posted on December 4, 2011 04:36:48 PM new
U.S. Postal Service Faces Bankruptcy, Plans Cuts To Slow Delivery Of First Class Mail
WASHINGTON Facing bankruptcy, the U.S. Postal Service is pushing ahead with unprecedented cuts to first-class mail next spring that will slow delivery and, for the first time in 40 years, eliminate the chance for stamped letters to arrive the next day.
The estimated $3 billion in reductions, to be announced in broader detail on Monday, are part of a wide-ranging effort by the cash-strapped Postal Service to quickly trim costs, seeing no immediate help from Congress.
The changes would provide short-term relief, but ultimately could prove counterproductive, pushing more of America's business onto the Internet. They could slow everything from check payments to Netflix's DVDs-by-mail, add costs to mail-order prescription drugs, and threaten the existence of newspapers and time-sensitive magazines delivered by postal carrier to far-flung suburban and rural communities.
That birthday card mailed first-class to Mom also could arrive a day or two late, if people don't plan ahead.
"It's a potentially major change, but I don't think consumers are focused on it and it won't register until the service goes away," said Jim Corridore, analyst with S&P Capital IQ, who tracks the shipping industry. "Over time, to the extent the customer service experience gets worse, it will only increase the shift away from mail to alternatives. There's almost nothing you can't do online that you can do by mail."
The cuts, now being finalized, would close roughly 250 of the nearly 500 mail processing centers across the country as early as next March. Because the consolidations typically would lengthen the distance mail travels from post office to processing center, the agency also would lower delivery standards for first-class mail that have been in place since 1971.
Currently, first-class mail is supposed to be delivered to homes and businesses within the continental U.S. in one day to three days. That will lengthen to two days to three days, meaning mailers no longer could expect next-day delivery in surrounding communities. Periodicals could take between two days and nine days.
About 42 percent of first-class mail is now delivered the following day. An additional 27 percent arrives in two days, about 31 percent in three days and less than 1 percent in four days to five days. Following the change next spring, about 51 percent of all first-class mail is expected to arrive in two days, with most of the remainder delivered in three days.
The consolidation of mail processing centers is in addition to the planned closing of about 3,700 local post offices. In all, roughly 100,000 postal employees could be cut as a result of the various closures, resulting in savings of up to $6.5 billion a year.
Expressing urgency to reduce costs, Postmaster General Patrick Donahoe said in an interview that the agency has to act while waiting for Congress to grant it authority to reduce delivery to five days a week, raise stamp prices and reduce health care and other labor costs.
The Postal Service, an independent agency of government, does not receive tax money, but is subject to congressional control on large aspects of its operations. The changes in first-class mail delivery can go into place without permission from Congress.
After five years in the red, the post office faces imminent default this month on a $5.5 billion annual payment to the Treasury for retiree health benefits. It is projected to have a record loss of $14.1 billion next year amid steady declines in first-class mail volume. Donahoe has said the agency must make cuts of $20 billion by 2015 to be profitable.
It already has announced a 1-cent increase in first-class mail to 45 cents beginning Jan. 22.
"We have a business model that is failing. You can't continue to run red ink and not make changes," Donahoe said. "We know our business, and we listen to our customers. Customers are looking for affordable and consistent mail service, and they do not want us to take tax money."
Separate bills that have passed House and Senate committees would give the Postal Service more authority and liquidity to stave off immediate bankruptcy. But prospects are somewhat dim for final congressional action on those bills anytime soon, especially if the measures are seen in an election year as promoting layoffs and cuts to neighborhood post offices.
Technically, the Postal Service must await an advisory opinion from the independent Postal Regulatory Commission before it can begin closing local post offices and processing centers. But such opinions are nonbinding, and Donahoe is making clear the agency will proceed with reductions once the opinion is released next March.
"The things I have control over here at the Postal Service, we have to do," he said, describing the cuts as a necessary business decision. "If we do nothing, we will have a death spiral."
The Postal Service initially announced in September it was studying the possibility of closing the processing centers and published a notice in the Federal Register seeking comments. Within 30 days, the plan elicited nearly 4,400 public comments, mostly in opposition.
Among them:
_Small-town mayors and legislators in states including Illinois, Missouri, Ohio and Pennsylvania cited the economic harm if postal offices were to close, eliminating jobs and reducing service. Small-business owners in many other states also were worried.
