The postmaster general announced on Thursday, May 17, that he would move forward with the closing of hundreds of mail-processing plants. That followed his announcement on Wednesday, May 9, that rather than proceed with post office closings he would sharply reduce hours in thousands of rural post offices.

In response to the latest announcement, NALC President Fredric Rolando said: “Since $3.1 billion of the reported $3.2 billion loss in the most recent fiscal quarter stems from pre-funding future retiree health benefits—which no other entity in America is compelled to do—the USPS and congressional response ought to address the actual problem. Moreover, what’s lacking is a business plan for the future that takes advantage of opportunities to meet the needs of an evolving society. Dismantling the network and reducing services to Americans and their businesses is not a business plan.”

The Republican-controlled House of Representatives, on a mostly party-line vote, approved a budget measure Thursday that would require federal employees in both the Civil Service Retirement System and the Federal Employees Retirement System to contribute 5 percent more of salary toward their pensions—in effect, a 5 percent cut in pay phased in for current workers over five years. Click here to read more.

May 10, 2012 — Today’s U.S. Postal Service’s announcement about the most recent fiscal quarter reinforces our view of the financial situation facing the USPS and how it can be fixed.

The Postal Service reports that 96 percent of its losses – $3.05 billion out of $3.18 billion – have nothing to do with mail delivery expenses, but rather result from an external political mandate. Since 2007, Congress has compelled the Postal Service to pre-fund future retiree health benefits for 75 years into the future, an obligation that will cost the USPS $11 billion this year. No other public agency or private company in the country is compelled to pre-fund.

Today’s report follows on last quarter’s financial statement by the Postal Service, which also showed that in operational terms the Postal Service is doing quite well – in fact last quarter there was a $200 million profit delivering the mail, with pre-funding accounting for all the losses.

The Postal Service’s own data shows that the first thing Congress needs to do is address this artificial political burden that is driving almost all the red ink. For the first half of this fiscal year, the USPS reports that pre-funding accounts for $6.2 billion of the $6.5 billion in red ink.

It would be absurd to start to dismantle the universal network and degrade service to the American people and America’s businesses – when almost all of the red ink has nothing to do with the costs of those services but stems directly from a burden that Congress imposed and Congress could fix overnight.

The service reductions called for in the Senate bill, and the worse ones called for in the House bill, would not fix the actual financial drain on the Postal Service. Rather, they would worsen things by driving customers away and reducing revenue.

We acknowledge that a thoughtful restructuring of the Postal Service is needed to adapt to the country’s changing needs. For 200 years, the USPS has adapted to an evolving society. Neither of the bills before Congress provides for such a thoughtful or constructive approach.

The Postal Service’s own figures and statement shows that the major cause of the financial problems is not – despite the conventional wisdom – Internet competition. In fact, the USPS today, as last quarter, cited a sharp rise in the shipping of packages ordered online as contributing to the good operational performance. That bodes well for the future, because that part of the business will continue to grow. If Congress will step up and fix the pre-funding problem it created, the USPS can focus on taking full advantage of this and other opportunities to better serve the public.

For 30 years, the Postal Service has not used a dime of taxpayer money, while providing the world’s most efficient and most affordable delivery service.

“Keep your chin up; this fight is far from over,” Rolando says

Amendment to save door-to-door passes

The United States Senate adopted a deeply flawed postal reform bill on Wednesday, voting for S. 1789, the 21st Century Postal Service Act, by a vote of 62 to 37.

The legislation embraces a downsizing strategy and fails to fully lift the onerous burden to fund decades of future retiree health benefits decades in advance. If it were to become law, it would be almost impossible to save Saturday mail delivery for the American people and their businesses.

The bill gives the postmaster general the authority to propose a switch to five-day delivery in two years—at a cost of 80,000 jobs—if he believes such a change is necessary to preserve the “solvency” of the Postal Service, subject to review by the Postal Regulatory Commission (PRC) and the Government Accountability Office (GAO). Although the bill reduced the level of required pre-funding, the cost of the mandate is still too heavy to allow the USPS to regain a sound financial footing.

“We’re disappointed, but we are determined to fight on,” NALC President Fredric Rolando said after the vote. He reminded letter carriers that the legislative process is far from over. “It may take months to get a bill through the House of Representatives,” he said, “but we will not rest in this struggle to defend a strong and viable Postal Service.”

