its fiscal year to date losses to $7.7 billion with one month left to report. The retiree health benefit pre-funding requirement imposed in the 2006 postal reform act accounts for $5 billion of the loss. Another $2 billion is the result of what the service calls a “fair value adjustment to workers’ comp liability”, something the service says it has no control over. As a result, the service says that its “controllable” operating loss is only $453 million year to date.

First class mail volume continued to decline, down 6.4% from the already low level of a year ago. Standard mail volume, however, increased by 11% compared with August a year ago, and is now almost level with the year to date numbers from 2009. The increase in standard pushed total volume for August to 13.7 billion pieces, an increase of 1.8% over 2009. Because standard mail only brings in about half the revenue of first class however, revenue was still down by 0.7% for the month, and -2.2% for the fiscal year.

“Controllable” personnel costs were up by 3.8% over SPLY last month. While salaries and benefits were down slightly from 2009, that decline was more than offset by a doubling of “Workers compensation caseload expenses”, which went from $120 million in August 2009 to $268 million this year. Total workhours were down 3% for the month, and 6.2% for the year to date.

An organization that calls itself the “Postal Consumer Council” today issued its “Postal Freedom Index”, which claims to chart various postal services around the world based on “two major indicators — Market Freedom and Market Competition”. You probably won’t be surprised to learn that the “Council” is actually just a front for the far-right wing Lexington Institute. You also won’t be surprised to learn that the Lexington Institute finds that the US Postal Service is just about the worst in the world in terms of “Postal Freedom”. What you just might be surprised at, though, is which country the ultra-conservatives think has reached postal free market perfection:

Sweden!

Yes, the socialist nanny state where people pay incredibly high taxes and are subjected to such indignities as health care, unemployment insurance and actual pensions when they retire is the right winger’s postal paradise!

What’s even more bizarre is the summary the “Council” offers on Sweden’s supposed “privatization” of its postal services. Here are some excerpts:

“Sweden’s national post — or “ Posten,” as it is known in Sweden — lost its monopoly privileges on letter mail in 1993, well before all of its European counterparts, with the exception of Finland.”

“Posten was officially “privatized” in 1994, but the privatization was more formal than real. The new entity — a limited liability company titled Posten AB — remains entirely owned by the Swedish government and there are, as yet, no immediate plans to sell the company off to private investors. ”

“As of 2007, there were 33 licensed postal operators in Sweden, but almost all were tiny, local operations in niche markets. Only one could remotely be considered a competitor to Posten. That company — CityMail — specializes in low-end business bulk mail. ”

“European postal commissions estimated that national incumbents would be likely to retain roughly 80% of mail share after privatization. In Sweden, Posten AB has been able to maintain a dominant position in all segments of the market. Some 14 years after the opening of the letter market, for instance, Posten AB retains 91%.”

“Price increases for letter mail are in theory tied to the CPI but in fact have risen about 90% since liberalization.”

“Competition combined with technology has brought bulk mail prices down 50% in real terms. Large mailers have benefited. Smaller businesses have seen less improvement. Despite the price cap, such businesses have endured gradual increases of over 50% in rates. Moreover, letter postage has increased dramatically even as the percentage of letters in the mail stream continues to decline. Also, parcel rates have soared by 253%.”

So basically, the Lexington Institute’s vision of postal nirvana is a socialist welfare state where the government still owns the postal service, which still has a virtual monopoly, and where prices have dropped for bulk mail, but skyrocketed for everyone else.

Who knew?

Update: Thanks to commenter Patrik for pointing out that Posten AB’s only significant competitor, CityMail, is owned by the Norwegian government!. Isn’t “privatization” wonderful!

via News & Research > Introducing the Postal Freedom Index — 2010 Edition.