"It's kind of a lifeline," said William C. Snodgrass, who owns a USave Pharmacy in North Platte, Neb., referring to next-day first-class delivery. His store mails hundreds of prescriptions a week to residents in mostly rural areas of the state that lack local pharmacies. If first-class delivery were lengthened to three days and Saturday mail service also were suspended, a resident might not get a shipment mailed on Wednesday until the following week.
"A lot of people in these communities are 65 or 70 years old, and transportation is an issue for them," said Snodgrass, who hasn't decided whether he will have to switch to a private carrier such as UPS for one-day delivery. That would mean passing along higher shipping costs to customers. "It's impossible for many of my customers to drive 100 miles, especially in the winter, to get the medications they need."
_ESPN The Magazine and Crain Communications, which prints some 27 trade and consumer publications, said delays to first-class delivery could ruin the value of their news. Their magazines are typically printed at week's end with mail arrival timed for weekend sports events or the Monday start of the work week. Newspapers, already struggling in the Internet age, also could suffer.
"No one wants to receive Tuesday's issue, containing news of Monday's events, on Wednesday," said Paul Boyle, a senior vice president of the Newspaper Association of America, which represents nearly 2,000 newspapers in the U.S. and Canada. "Especially in rural areas where there might not be broadband access for Internet news, it will hurt the ability of newspapers to reach customers who pretty much rely on the printed newspaper to stay connected to their communities."
_AT&T, which mails approximately 55 million customer billing statements each month, wants assurances that the Postal Service will widely publicize and educate the public about changes to avoid confusion over delivery that might lead to delinquent payments. The company is also concerned that after extensive cuts the Postal Service might realize it cannot meet a relaxed standard of two-to-three day delivery.
Other companies standing to lose include Netflix, which offers monthly pricing plans for unlimited DVDs by mail, sent one disc or two at a time. Longer delivery times would mean fewer opportunities to receive discs each month, effectively a price increase. Netflix in recent months has been vigorously promoting its video streaming service as an alternative.
"DVD by mail may not last forever, but we want it to last as long as possible," Netflix CEO Reed Hastings said this year.
Maine Sen. Susan Collins, the top Republican on the Senate committee that oversees the post office, believes the agency is taking the wrong approach. She says service cuts will only push more consumers to online bill payment or private carriers such as UPS or FedEx, leading to lower revenue in the future.
"Time and time again in the face of more red ink, the Postal Service puts forward ideas that could well accelerate its death spiral," she said, urging passage of a bill that would refund nearly $7 billion the Postal Service overpaid into a federal retirement fund, encourage a restructuring of health benefits and reduce the agency's annual payments into a retiree health account.
That measure would postpone a move to five-day-a-week mail delivery for at least two years and require additional layers of review before the agency closed postal branches and mail processing centers.
"The solution to the Postal Service's financial crisis is not easy but must involve tackling more significant expenses that do not drive customers," Collins said.
In the event of a shutdown due to bankruptcy, private companies such as FedEx and UPS could handle a small portion of the material the post office moves, but they do not go everywhere. No business has shown interest in delivering letters everywhere in the country for a set rate of 44 cents or 45 cents for a first-class letter.
Ruth Goldway, chair of the Postal Regulatory Commission, said the planned cuts could test the limits of the Postal Service's legal obligation to serve all Americans, regardless of geography, at uniform price and quality. "It will have substantial cost savings, but it really does have the potential to change what the postal service is and its role in providing fast and efficient delivery of mail," she said.
posted on December 4, 2011 05:44:35 PM new
"Maine Sen. Susan Collins, the top Republican on the Senate committee that oversees the post office, believes the agency is taking the wrong approach. She says service cuts will only push more consumers to online bill payment or private carriers such as UPS or FedEx, leading to lower revenue in the future."
I agree. Apparently the USPS is, and will continue to be in a death spiral, without the help of Congress.
This will not be good for sellers, as there will be higher shipping costs and later deliveries.
posted on December 5, 2011 03:03:18 AM new
So,does she have a solution to the problem?
It is just not profitable to deliver first class letter for 44 cents when gas is 3-4 dollars a gallon and wages and health benefits are not coming down.
But who would fund billion dollars of pension liability on 44 cents first class mail?
