naps legislative issues brief

8/7/2019 NAPS Legislative Issues Brief

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NationalAssociation

of PostalSupervisors

Legislative Issues

Brief

Legislative Issues

Brief

March 2011

NationalAssociation

of PostalSupervisors

March 2011


2/20

REPRESENTING MORE THAN 33,000

POSTAL SUPERVISORS, MANAGERS AND POSTMASTERS

AND THE LARGER POSTAL COMMUNITY OF

MORE THAN THREE MILLION VOTING POSTAL FAMILIES

National Associationof Postal Supervisors


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NAPS LEGISLATIVE ISSUES BRIEF 1

Number 1. No tax-payer dollars support the

United States Postal Service.The Postal Service is self-funded without taxpayer dol-lars. Congress reorganized the Post Office Department

in 1970 and created the U.S. Postal Service as an inde-

pendent agency of the executive branch. The USPS

operates as a commercial entity and is expected to cover

its costs. The Postal Service has not received taxpayer

dollars to fund operations since 1982. Its revenues,

which amounted to $67 billion in 2010, rely on the sale

of postage and mail products. Annual increases in

postage rates cannot exceed inflation.

To live within its means, the Postal Service, since 2002,has cut its costs by $43 billion, including $6 billion in

2009. These savings have come through work-force and

overtime reductions, the renegotiation of more than 500

supplier contracts, the consolidation of facilities, the

closing of administrative offices and cuts in travel

expenses and supply budgets. These cost-cutting moves

are continuing.

Number 2. The Postal System is an econom-ic engine for the nation.

The Postal Service is the driver of a $1.2 trillion-a-yearmailing industry in the United States, responsible for

8.3 million jobs. The Postal Service is the nations sec-

ond largest employer, with 600,000 employees. The

mailing industry includes catalog companies, publish-

ers, charities, advertisers and transactional mailers

banks, insurance companies, utilities, telecommunica-

tions companiesas well as those that support these

businesses, including printers, paper companies, tech-

nology companies and other service providers. These

businesses and organizations rely on a healthy and

affordable Postal Service to communicate with cus-

tomers and promote commerce. Households rely on

the mail to communicate and receive goods.

Number 3. The Postal Service deliverseverywhere, others dont.The Universal Service Obligation (USO) ensures that

every American citizen can send and receive mail at

affordable prices. The USO originates from the consti-

tutional obligation of the federal government to main-

tain and operate post offices. The USO is achieved

through a Postal Service delivery network that reaches

all addresses in the nation and serves a larger geo-

graphical area than any other post in the world.

The Postal Service delivers mail to 149 million resi-

dences, businesses and post office boxes in every state,

city, town and borough in the country. UPS and FedEx

do not deliver express mail or packages to suburban,

rural and remote locations that are not profitable; they

rely on the Postal Service to take their packages the

last mile for delivery. Yet the Postal Service does not

even impose a fuel surcharge on its customers.

Number 4. Postal Service customer serviceand trust are at record levels.Customer satisfaction with the Postal Service and the

Postal Services satisfaction of its own service stan-

dards are at the highest levels ever reported. For six

years in a row, the American public has rated the

Postal Service the most trusted government agency,

according to the Ponemon Institute.

Number 5. The Postal Service is GoingGreen.While mail remains reliant on paper and its delivery

requires energy, the Postal Service is becoming an

increasingly eco-friendly government agency. Its fleet

of 44,000 alternative-fuel-enabled vehicles is the largest

in the world and includes electric, three-wheeled elec-

tric, hybrid electric, ethanol, fuel-cell, biodiesel and

propane technology. More than a half-billion of the

packages and envelopes the Postal Service provides free

are recyclable and made of environmentally friendly

materials. Last year, the Postal Service recycled more

than 200,000 tons of paper, plastics and other waste

the equivalent of saving 1.67 million barrels of oil,

according to the Environmental Protection Agency. The

EPA also reports that advertising mail represents less

than 2.1 percent of the material in our nations landfills.

By comparison, disposable diapers represent 2.2 per-

cent; glass beer and soft-drink bottles, 3 percent; and

yard trimmings, 6.9 percent.