The USPS Office of the Inspector General has issued a report finding that the postal service could reduce the $1.5 billion annual cost of operating 8 area and 74 district offices across the country. The report suggests that as many as 14 district offices could be eliminated, and that area offices could be reduced to just four, or even eliminated altogether, with their functions moved to Headquarters. The OIG also found that the USPS has no strategic plan to streamline its management structure, and did not bother to document the process it used to make cuts in the structure in 2009:

The Postal Service has significant opportunities to reduce costs by consolidating its field structure. We identified two options the Postal Service should consider that would reduce the number of area and district offices. Further, we identified a third option the Postal Service should consider that would relocate area offices to headquarters. The Postal Service should develop a comprehensive strategic plan that would guide future field structure decisions and explore the viability of relocating area offices to headquarters. At a minimum, this strategic plan would provide the Postal Service with a method to evaluate and define an economic, efficient, and effective field structure to oversee its universal service mission. The strategic plan would also provide the needed foundation to develop a more flexible area and district field structure and workforce that is responsive to changing demand. During the development of a comprehensive strategic plan, fundamental issues such as the functional need for area and/or district offices, right-sized staffing, operational impact, geographic distribution, and the ideal location for area offices should be addressed.

Because consolidations were limited and management did not have documentation of data used to make the decisions, we could not fully evaluate the effectiveness of the recent area and district consolidations. However, headquarters, area, and district management we interviewed believed the consolidations went smoothly and had no negative impact on operations.

Postal Service Can Consolidate

Although the Postal Service recently consolidated one area and six district offices, we identified three other options, done separately or in combination, to consolidate its field structure further:

• Eliminate 14 offices by consolidating districts that have offices within 50 miles of another district office.

• Eliminate four area and 32 district offices by consolidating those offices whose workhours and mail volume are both below the mean mail volume and workhours.
• Eliminate duplicative staff positions and better position area management to work strategically with headquarters by relocating all area offices to headquarters.

In exploring the viability of relocating area offices to headquarters and determining field structure, the Postal Service should develop a comprehensive strategic plan. To develop the plan, management should study spans of control, environmental and operational factors, and other issues impacting the Postal Service. Having a comprehensive strategic plan will enable the Postal Service to have a supportable
method to evaluate and oversee its universal service mission and adjust its organizational structure when circumstances warrant. Such a plan would be useful in developing a more flexible area and district field structure and a workforce that can respond to changes in Postal Service operations. While the Postal Service did take a step towards developing a workforce plan by contracting for a study of critical mission
skills, they have not yet developed a comprehensive plan that addresses the area and district field structure.

Management could not address why a comprehensive strategic plan has not been developed for area and district optimization. They stated they did not review all offices for consolidations across the country for the 2009 consolidations, because it would have taken significantly more time. Rather, management limited the district consolidations to those they believed could be accomplished quickly with no negative impact to operations. See Appendix B for our detailed analysis of this topic.

Implementing option 1, the most conservative of the options, closing district offices that are within 50 miles of one another, the Postal Service can save approximately $33.6 million annually or $289 million over 10 years. See Appendix C for monetary impact. Option 2, closing area and districts that have less than the mean mail volume and workhours, the Postal Service can save approximately $104 million annually or $894 million over 10 years. We did not estimate the cost savings that could be realized for option 3 due to the many factors associated with such a move. However, we believe this option provides both overall cost savings and other non-financial benefits.

The office of Senator Tom Carper of delaware issued the following press release:

WASHINGTON – Today, Sen. Tom Carper (D-Del.) introduced the Postal Operations Sustainment and Transformation (POST) Act of 2010. The POST Act addresses the current budget issues plaguing the U.S. Postal Service by proposing a series of provisions including: easing postal employee pension and retiree health costs; addressing postal employee wages and benefits; allowing partnerships with state and local governments; and giving the Postal Service leeway to close post offices, market certain non-postal items, and eliminate Saturday delivery.

“For decades, Americans have taken the Postal Service for granted. We’ve assumed that it would always be there. But our troubled economy – coupled with the continued migration to electronic forms of communication – is putting the future of the Postal Service in jeopardy,” said Sen. Carper. “If we do nothing, we face a future without the valuable services the Postal Service provides. However, if we act quickly, we can turn things around by passing this necessary bill that would give the Postal Service the room it needs to manage itself and avoid it becoming the latest victim of Congressional gridlock.