This is like selling 99 cents keychain on Ebay to pay for your mortgage on a multi millions dollars mansion?
posted on December 5, 2011 09:40:24 AM new
It is not like they just wake up and find out more people are emailing each other,they should be the first to know what happens,look at the packages they have been delivering .
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posted on December 5, 2011 11:18:22 PM new
Welllll, I have to say that we're lucky to have a postal service that we can trust. I know there are bad eggs everywhere, but when I consider what I hear about postal service in other countries, I think we can be glad we're here.
It seems silly to expect any letter to get from here to there in one day.
On the other hand, I'm worried about increased postal rates, even though I'm cutting way back on my eBay selling.
_____________________
Gandhi's seven deadly social sins:
Politics without principle
Wealth without work
Commerce without morality
Pleasure without conscience
Education without character
Science without humanity
Worship without sacrifice
posted on December 6, 2011 08:03:24 AM new
USPS rates is still cheaper than UPS and Fed Exp.
I am happy with USPS service,I ship 100% USPS.
Question- I live in a subdivision,we have those mail stations where 15 households share one station,I dont know what is the proper name for it,but the postman uses a key to open all the mailboxes.
So if a package is scanned delivered but delivered by mistake to my neighbor mailbox,who loses?
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posted on December 18, 2011 10:19:19 AM new
"After five years in the red, the post office faces imminent default this month on a $5.5 billion annual payment to the Treasury for retiree health benefits."
We can thank Republicans for this poison pill disaster. It was Republicans during the Bush Administration who created this poison pill to kill off the Post Office. It was done in the middle of the night and was meant to kill off the Post Office in favor of private companies such as Fed Ex and UPS. Darrell Issa continues the assault.
What is this poison pill I describe???
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"The USPS finds itself today in a financial pickle because of the Republican Congress of 2006. In 2006, the Congress passed what is known as the Postal Accountability and Enhancement Act of 2006. What this legislation did was essentially break the back of the Postal Service, financially.
The stated intention was to pre-fund healthcare for future retirees for the next 75 years. As part of their war on "good government" (public perception being the USPS is a government agency) It put requirements on the USPS that do not apply to any other agency or corporation. They required the USPS to set aside every year, for 10 years, $5.5 Billion dollars for future retiree health benefits. In other words, the USPS starts every year in a $5.5 Billion Dollar hole. In my opinion this was a poison pill to kill-off the USPS."
Darryl Issa continues to work against the USPS, attempting to accelerate the death of USPS with additional legislation. "Again. The USPS is not funded by the taxpayer, yet Rep. Darrell Issa, R-Calif., chairman of the House Committee on Oversight and Government Reform had this to say about the USPS -
"USPS has felt the need to give themselves a taxpayer-funded bailout. This unprecedented action indicates the urgent need for these reforms"
Excerpt from the Thom Hartman Show
--------------
You can find tons of articles about how Republicans began this slow death of the Post office, but you have to look for articles referring to the 2006 bill, not the latest breaking news... 5 years after the bill was implemented.
I'm sure some of you will rub your eyes in disbelief, but ask yourself... who the hell socks away $5 billion each year for pension plans for people who are yet to be born? That is exactly what the Republicans set up.
posted on December 18, 2011 12:22:37 PM new
Estimating pension liability is like shooting a moving target-workers quit, retire,die,marry,take on more dependents,divorce,remarry,have children,adopt more children,children reach 18 years of age,step children with remarriage etc.
It is not like staring at a dead pool of stale water which does not change .
Congress does not have a crystal ball to see what internet can do to USPS business,even companies in private industries such as Barnes and Noble,BestBuy underestimate how people use internet for shopping and connecting with each other.
But counting on nickel and dimes to finance bilion dollars liability is not too smart,no differente than Ebay sellers selling 99 cents metal key chains to sustain a yuppy lifestyle with milion dollar mansion and BMW and eating out,joining health club and taking fancy vacations.
Wonder when will USPS start auctioning off their post office fixtures on Ebay?
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posted on December 18, 2011 07:25:33 PM new
Even third world countries have a postal system. Surely the USPS will survive!
I know it may be difficult with the current change but if they can hang on two more years.
posted on December 18, 2011 08:43:00 PM new
USPS is a huge organisation which has been in existance for many years,why blame the congress or anyone ,if USPS thinks it is not the right thing to do,then they should speak up and explain their situation.