Despite the truly regressive nature of the House Republican bill, H.R. 2309, the NALC’s top priorities—preserving six-day delivery and fixing the pension and health care funding provisions of the law—have a lot of bi-partisan support in the House. Indeed, a majority of representatives support both H. Res. 137 (regarding six-day service) and H.R. 1351 (regarding pension equity). President Rolando vowed a spirited campaign in the House. Once that body acts, the process will not be over. A conference committee would have to reconcile the competing bills, and President Obama would be able to weigh in on the legislation—since a final bill that passed both houses would not become law unless he signed it.

“I want to thank the thousands of letter carriers who joined together to lobby the Senate this week,” Rolando said. “We flooded the Senate this week with tens of thousands of calls and other contacts. We did not prevail in striking the five-day delivery provision or the regressively unfair FECA cuts in S. 1789, but we did protect tens of thousands of letter carrier jobs by winning the adoption of the door-to-door delivery amendment sponsored by Senator Chuck Schumer [D-NY]. We also removed an anti-FEHBP health care proposal thanks to an amendment from Senator Jay Rockefeller [D-WV].

“We thank both of those senators as well as Senators Udall of New Mexico and Akaka of Hawaii for leading the fight on all our amendments. Thanks also go to Senator Bernie Sanders [D-VT] for his months of relentless work to support the Postal Service and its workers.

“Last, but not least, I want to thank the staff of our Legislative and Political Affairs Department who worked ’round the clock for the members. We are grateful for all their hard work.”

“Keep your chins up, brothers and sisters,” Rolando concluded. “This fight to save America’s Postal Service is far from over.”

April 24, 2012 — The Senate voted Tuesday to begin the slow dismantling of the United States Postal Service and to attack injured postal workers by slashing their workers’ compensation benefits.

The NALC has argued for months that S. 1789 would fail to preserve the long-term viability of the Postal Service because it embraces the downsizing plans of Postmaster General Pat Donahoe. Today, by voting against an amendment offered by Sen. Tom Udall (D-NM) to preserve six-day delivery (by a vote of 56 to 43) and by voting to slash federal employee workers’ compensation benefits (by a vote of 53 to 46), the Senate has failed to improve a deeply flawed bill.

Senators ignored more than 25,000 phone calls from NALC members around the country Tuesday urging them to adopt these amendments. Now we have no choice now but to strongly oppose final passage of S. 1789, a vote on which is expected Wednesday in the Senate.

We cannot give up the fight for positive reform. So our first task must be to do everything we can defeat the 21st Century Postal Service Act when it comes up for a final vote tomorrow.

I urge you and every city letter carrier to call 1-888-863-6103 to be connected to your two senators’ offices. Tell your senators to vote “NO” on S. 1789. (If you have trouble getting through, call the Capitol Hill switchboard, 202-224-3121, and ask to be transferred to your senators.)

I know all of you share my deep disappointment with today’s action on the amendments. But we cannot let that disappointment diminish our energy or silence our voices. We must send a message to our representatives in the Senate that we cannot save the Postal Service by dismantling its greatest asset—the last-mile delivery network that our members make real every day. And no reform can justify the punitive workers’ compensation reforms shoe-horned into this bill.

We’ve been knocked down, but we have to get up right away and continue the fight.

Call 1-888-863-6103 and tell your senators to vote NO Wednesday on final passage of S. 1789.

Whatever happens tomorrow in the Senate, the fight to save America’s Postal service will go on. A bill doesn’t become law until both houses of Congress passes it and the president signs it.

We have a long battle ahead of us. If we stay together and mobilize all of our resources, we can prevail.

See below for how your senators voted.

On the Akaka amendment:

On the Udall amendment:

A new video urges Americans to contact their senators to tell them S. 1789 is not the solution to the challenges facing the Postal Service, as this piece of legislation advances a dangerously misguided strategy that purports to somehow “save” the Postal Service by cutting service to customers.

As noted above, the Senate may vote on this bill as early as Tuesday, and the video urges you to contact your senators right now to tell them S. 1789 is not a plan to reform the Postal Service. Click here to watch the video, then call 888-863-6103 to deliver the message.

April 20, 2012 — The April 8 deadline for mediation has passed and negotiations for a new National Agreement between the NALC and the U.S. Postal Service have concluded. The process now moves to interest arbitration.

Formal talks between the two parties began in August, three months before the Nov. 20 expiration date of the 2006-2011 contract. But following several extensions, the USPS announced on Jan. 20 that it was declining to further extend its collective-bargaining negotiations with the NALC.

“I am disappointed by the Postal Service’s decision,” NALC President Fredric Rolando said in January. “We have been making steady progress in negotiations, and our negotiations have been innovative, professional and productive and have been conducted at the highest level.”