“Under the leadership of Postmaster General Potter, the Postal Service has made tremendous efforts to cut costs. They’ve also put forth a plan that shows a commitment to further cost cutting and efforts to make their business relevant during these changing times. Achieving these goals will require a shared sacrifice on the parts of the Postal Service, postal employees, and major postal customers.”

“Legislation introduced today by Senator Tom Carper is a roadmap to recovery for the Postal Service,” said Postmaster General John E. Potter. “It incorporates many of the key elements we have identified as necessary and essential to allow the Postal Service to meet the changing needs of its customers.

“This legislation is creative in that it alleviates our retiree health benefit burden while bringing resolution to the pension overpayment dilemma we’ve faced. It permits us to step into the 21st Century by enabling elemental reforms to our network, our infrastructure, and our labor relations and it reduces the number of days we provide door to door delivery service to more closely align our costs and the needs of our customers.

“We commend Senator Carper for his leadership and thank him for his continued support of the Postal Service and his recognition of the vital role we play in the lives of the American people.”

Sen. Carper’s bill attempts to permanently address the pension and retiree health issues that have been a drain on postal finances over the years. The Postal Service currently pays into the old Civil Service Retirement System (CSRS) using a formula that recent studies by the Postal Service’s Inspector General, the Postal Regulatory Commission, and at least two outside consulting firms found resulted in gross overpayments. In addition, the Postal Service since FY2007 has been required to pay between $5.5 billion and $5.9 billion a year in an effort to prefund its future retiree health obligations. Sen. Carper’s bill would require the Office of Personnel Management to recalculate the Postal Service’s CSRS obligations using a modern formula that more fairly divides responsibility for pension costs related to pay increases granted to former Post Office Department employees who transitioned to the Postal Service between the Postal Service and the federal government. This recalculation would result in a finding that the Postal Service has overfunded CSRS by about $50 billion. Sen. Carper’s bill would give the Postal Service more than $5 billion each year from this $50 billion overpayment to help it make its retiree health payments.

Another provision of Sen. Carper’s bill would reaffirm the Postal Service’s authority to reduce delivery frequency when it felt like doing so was necessary. Based on the Postal Service’s proposal to eliminate Saturday delivery, such authority could save the Postal Service $3 billion or more a year. The bill would also eliminate several provisions in law that force the Postal Service to maintain post offices that are no longer necessary, allowing the Postal Service to open cheaper, more convenient retail options such as automated kiosks or postal stations located in grocery stores or other places where people go every day.

Under current law, the Postal Service is prohibited with a few exceptions from offering “non-postal” products and services; however, Sen. Carper’s bill would revise the prohibition, allowing the Postal Service to offer non-postal products that are in the public interest and make use of the existing postal network. Additionally, the new bill would allow the Postal Service to ship wine and beer, a service UPS and FedEx already provides, and to work with state and local governments seeking to use postal retail locations to serve citizens seeking to access services such as voter registration or driver’s license renewal.

Finally, Sen. Carper’s legislation seeks to reform the way in which Postal employees’ wages and benefits are determined. Wages and benefits currently account for roughly 80 percent of the Postal Service’s expenses. On top of this, the Postal Service is required under the law to pay its employees wages and benefits that are comparable to those paid in the private sector. At times, arbitrators have awarded postal employees what they believe are comparable pay and benefits without taking the Postal Service’s financial condition into account. Recognizing that this situation cannot continue in a world where the Postal Service operates under a rate cap and faces stiffer competition from electronic communication, the bill requires arbitrators to take the Postal Service’s financial condition into account along with other factors such as the comparability requirement and the details of the rate system.