Five Things to Know About the Postal Service


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2 NAPS LEGISLATIVE ISSUES BRIEF

The National Association of Postal Supervisors rep-

resents more than 33,000 postal Supervisors, man-

agers and postmasters and the larger postal commu-

nity of more than three million voting families.

NAPS urges the Senate and the House of Representa-

tives to focus attention on three issues:

1. Fix the Postal Services Financial

Problems: Correct Pension Mistakes andRestore the Postal Service to FinancialStabilityTwo massive pension-related errors by the federal

government have caused the Postal Service to near

the brink of financial insolvency. These mistakes

were avoidable. The Postal Service should not be

penalized for errors that were not its doing and have

driven it into the red. Congress should correct both

errors and restore the Postal Service to financial sta-

bility.

First, Congress should refund to the Postal Servicethe billions of dollars in overpayments the Postal

Service has made to the civil service retirement fund

in the federal treasury. Second, Congress should

relieve the Postal Service of the huge financial burden

of setting aside billions of dollars to satisfy the future

costs of medical care for its retirees and restructure

the prefunding payments to a more manageable level.

These steps will generate a substantial savings to the

Postal Service and return it to a more secure financial

footing in the short term.

2. Reinvent the Postal Service: Make theUSPS Responsive to Americas Needs,Including Preserving Six-Day DeliveryThe Postal Service must adapt to meet the changing

needs of the American people. For more than 225

years, the Postal Service has served the communica-

tion needs of America. As America changes how it

communicates, the Postal Service must adapt.

Congress needs to confer greater authority to the

Postal Service to introduce new products and servic-

es that expand the definition of mail, as well as pro-

vide for wider pricing flexibility. This involves a re-

examination of the Postal Service business model and

its underlying legal and regulatory framework. The

Postal Service also needs to continue to cut costs,

reduce infrastructure capacity and eliminate wasteful

programs. However, moving to five-day delivery

should be the last resort, not the first, because of thegreater and more preferable cost-savings available

through restructuring of the Postal Services pension

and retiree health benefit obligations.

3. Pursue Balanced Deficit Reduction andPreserve Americas Commitments to thePostal Service and Its EmployeesIncreasing public concern over the size of the federal

budget deficit and ballooning debt is drawing atten-

tion to federal mandatory and discretionary spending

and taxes. The nation must restore fiscal orderthrough a combination of cuts in mandatory and dis-

cretionary spending, as well as restore fairness in our

nations tax code.

No taxpayer dollars are used to run the operations of

the Postal Service or compensate its employees. Cuts

in the pay or retirement benefits of postal employees

will not reduce the federal deficit. The key to suc-

cessful deficit and debt reduction lies in shared sacri-

fice by all Americans.

NAPS Legislative Issues BriefExecutive Summary


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SummaryTwo massive errors by the federal government in the

administration of the civil service pension fund have

caused the Postal Service to near the brink of financial

insolvency. These mistakes were avoidable. The

Postal Service should not be penalized for these errors

that were not its doing and have driven it into the red.

Congress should correct both errors and restore the

Postal Service to financial stability.

First, Congress should refund to the Postal Service the

billions of dollars in overpayments the Postal Service

has made to the civil service retirement fund in the

federal treasury.

Second, Congress should relieve the Postal Service of

the huge financial burden of setting aside billions of

dollars to satisfy the future costs of medical care for

its retirees and restructure the prefunding payments to

a more manageable level.

These steps will not use taxpayer funds, will generate

a substantial savings to the Postal Service and return

it to a more secure financial footing in the short term.

An Avoidable Crisis for the Postal ServiceNearsWithout changes in current law, by Sept. 30, 2011, the

Postal Service will be insolvent, unable to meet all its

financial obligations (see sidebar). The Postal Service

will reach its statutory borrowing limit, resulting in a

cash shortfall.1

This alarming outcome will not be due to the Internet,

or Postal Service mismanagement or even the deep

economic recession. Two massive pension-related

policy and administrative errors by Congress and the

federal bureaucracy have caused the Postal Service to

reach the brink of financial insolvency. These mis-

takes were avoidable. The Postal Service should not

be penalized for these errors that were not its doing.