About three weeks after the impasse was declared, Federal Mediation and Conciliation Service Director George Cohen announced the appointment of a mediator, attorney Joshua Javits, to help NALC and USPS reach a new agreement. The two parties agreed on a mediation deadline of April 8.

In mediation, the neutral mediator—in this case, Javits—is called upon to assist the parties to jointly explore and attempt to settle their differences. Javits held a number of meetings with both sides, both jointly and separately, and attempted to focus on the parties’ common interests. Unfortunately, an agreement could not be reached.

The process now moves to interest arbitration.

In interest arbitration, each party selects an arbitration advocate to represent it on a three-person board, with the third person being an independent and neutral third party chosen by both parties to resolve the dispute. Much like a court case, each side presents evidence through witness testimony and documents, complete with opening and closing arguments, chances for cross-examination and rebuttal. After the arbitrator takes time to review the case, he or she announces a decision and explains how the arbitration decision was reached.

As with mediation, there are advantages and disadvantages to resorting to interest arbitration. That step in the contract negotiation process generally is perceived as fair and unbiased, resolving a dispute with a measure of finality. A disadvantage, though, is that there is no guarantee that both sides will come out winners in an arbitration decision. Of course, even after the arbitration gets started, the NALC and USPS could still choose to settle on an agreement on their own, sidestepping the binding arbitration process.

The last time an NALC-USPS agreement was reached through interest arbitration was in the summer of 1999, following 23 days of intense hearings and live testimony from letter carriers about the realities of their working conditions, both on the workroom floor and in weather extremes delivering mail on their routes. The arbitration decision, announced in September 1999 by Arbitrator George Fleischli, resulted in a substantial win for the NALC, with a three-year pact that provided a rise to Grade 6 pay for all city letter carriers, annual wage increases and continued cost-of-living adjustments, and improved health care benefits.

“The negotiating atmosphere is a lot tougher in 2012 than it was 13 years ago,” Rolando said, “which is why we’ve literally been preparing for interest arbitration since the 2010 national convention in Anaheim.

“Our members should have faith that we continue to bring all our resources to bear on this effort to achieve a new National Agreement,” he said, “and will work day and night to make sure our full case gets heard by the arbitration board, just as we did at the bargaining table.”

See NALC Collective Bargaining Timeline

Statement of NALC President Fredric Rolando on the new version of S. 1789, The 21st Century Postal Service Act

April 17, 2012 — Today, the four co-sponsors of S. 1789 introduced a new version of their bill to reform the Postal Service and the Senate has voted to debate this legislation in the days ahead.

Although the National Association of Letter Carriers deeply appreciates the hard work of Sens. Joe Lieberman (I-CT), Susan Collins (R-ME), Tom Carper (D-DE) and Scott Brown (R-MA) in bringing this legislation to the floor, we cannot in good conscience support S. 1789 as currently drafted. We believe it will drive the Postal Service into a death spiral.

The legislation unwisely continues a policy adopted in 2006 that requires the Postal Service —and only the Postal Service—to massively pre-fund future retiree health insurance premiums decades in advance. No other company, agency or branch of government—including UPS, FedEx and the U.S. Congress—is required to pre-fund such benefits. The USPS has already set aside nearly $45 billion for future retiree health benefits, enough for nearly 30 years’ of premiums. Although S. 1789 would reduce the burden of pre-funding somewhat, the revised legislation retains a mandate on the Postal Service to plow $3.5 billion to $5 billion per year into its massive retiree health fund.

Unfortunately, the legislation fails to include the most sensible solution to the pre-funding burden that was included in predecessor bills sponsored by Sens. Carper and Collins (S. 1010 and S. 353). Those bills called on the Office of Personnel Management (OPM) to implement the results of an independent private-sector audit of the Postal Service’s account in the Civil Service Retirement System, conducted for the Postal Regulatory Commission. It found a surplus of $50 billion to $55 billion that, if recognized, would automatically be transferred into the Postal Service Retiree Health Benefit Fund (PSRHBF) in 2015. This would obviate the need for further pre-funding payments and the need for more counterproductive downsizing.

Despite this pre-funding burden, the bill maintains the current law’s rigidly inflexible price controls and strictly limits the range of services that can be provided.

To cover this unaffordable burden, the bill essentially endorses the gradual dismantling of one of America’s oldest and most beloved institutions, including eliminating the jobs of 18 percent of the nation’s postal workers—nearly 100,000 jobs—over the next three years.