Whether law is passed or not,the pension liability is there,the day of reckoning will come .
This is like the dog eats my homework,we are all too old to blame others for things which did not work out down the road.
Ebay has over 160,000 rules,do we go around and blame Ebay if we sold an item below our cost or find out we did not charge enough for shipping?
USPS is not the only entity which has problem funding pension benefits,many cities and states have the same problem,ask California governor !
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posted on December 18, 2011 08:47:04 PM new
USPS knows they only have a small share of the package delivery business so they will look into expanding it.
I used to spend no more than 40 dollars buying postage stamps in one year and now I am spending thousand of dollars buying postage for my internet business.
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If you read your article, it clearly states, "AFTER 5 YEARS IN THE RED, the post office faces imminent default this month on a $5.5 billion annual payment to the Treasury for retiree health benefits. It is projected to have a record loss of $14.1 billion next year amid steady declines in first-class mail volume. Donahoe has said the agency must make cuts of $20 billion by 2015 to be profitable."
In 2006, USPS was required to give 5.5 billion dollars each year towards funding a pension plan 75 years into the future. Exactly 5 years ago when this bill was implemented is when USPS started running in the red. Coincidence?
USPS is required by Congress to fund a retirement plan for people who will begin working for USPS in the year 2056 if they were to retire after 30 years of service. What company in the world can operate in the black with that type of burden?
posted on December 20, 2011 04:01:34 PM new
USPS is required by Congress to fund a retirement plan for people who will begin working for USPS in the year 2056 if they were ???
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Pension liability is accrued based on existing workforce,are you saying that 5.5 billion dollars per year includes those who are not born yet?
I dont see how 75 years means a big deal ,insurance company design annuity which will pay you as long as you live,but we know better,unless its policyholders are immortals.
Consider the size of USPS,5.5 billions dollars may not be outrageous,people are living longer now.
I am reading an article now of a small town Crystal Falls in RHONE ISLAND,some of their retiree checks have been cut from 27,000 to 12,000 as the city is bankrupt.
This may be OT,but Japanese retirees reap a windfall when they retire in the 80s ,then as Japan falls into a state of stagnation and deflation,retirees find that they can now afford things they cannot afford in the 80s like the fancy tuna and other delicacies!
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[ edited by hwahwa on Dec 20, 2011 04:02 PM ]
[ edited by hwahwa on Dec 20, 2011 04:03 PM ]
posted on December 20, 2011 09:15:07 PM new
Yes, Congress passed the Postal Accountability and Enhancement Act of 2006... 5 years ago.
This bill was designed to require that USPS pre-fund their retirement health program 75 years in advance over a 10 year period. So, USPS has had to pay 5.5 billion at the beginning of each fiscal year, essentially starting in the hole.
This means that USPS needs to have the money by 2016 to fund 75 years of health benefits for future retirees. USPS needs to have funds by 2016 to pay for new employees who won't be hired until the year 2056. Those people are eligible for their benefits after 30 years of USPS service. 30 years of employment is 2086... or 75 years from 2011.
[ edited by shagmidmod on Dec 20, 2011 09:15 PM ]
posted on December 21, 2011 11:59:37 AM new
What a punishment,why didn't the USPS speak up if they cant afford to do so?
From what I read,first class mail has been steadily dropping,as much as 1 billion pieces less each year,I assume these are 44 cents letters we send to each other to say hello or happy birthday or life in general.
These have been replacd by first class mail packages we sent to each other via Ebay or AMZN or Yahoo sales,minimum cost is 1.75 including online tracking,may be not one billion such packages were sent,but each 1.75 package can replace four 44 cents letters.
USPS wil be working on getting more package delivery business,this is where the money is,plus signature confirmation and insurance.
posted on December 21, 2011 12:02:07 PM new
USPS operating costs must have gone up too,when oil was at 143 dollars a barrel,USPS cried as the housing boom created many subdivisions far away from city and the postman must drive farther to deliver mail .
And lets not forget the ever rising healthcare cost !
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posted on December 22, 2011 03:40:25 PM new
hwa- I wish I could answer the question about USPS officials speaking up. I honestly don't know if they did or not. From what I can tell on the history of the bill, it was literally created and passed in the House and Senate within 1 day, likely done so that nobody would notice it until after it was signed into law.