The funds should be returned to the Postal Service

to satisfy other obligations mandated by Congress.

Heres why.

The Hidden Stamp Tax on PostageRatepayersAn ongoing and long-standing error by a federal

agencythe Office of Personnel Managementhas

forced the Postal Service to make pension overpay-

ments into the federal civil service pension system.

For the past four decades, the Postal Service has been

required by OPM to pay far more than necessary to

satisfy its pension obligations to its workers.


Fix the Postal Services Financial Problems:

Correct Pension Mistakes and Restore the Postal

Service to Financial Stability

1 Federal statute bars the Postal Service from borrowing more than $3 billion in any one year and $15 billion total (39 U.S.C. 2005(a)).

Will the Postal Service Run Out of Cash?In testimony on March 2, 2011, PMG Pat

Donahoe warned Congress the Postal Service

would not have sufficient cash on hand on Sept.

30, 2011, to make a required payment of $5.5

billion into the Retiree Benefit Health Fund.

Without changes to the law mandating thisonerous obligation, Donahoe warned, the Postal

Service will be forced to default on a financial

obligation to the federal government, due at the

close of the fiscal year on Sept. 30, 2011.

The testimony was before the Subcommittee

on Federal Workforce, U.S. Postal Service and

Labor Policy of the House of Representatives.

The Postal Service also will be required to

make a $1.3 billion payment for workers com-

pensation in November 2011.


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These overpayments are documented. Following in-

depth investigations, the Postal Services Office of

Inspector General (OIG) and the Postal Regulatory

Commission (PRC) both have determined the Postal

Service, since 1971, has overpaid its pension obliga-

tions to the Civil Service Retirement System (CSRS)

by as much as $55 - $75 billion.2

The USPS OIG and the PRC conclusively found that

the actuarial methods used by the Office of Personnel

Management to determine CSRS pension costs for

postal employees have been unfairly split between the

Postal Service and the federal government since 1971,

when the Postal Service was created, resulting in the

overpayment. The OIG also found that the Postal

Service has overpaid nearly $7 billion into the Federal

Employees Retirement System (FERS).3

All overpay-ments have been deposited in the Civil Service

Retirement and Disability Fund, an account within

the Department of Treasury.

The billions of dollars used to make these pension

overpayments did not come from the Postal Service.

The money came from postal ratepayersbusinesses

and individuals using the nations postal system

improperly charged for USPS retirement contributions

far beyond the correct level. This has amounted to no

less than a hidden stamp tax wrongfully imposed on

postal ratepayers for more than four decades (see side-bar on page 6). It is time for the federal government to

correct this wrong and recalculate the exact amount

the Postal Service should have paid.

A Crippling Set of Billion-Dollar Paymentsto Prefund Retiree Health BenefitsThe second mistake that has thrown the Postal Service

into the red involves a crippling and deeply flawed

schedule of payments that Congress imposed on the

Postal Service to satisfy its future retiree health bene-

fit obligations. These retiree health benefit payments

have contributed to almost 90 percent of the Postal

Services $20 billion cumulative loss over the past

four years.4 The payments have caused postage rates

to rise and forced the Postal Service to incur tremen-

dous debt.

Why are the payments flawed? Congress, in the

Postal Accountability and Enhancement Act of 2006,

required the Postal Service to prefund its future retiree

health benefits for the next 40 years at a cost of

approximately $5.6 billion per year (Figure 1) for 10

years.5 In doing this, Congress moved the Postal

Service from funding its retirees health care costs

from out-of-pocket annual payments to prefunding

those obligations for the present and future years.

Congressional insistence that the Postal Service ade-quately prepare for its future financial obligations,

particularly its large retiree health benefit costs, was a

responsible policy decision. But the size of the Postal

Service prefunding payments written into the 2006

postal reform law were far too large, driven principal-


Figure 1. Postal Service Retiree HealthBenefits Fund Payments Under PAEA

Source: Postal Accountability and Enhancement Act (P.L.109-435, Sec. 803; 120 Stat. 3251-3252; 5 U.S.C. Sec.8909(d)(3)(A).)

a. FY 2009 payment amount of $5.4 billion was reducedto $1.4 billion with enactment of P.L. 111-68.