Rather than using its limited resources to adapt and restructure its services to take advantage of an explosion in e-commerce deliveries and finding new uses for the Postal Service’s unmatchable networks, the bill opens the door to further downsizing. This would not only damage the nation’s No. 1 employer of veterans, but also threaten the entire mailing industry that employs nearly 7.5 million private-sector workers—particularly those employed by millions of small businesses and rural-based enterprises.

The bill would all but guarantee the elimination of Saturday delivery in two years, degrading the Postal Service’s most unique quality—a last-mile delivery network that gives America’s businesses (banks, utilities, magazines, shippers, prescription drug distributors and advertisers) access to 150 million addresses six days a week. This would weaken a crucial part of the nation’s economic infrastructure and undermine the USPS’ ability to continue to continue its recent growth in the booming e-commerce sector.

S. 1789 also would mandate the phase-out of door-to-door service for the 35 to 40 million households and businesses that enjoy such delivery in favor of curb or centralized (remote) service, and would open delivery to household mailboxes to unaccountable third parties on days the USPS does not deliver.

Lower quality, less frequent and slower service will simply drive more business away and do more harm than good. A recent internal USPS study predicted a 10 percent loss in mail volume if all these service cuts are implemented—the study was withheld from the Postal Regulatory Commission’s proceedings on the Postal Service’s network realignment plan.

Beyond the central “business strategy” flaw in the legislation, the bill includes a punitive workers’ compensation reform that could impoverish injured workers suffering from long-term injuries when they reach retirement age.

NALC is committed to working with senators from both parties to fix the worst flaws in this legislation. But as today’s white paper drafted by our consultants from the Lazard investment bank concluded, what really is needed is a new business model for the Postal Service. As drafted, S. 1789 will simply accelerate a failing business strategy. Our message to the policy makers is simple: We don’t have to dismantle the Postal Service to save it.

Congress and the Obama administration should commit themselves to developing a sensible restructuring plan for the USPS. Such a plan should embrace an ethic of shared sacrifice so that a more innovative, albeit somewhat smaller, Postal Service can emerge to meet the changing needs of the American economy. NALC members are willing to do their part to make this happen. We hope policy makers at both ends of Pennsylvania Avenue will do so as well.

White paper drafted by international financial advisory firm Lazard

WASHINGTON, D.C., April 17, 2012 — Successful revitalization of the U.S. Postal Service requires a strategic business plan that leverages the unmatched reach of its network, legislative action to relieve it of obligations no other business bears and shared sacrifice from all stakeholders, says the renowned international financial advisory firm, Lazard.

“While the Postal Service clearly faces enormous challenges, we do believe that its revitalization is achievable,” Lazard says in a white paper released on April 17. The paper, “Delivering Change to Revitalize an American Icon,” results from a due diligence investigation of the USPS commissioned in October 2011 by the National Association of Letter Carriers and conducted by a Lazard team with extensive experience in restructuring strategy.

Lazard outlined the basic elements of a reform plan that would aim to revitalize the Postal Service, rather than the approach being advocated by the Postal Service — an approach based on massive, and ultimately counterproductive, reductions in service. Lazard indicated that based on its analysis and experience, the Postal Service’s “shrink to survive” strategy will simply facilitate the decline of this vital American institution.

In addition, Lazard’s analysis of pending legislation (S. 1789) determined that, while the bill does not go as far as the Postal Service in proposing service reductions, the legislation still amounts to a stop-gap — not real — solution, because it does not fundamentally address the need for change in the way the Postal Service does business. And it too reduces service to the public and to America’s businesses.

“In private sector restructurings, successful turnarounds are generally premised on (i) a strategic plan that aims for a sustainable and viable enterprise and (ii) a management team and governance structure that is capable of executing that plan. Those two elements are developed first and then the necessary capital is secured. Unfortunately, this legislation provides the Postal Service with capital without either of these two elements being in place. Even worse, by adopting the Postal Service ’s proposals to reduce the quality and value of the services it provides to American households, it may actually accelerate the Postal Service’s decline,” Lazard said.

According to Lazard, a plan to revitalize the Postal Service should include:

• Better leveraging of the USPS delivery network to grow its parcel service business;
• Expansion of the kinds of products and services that the Postal Service is allowed to provide (this would require congressional action);
• Giving the Postal Service greater flexibility in pricing its products and services, some of which are notably underpriced compared to the cost of providing them (also requiring legislative action);
• Legislative action to address the burdensome – and unique – congressional mandate requiring USPS to pre-fund retiree health care for the next 75 years in just 10 years; and
• Shared sacrifice from of all postal stakeholders, rather than one-sided employee sacrifice.