The initial bill was created on 12/7/2006, voted on at 10:11pm on 12/8/2006 with just 20 minutes of debate. It was sent to the Senate same night and passed the next day with unanimous consent (voice vote). President Bush signed into law on 12/20/2006 just before Christmas recess.
The bill had 67 pages, so you know that nobody read it before voting on it considering all the other bills crammed through just before a recess.
posted on December 22, 2011 03:43:56 PM new
Everyone can find the bill online: http://thomas.loc.gov/cgi-bin/bdquery/z?d109:HR06407:@@@X
HR 6407 (2006), Section 803.
It reads as follows:
SEC. 803. HEALTH INSURANCE.
(a) IN GENERAL.
(1) FUNDING.Chapter 89 of title 5, United States Code,
is amended
(A) in section 8906(g)(2)(A), by striking shall be paid
by the United States Postal Service. and inserting shall
through September 30, 2016, be paid by the United States
Postal Service, and thereafter shall be paid first from the
Postal Service Retiree Health Benefits Fund up to the
amount contained in the Fund, with any remaining amount
paid by the United States Postal Service.; and
(B) by inserting after section 8909 the following:
§ 8909a. Postal Service Retiree Health Benefit Fund
(a) There is in the Treasury of the United States a Postal
Service Retiree Health Benefits Fund which is administered by
the Office of Personnel Management.
(b) The Fund is available without fiscal year limitation for
payments required under section 8906(g)(2)(A).
(c) The Secretary of the Treasury shall immediately invest,
in interest-bearing securities of the United States such currently
available portions of the Fund as are not immediately required
for payments from the Fund. Such investments shall be made
in the same manner as investments for the Civil Service Retirement
and Disability Fund under section 8348.
(d)(1) Not later than June 30, 2007, and by June 30 of each
succeeding year, the Office shall compute the net present value
of the future payments required under section 8906(g)(2)(A) and
attributable to the service of Postal Service employees during the
most recently ended fiscal year.
(2)(A) Not later than June 30, 2007, the Office shall compute,
and by June 30 of each succeeding year, the Office shall recompute
the difference between
(i) the net present value of the excess of future payments
required under section 8906(g)(2)(A) for current and future
United States Postal Service annuitants as of the end of the
fiscal year ending on September 30 of that year; and
(ii)(I) the value of the assets of the Postal Retiree Health
Benefits Fund as of the end of the fiscal year ending on September
30 of that year; and
(II) the net present value computed under paragraph (1).
(B) Not later than June 30, 2017, the Office shall compute,
and by June 30 of each succeeding year shall recompute, a schedule
including a series of annual installments which provide for the
liquidation of any liability or surplus by September 30, 2056, or
within 15 years, whichever is later, of the net present value determined
under subparagraph (A), including interest at the rate used
in that computation.
(3)(A) The United States Postal Service shall pay into such
Fund
(i) $5,400,000,000, not later than September 30, 2007;
(ii) $5,600,000,000, not later than September 30, 2008;
(iii) $5,400,000,000, not later than September 30, 2009;
(iv) $5,500,000,000, not later than September 30, 2010;
Deadlines.
VerDate 14-DEC-2004 15:25 Feb 22, 2007 Jkt 059139 PO 00435 Frm 00055 Fmt 6580 Sfmt 6581 E:\PUBLAW\PUBL435.109 APPS06 PsN: PUBL435
120 STAT. 3252 PUBLIC LAW 109435DEC. 20, 2006
(v) $5,500,000,000, not later than September 30, 2011;
(vi) $5,600,000,000, not later than September 30, 2012;
(vii) $5,600,000,000, not later than September 30, 2013;
(viii) $5,700,000,000, not later than September 30, 2014;
(ix) $5,700,000,000, not later than September 30, 2015;
and
(x) $5,800,000,000, not later than September 30, 2016.
(B) Not later than September 30, 2017, and by September
30 of each succeeding year, the United States Postal Service shall
pay into such Fund the sum of
(i) the net present value computed under paragraph (1);
and
(ii) any annual installment computed under paragraph
(2)(B).
posted on December 22, 2011 03:46:34 PM new
You and I may not want to read it,but I am sure USPS executives must have read it,and know it is coming or may have some input into it.
USPS must be over a hundred years old,it is too old to blame its problems on others,grow up !
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