Fiscal Year Payment (billions)

2007 $5.4

2008 $5.62009 $5.4a

2010 $5.5

2011 $5.5

2012 $5.6

2013 $5.6

2014 $5.7

2015 $5.7

2016 $5.8

2 Office of Inspector General, U.S. Postal Service, Management Advisory ReportCivil Service Retirement System Overpaymentby the Postal Service (Report Number CI-MA-10-001), June 18, 2010. PRC Press Release: PRC Finds $50 Billion Discrepancy,July 30, 2010. The OIG-USPS study was conducted in conjunction with the Hay Group, a human resources consulting firm. ThePRC study was conducted by the Segal Company, a human resources compensation consulting firm.3 Office of Inspector General, U.S. Postal Service, Management AdvisoryFederal Employees Retirement System Overfunding(Report Number FT-MA-10-001), Aug. 16, 2010.4 Testimony of David Williams, Inspector General, U.S. Postal Service, before the Subcommittee on Financial Services and GeneralGovernment, Committee on Appropriations, House of Representatives, Feb. 11, 2011, at 1.5 Any remaining obligation is to be amortized over the subsequent 40-year period, beginning in 2017.


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ly by budget scoring requirements underlying enact-

ment of the 2006 law.

This is a burden that no other organization, public or

private, has been required to bear. No federal compo-

nentother than the Postal Servicehas been

required to prefund its future retiree health obliga-

tions. Even in the private sector, prefunding future

retiree health obligations at

such a massive payment rate

is highly uncommon.

The impact of these prefund-

ing health benefit payments

on the financial health of the

Postal Serviceeven without

its pension overpaymentshas been horrendous. As

Figure 2 shows, the Postal

Services operating expenses

outpaced its revenues after the

Postal Service began paying

into the Retiree Health Benefit

Fund (RHBF) in FY 2007.

In the four years prior to the

enactment of the prefunding

requirement, the Postal Ser-

vice saw positive net incomein each of those four years

(see Figure 3). Since 2007, the

Postal Service has paid $21

billion into the RHBF and,

during the same period, the

Postal Service had a net loss

of $20 billion.6

If the Postal Service had not

been required to make the

payments into the RHBF, it

would have experienced no

operating losses until FY

2009. Put another way, in two

of the four years following

enactment of the 2006 postal

reform law, even during the

deepest depths of the recession, the Postal Service

would have been profitable were it not for these pre-

funding payments. As the chairman of the Postal

Regulatory Commission recently pointed out,

Without the RHBF requirement, the Postal Service

would have broken even financially, despite the large

mail volume declines that occurred during that time

and without use of its borrowing authority.7


Figure 2. USPS Operating Revenues and Expenses, FY 2004-FY 2010

Source: U.S. Postal Service, Annual Reports, 2004-2010

Figure 3. The USPS Is Experiencing Unprecedented Losses

1 Includes one-time reduction of $4 billion.

Note: All years refer to fiscal years ending on Sept. 30.

6 Statement of Ruth Goldway, Chairman, Postal Regulatory Commission, before the House Subcommittee on Federal Workforce,U.S. Postal Service and Labor Policy, House Committee on Oversight and Government Reform, March 2, 2011, at 4.7 Id.


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Congress, nonetheless, has been slow to restructure

the Postal Services prefunding payments, largely

because of the impact on the federal deficit. Although

the Postal Service is not included within the federal

budget, the Retiree Health Benefit Fund is; assets

deposited into the RHBF count as income for the fed-

eral government.

This means that reducing or eliminating the Postal

Services prefunding payments into the RHBF would

appear to increase the federal budget deficit. The

result: $42 billion in postal retiree health assets cur-

rently sit in the federal treasury, earning interest for

the treasury and reducing the federal deficit, while the

Postal Service is on a path to run out of cash in the

coming months.