The Lazard paper acknowledges that the Postal Service faces a financial crisis and must adapt to rapid technological changes that have reshaped — and are still reshaping — the way Americans communicate with others, primarily because of the Internet and its impact on the use of First Class Mail. On the other hand, some of those changes can stimulate new business for the Postal Service, Lazard said, such as increased delivery of packages ordered on-line.

“The Postal Service that results from these changes will have fewer employees, but will enhance (rather than degrade) the quality and value of the essential services it provides to millions of households and American businesses,” Lazard said.

The Lazard paper stresses that cuts in the number of employees and reductions in services alone can neither save the Postal Service nor enable it to adapt to the evolving needs of the American public and postal customers, both business and residential. On the contrary, they could destroy it by driving customers away and further reducing revenue.

“Similar to any successful private sector restructuring, the Postal Service requires a business plan based on a fundamental rethinking of the institution, top-to-bottom changes in its operations and culture and a first-rate management team and corporate governance structure to ensure that the plan is effectively executed,” Lazard advised.

In particular, Lazard noted, “a successful restructuring of the Postal Service must start with a plan to better leverage its unrivaled last-mile delivery network — a retail network that touches every city, town and neighborhood in America. Instead of focusing on shrinking its network and capabilities, thereby yielding its competitive advantage, the Postal Service needs an ambitious rethinking of its business model.”

“This analysis clearly shows it would be a terrible mistake for Congress or the Postal Service to rely on massive cuts in service to deal with the Service’s financial difficulties, which are real,” said Fredric V. Rolando, president of NALC. “Yet that’s exactly what they are doing. The Postal Service does need basic rethinking, but not heavy-handed, ill-considered slashes in employees, facilities and delivery services.”

Lazard based its conclusions on a review of publicly available data, including public testimony of the Postal Service’s leadership and the Postal Service’s own “Plan to Profitability,” and Lazard’s meetings with outside postal experts and users of Postal Service products and services.

Lazard’s findings reflected a full examination of the Postal Service’s “Plan to Profitability.” That plan has some reasonable assumptions and proposals, Lazard concluded, including repeal of a Congressional mandate that, since instituted, has led to a massive diversion of $21 billion of Postal Service revenues into a fund for future retirees’ health benefits.

But ultimately the Postal Service’s own plan is too focused on shrinking service to allow the agency to survive and therefore is unlikely to succeed — and will instead quite possibly worsen its business situation, Lazard said.

“The Postal Service’s proposed modifications — termination of Saturday delivery, a significant curtailment of ‘to the door’ delivery, and other reductions in service standards — could easily reduce demand by an amount equal to the alleged cost savings being discussed,” Lazard warned. Lazard noted that a Postal Service witness recently acknowledged at a Postal Regulatory Commission hearing that the combined effect of all the proposed cuts could reduce mail volume by 10 percent, offsetting almost all of the intended savings from the cuts.

Additional Information on Lazard:

Lazard is a preeminent international financial advisory firm that has long specialized in crafting solutions to address the complex financial and strategic challenges of its clients. It serves a diverse set of clients around the world, including corporations, partnerships, institutions, governments and individuals.

Lazard and its senior professionals have extensive experience in the reorganization and restructuring of troubled companies and have advised debtors, creditors, equity constituencies and government agencies in numerous complex financial reorganizations. Since 1990, Lazard’s professionals have been involved in over 250 restructurings, representing over $1 trillion in debtor assets. Lazard also has over 35 years of government advisory experience involving over 40 sovereign assignments.

Join us April 12 for demonstrations to oppose S. 1789

On April 12, the National Association of Letter Carriers will hold “Save America’s Postal Service” demonstrations outside of Senate offices across the country. They are designed to put pressure on each senator to oppose S. 1789.

S. 1789 likely will be brought up in the Senate following the Easter recess, the week that follows the April 12 demonstrations. The timing and impact of these events will be critical in helping us to stop S. 1789 and save America’s Postal Service.

If S. 1789 were to pass, the bill would hurt the Postal Service by:

• Putting an end to six-day mail delivery in two years.
• Phasing out door-to-door mail delivery.
• Failing to fully address the Postal Service’s pre-funding requirement.
• Not addressing the overpayment into the CSRS pension fund.

These events are meant to engage the public through the use of speeches, handouts and demonstrations to make our voices heard.

The Postal Service has a wide variety of supporters, many of whom may wish to participate in your “Save America’s Postal Service” demonstration, including small-business owners who use the mail to advertise, veterans groups, local elected officials, labor union members, faith leaders, and progressive allies who have concerns for the plight of working men and women.