The POST Act would provide relief starting in the next fiscal year, FY11. Since the Postal Service will be unable to make the retiree health payment due on September 30 of this year, however, Congress will need to enact legislation to prevent a Postal Service default or a disruption in postal operations as it did in FY09. Sen. Carper’s bill aims to permanently end the need for similar one-year fixes.

Steven M. Dettelbach, United States Attorney for the Northern District of Ohio, today announced that a federal grand jury has returned an indictment charging Brenda Moore, age 48, of East Cleveland, Ohio, with theft of mail by a postal employee and unauthorized opening of mail by a postal employee.

The indictment charges that on June 24, 2010, Brenda Moore, a clerk assigned to the Station B/C, Cleveland, Ohio, stole $500.00 which had come into her possession to be conveyed by mail and that on January 26, 2010, stole $2,000.00 which had come into her possession to be conveyed by mail. The indictment also charges that on January 26, 2010, and June 24, 2010, Brenda Moore, without authorization, opened mail not directed to her.

The indictment was presented to the grand jury by Assistant United States Attorney Gregory C. Sassé after investigation by the United States Postal Service Office of Inspector General.

If convicted, the defendant’s sentence will be determined by the Court after a review of factors unique to the case, including the defendant’s prior criminal record, if any, the defendant’s role in the offense, and the characteristics of the violation. In all cases the sentence will not exceed the statutory maximum and in most cases it will be less than the maximum.

The National Association of Letter Carriers released this letter to the editor of the Washington Times responding to yesterday’s column by Congressman Darrell Issa claiming, among other things, that the US Postal Service was seeking a “taxpayer bailout”:

September 21, 2010
Letter to the Editor
Washington Times

To whom it may concern:

It’s election time in an era of extreme political polarization. But that does not excuse misleading the public with false claims that the Postal Service is seeking a taxpayer bailout. Nor does it excuse Congress interfering with collective bargaining between the financially self-sufficient Postal Service and its unions. Unfortunately, the opinion piece by Rep. Darrell Issa (RCA), the Ranking Member of the House Committee on Oversight and Government Reform, fails on both counts. (“Time for another government bailout,” September 20, 2010.)

The Postal Service is not seeking a taxpayer bailout. Rather it is proposing to use a massive surplus in its pension account within the Civil Service Retirement System (paid for by postage rate payers and postal employees — its own funds, not taxpayer funds) to cover the cost of future retiree health benefits. The cost of prefunding these future retiree health benefits, some $5.6 billion per year, was imposed on the USPS by Congress in 2007, just as the economy crashed. This requirement, which no other agency or private business in America faces, caused the recent financial crisis at the USPS not the internet or the recession, though both factors have made things worse. Read the rest of this entry »

Yesterday Republican Congressman Darrel Issa of California wrote an opinion piece in the Washington Times in which he characterized the postal service’s request for relief from the retiree pre-funding requirement as a “taxpayer bailout”, even though no taxpayer funds are involved. What Issa didn’t mention was that just a year ago he not only voted in favor of a similar measure, but helped shepherd it through the Congressional Oversight Committee where he is the ranking Republican. The “United States Postal Service Financial Relief Act of 2009″ allowed the USPS to “to reduce the amount that the United States Postal Service is required to pay into the Postal Service Retiree Health Benefits Fund by the end of fiscal year 2009″ by $4 billion! In June 2009, as the bill made its way through the House, NALC President Bill Young pointed out that “Full Committee Ranking Member Darrel Issa (R-CA) and Subcommittee Ranking Member Jason Chaffetz (R-UT) were instrumental in the passage of the amended bill.” When it passed the full House, by a lopsided 388-32 margin, NALC President Fred Rolando “expressed appreciation to the bipartisan leadership of the House Government Reform Committee, including Chairman Towns and ranking Republican Darrell Issa of California, as well as subcommittee Chairman Stephen Lynch (D-MA) and ranking Republican Jason Chaffetz of Utah for fighting so long and hard for H.R. 22.”

Why the sudden about face for a politician who has happily accepted campaign contributions from postal union PACs, and has even addressed meetings of the NALC?