Correction of Postal Pension OverpaymentsShould Not Increase the Federal DeficitWe remain unconvinced that an intergovernmental

transfer of funds from the federal treasury to the

Postal Servicean independent establishment within

the federal governmentwill increase the federal

deficit. This transfer of funds is not intended to

expand federal spending, but only to right an admin-

istrative wrong: overpayments into the civil service

pension fund.

Fair dealing between one arm of the federal govern-

ment and another should not permit incorrect and

unjustified payments into the federal treasury to

stand. Moreover, the revenues for these payments

were provided by postage ratepayers to fund benefits

for postal employees, not non-postal federal employ-

ees. Fairness to the Postal Service and its ratepayers

mandates the return of these overpaid funds to the

Postal Service.

Correcting Two Wrongs Will ProduceFinancial Stability for the USPSMeanwhile, the Postal Service has continued to

sharply eliminate costs and increase productivity. It

has reduced its work force by 240,000 employees in

recent years. Last year, it cut costs by $3 billion and

expects to reduce spending by another $2 billion this

year.8 At the same time, the Postal Serviceaided by

a conscientious and loyal work forcecontinues to

deliver the mail at historic service levels. The current

national score for overnight Single-Piece First-Class


8 Statement of PMG/CEO Patrick R. Donahoe, supra, at 1. The Postal Service also has proposed to reduce delivery frequency byeliminating Saturday deliverya move it projects will save $3 billion per year. The return of the Postal Service's pension overpay-ments and their use to satisfy future retiree health benefits will remove the need for the present time to cut a delivery day. That iswhy we regard the proposed move to five-day delivery as a last resort, not the first.

OPM Has Erred Multiple TimesAs incredible as it may seem, there is a

long history of repeated miscalculations by the

Office of Personnel Management of the Postal

Services pension obligations, resulting in bil-

lions of dollars of costly overpayments by the

Postal Service into the civil service pension

fund.

In 2002, it was determined the Postal

Service was on track to overpay the Civil

Service Retirement System by $78 billion. This

error was corrected by Congress in 2003

through legislation.

In 2003, Congress rejected an attempt by

OPM to make the Postal Service responsible for

$27 billion in military service pension obliga-

tions for Postal Service employees.

In 2009, the Office of Inspector General

(OIG) of the Postal Service found that OPM used

an exaggerated forecast of health-care inflation

in connection with Postal Service payments into

the Postal Retiree Health Benefits Fund. The

miscalculation was putting the Postal Service on

track to overpay the PRHBF by $13.2 billion by

2016. Congress ordered OPM to review the fore-

cast, resulting in its correction.

According to the Postal Service OIG andthe Postal Regulatory Commission, the most

egregious miscalculations have involved OPMs

repeated erroneous directives to the Postal

Service over the course of 40 years, resulting in

estimated overpayments of $7 billion into the

Federal Employees Retirement System and

$55 - $75 billion into the Civil Service Retire-

ment System.


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Mail is at an astounding 96 percent on-time rate, an

improvement over the same period last year.

Without a change in the current law, the Postal

Service faces severe liquidity problems, due to the

burdensome retiree health prefunding payments. (In

addition to the prefunding, the Postal Service also

pays $2.2 billion for annual health benefit premiums

for current retirees.) The Postal Service has forecast it

will exhaust the $3 billion in borrowing authority

available this year. It will hit the budget ceiling and

run out of cash by Sept 30.

In the 111th Congress, Sen. Tom Carper (D-DE), Sen.

Susan Collins (R-ME) and Rep. Stephen Lynch (D-

MA) each introduced measures (respectively, S. 3831,

S. 4000 and H.R. 5746) to establish a process to usethe postal pension overpayments to fund the Retiree

Health Benefit Fund obligations. The three measures

did not advance, in part because of concerns by some

that transferring funds from the CSRS to the Postal

Service would add to the federal deficit.

Sen. Collins has reintroduced her measure in the current

Congress: S. 353, The U.S. Postal Service Improve-

ments Act of 2011.Among other things, it would direct

the Office of Personnel Management to recalculate

the Postal Services pension obligations and transfer

overpaid amounts to the Postal Service for its use insatisfying its future retiree health benefit obligations.

Congress Needs to Take Corrective ActionThe colossal and continuing accounting mistakes car-

ried out by executive branch authorities beckon

immediate correction by Congress.9 Resolution of this

error through the restoration and transfer of the cor-

rect amount of funds back to the Postal Service will

provide sufficient assets to return the Postal Service to

financial stability.

It will satisfy the Postal Services greatest financial

obligation, the prefunding of its future retiree health

benefits through 2016, as required by the 2006 postal

law. It also will remove the otherwise pressing need to

pursue deep cuts in service, including realignment of

the current six-day delivery schedule. (That is why we

regard the proposed move to five-day delivery as a

last resort, not the first.)

In light of these profound accounting and payment

errors and the Postal Services perilous financial condi-

tion, common sense suggests the Office of Personnel

Management recalculate and identify how much the

Postal Service overpaid to the Civil Service Retirement

System and the Federal Employees Retirement

System, and those amounts be credited to the Postal

Service for use in satisfying its future retiree health

benefit obligations. These overpayments will be more

than enough to cover the liabilities the Postal Service

faces for its future retiree health benefits.

Recommended ActionNAPS urges Congress to enact corrective legislation

that, once and for all, corrects the massive financial

mistakes that have been inflicted on the Postal

Service. NAPS urges Congress to enact legislation

that mandates:

The recalculation of the Postal Services pension

obligation to the Civil Service Retirement System

and Federal Employees Retirement System pen-sion funds, using more equitable, reasonable and

financially stable calculation methods and

assumptions; and

A credit to the Postal Service for an overcharge

in its payments into the CSRS and FERS pension

funds and use of that credit to satisfy the Postal

Services obligation to the Postal Retiree Health

Benefit Fund, fully funding all mandated pay-

ments through 2016.

These steps will generate substantial savings to the

Postal Service. They will assign a fairer share of pen-

sion liabilities to postal ratepayers, free the Postal

Service from unjustified legacy costs and return it to

a more secure financial footing for the short term.


9 Incremental relief, such as that proposed by the Obama Administration, would provide the Postal Service breathing space in thecurrent fiscal year. In its Fiscal Year 2012 budget, the Administration proposed deferring $4 billion of the $5.5 billion retiree healthprefunding payment due on Sept. 30 and amortizing that remainder into future payments. The Administration also proposed gradu-ally repaying the Postal Service for its FERS overpayments over the next 30 years. NAPS believes incremental relief is helpful, butis not the best option.


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SummaryNAPS encourages Congress to confer greater author-

ity to the Postal Service to introduce and sell new

products and services that expand the definition of

mail, as well as provide wider pricing flexibility.

This involves a re-examination of the Postal Service

business model and its underlying legal and regulato-

ry framework. The Postal Service also needs to con-tinue to cut costs, reduce infrastructure capacity and

eliminate wasteful programs. However, moving to five-

day delivery should be the last resort, not the first.

The Postal Service Needs to Adaptto Americas NeedsThe Postal Service is the linchpin of a $1 trillion mail-

ing industry that employs approximately 7.5 million

Americans in fields as diverse as direct mail, printing,

catalog production, paper manufacturing and finan-

cial services.1 Huge numbers of jobs rely on the mail.It is estimated that more than 7.5 million people

derive their livelihood directly from the mailfrom

paper companies, printers, publishers and graphics

designers to mailing preparation houses, software

designers, clerks, carriers and postal personnel.

The Postal Service needs to adapt to meet the chang-

ing needs of the American people. For more than 225

years, the Postal Service has served the communica-

tion needs of America. As America changes how it

communicates, the Postal Service needs to change.

Postal supervisors are doing their share to help the

Postal Service modernize and change. NAPS takes

seriously its responsibility to work with the Postal

Service to preserve the health and vitality of the

nations postal system. There is no other responsible

option.

During the past several years, NAPS has collaborated

with the Postal Service on organizational changes to

cut costs and find efficiencies; these are continuing.

Cost management has been critical to keeping the

Postal Service financially afloat. The Postal Service

has reduced its work force by 230,000 jobs since

2000a nearly 30 percent cut.

No other federal government entity has downsized atsuch a breathtaking rate. Many of those job cuts

occurred in the management and supervisory ranks,

especially in mail processing centers. Large down-

ward adjustments in the work hours of rank-and-file

employees have increasingly shifted the burden of

processing and delivery demands to postal supervi-

sors and postmasters (see sidebar).

NAPS supports changes in the law, infrastructure and

operations of the Postal Service that make sense and

will modernize and sustain Postal Service operations,

products and services.

What Congress Needs to DoNAPS urges Congress to confer greater authority to

the Postal Service to introduce and sell new products

and services that expand the definition of mail, as

well as provide wider pricing flexibility. This will

require a thorough re-examination of the Postal

Service business model and its underlying legal and

regulatory framework.

The Postal Service also needs to continue to cut costs,

reduce excess postal facility capacity and eliminate

wasteful programs. However, moving to five-day

delivery should be the last resort, not the first.

Since March 2010, the Postal Service has promoted

several cost-saving measures, including reducing the


Reinvent the Postal Service: Make the

USPS Responsive to Americas Needs, Including

Preserving Six-Day Delivery

1 Sen. Susan Collins, press release dated Dec. 2, 2010.


11/20


number of delivery days from the current six days per

week to a five-day delivery structure. NAPS believes

the Postal Service must develop new ways to become

more profitable, but a reduction in delivery days is not

the appropriate answer to the Postal Services prob-

lems. Better options are available.

Five-Day Delivery: The Last Resort, Not theFirstThe start of five-day delivery for the Postal Service

should be the last resort, not the first. Five-day deliv-

ery is rife with devastating outcomes for postal cus-

tomers and the Postal Service itself. The better course

lies in congressional action that restructures the Postal

Services pension and health benefits payment obliga-

tions. Such actions will restore the Postal Servicesfinancial stability and remove the current need for

five-day delivery.

Congress has annually mandated a six-day delivery

schedule since 1983. At first glance, one would con-

clude that reducing a postal delivery day is a promis-

ing way to cut costs. According to former Postmaster

General John E. Potter, in testimony before a House

subcommittee in 2010, it could save the Postal

Service at least $3 billion a year.2

Those savings are tempting in light of the PostalServices financial situation. In September 2010, the

Postal Service ended the fiscal year with an $8.5 bil-

lion net loss.3 It faces continued losses in the current

year, along with serious questions over its liquidity,

including whether it will have enough cash to meet

current obligations by the end of this fiscal year, in

September 2011.

But as NAPS and others have continued to point out,

the requirement imposed by the 2006 postal reform

law on the Postal Service to prefund its future retiree

health costs has been the chief culprit in forcing the

service into the red. And chief among those obliga-

tions is the requirement imposed by the Postal

Accountability and Enhancement Act of 2006 to pre-

fund retiree health benefits with payments of approx-

imately $5.6 billion each year through 2016.4

Moreover, NAPS seesfor a host of reasonsper-

ilous problems for the Postal Service should five-day

delivery become a reality. These problems involve the

precedent that would be set by the potential loss of

exclusive access by the Postal Service to mailboxes,

the disastrous consequences of delay to mailers and

customers in the delivery of time-sensitive parcels and

mail and the vicious downward spiral in mail volume

that likely would result as users of the mail begin to

resort to other means of delivery.

NAPS believes the elimination of six-day delivery

will be counterproductive to the Postal Service. It will

pose problems for some business mailers who depend

on Saturday delivery and will accelerate the migration

of business mail to the Internet. It also will damage

Increasing Workloads Placed onSupervisors and Postmasters

As a result of the Postal Service reducing itswork force by almost 30 percent since 2000,

more pressure is on the management side

especially on supervisors. For example, a super-

visor of 25 delivery routes now is expected to

assure delivery with 20 carriers.

NAPS members who work in processing

facilities are expected to cover vacancies and

persons on vacation or out sick with the remain-

ing employees scheduled for work. Operational

targets must be metdespite the shortages of

manpower.

When carrier routes are not covered, thesupervisor is expected to get the remaining carri-

ers to sort and deliver mail from open routes.

These continuing challenges are increasing and

straining the systems human capacity.

Ultimately, it will be necessary to re-exam-

ine the reasonableness of current Postal Service

standards.

2 Statement of PMG/CEO John E. Potter before the Committee on Oversight and Government Reform, U.S. House ofRepresentatives, April 15, 2010.3 U.S. Postal Service, media release dated Nov. 12, 2010.4 Postal Accountability and Enhancement Act, Public Law 109-435, Dec. 20, 2006.


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the competitive position of the Postal Service and

cyclically draw volume down faster.

Postal Service competitors will fill the

vacuum and offer Saturday delivery at

premium prices, gaining overall mar-

ket share. Until the Postal Service

presents a more compelling case for

five-day delivery, Congress should

refrain from giving approval to five-

day delivery. Five-day delivery should

be the last resort, not the first.

On March 2, 2011, Rep. Sam Graves

(R-MO) introduced a resolution (H.

Res. 137) calling on the Postal Service

to take all appropriate measures to ensure the con-tinuation of its six-day mail delivery. NAPS supports

this resolution.

Generating Greater Postal RevenueCongress should provide the Postal Service with

wider flexibility to introduce new products that reflect

changing customer needs, generate needed revenue

and allow the Postal Service to compete more aggres-

sively and fairly in the marketplace. This involves

introducing products and services that expand the def-

inition of mail, as well as wider commercial use of

postal facilities in partnership with government andthe private sector. This includes:

Government-wide use of the Postal Service as

the preferred provider of Parcel and Express

Mail services

Partnerships with for-profit enterprises to gener-

ate hybrid mail, involving the transfer of hard-

copy mail to electronic format, and vice versa

Expansion of USPS partnerships with UPS and

FedEx to use post offices as the retail entry por-

tal for their shipping services

Commercial partnerships with the private sector

to expand the use of last mile delivery ser-

vices

The co-location of government services, where

practicable, within post offices

Making post offices one-stop shops for transac-

tional local and state governmental services,

including bill, fee and permit payments.

These enterprise initiatives should be accompanied

by efforts that assist the Postal Service to more rapid-

ly replace or convert its gas-pow-

ered delivery vehicles with plug-

in electric vehicles. The Postal

Service operates the largest civil-

ian fleet of vehicles in the world,

with about 220,000 vehicles.

Also, Congress should provide suf-

ficient funding and resources

to empower the Postal Service and

its carrier network to quickly deliv-

er reliable and affordable antidotes

during any national public health

emergency. This should include the

capacity to deliver emergency medical countermea-sures to supplement state and local responses after a

biological attack.

President Obama, in an executive order in December

2009, called on the Postal Service to serve as such a

countermeasure dispensing model. This is an urgent

need. The congressionally appointed Commission on

the Prevention of Weapons of Mass Destruction,

Proliferation and Terrorism recently criticized the

White House and Congress for not building a rapid-

response capability for dealing with disease outbreaks

from bioterrorism.

Cutting Unnecessary CostsNAPS continually has sought to provide innovative

and practical ideas to Postal Service top-management

to cut costs and drive efficiencies. Some of these sug-

gestions have been adopted, but many have not.

These ideas have called for eliminating a number of

wasteful Postal Service programs and practices,

including the Mystery Shopper Program, contract

employees, details to unauthorized positions, the

VOE survey, the MHTS program, Priority Recovery

Program, Spot Awards for all employees and many of

the perks received by USPS officers and execu-

tives, including bonuses, non-contributory health and

life insurance and relocation assistance at retirement.

NAPS also favors the creation of flexible work rules

covering craft employees to match the ebb and flow

of mail.


Partnerships with

the private sector

are key to assuring

the Postal Service

leverages new

technology.


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In addition, the Postal Service could capture signifi-

cant savings through a reorganization of its operating

structure. Its nationwide management framework,

currently built around 74 district offices and seven

geographic areas, is too large, bureaucratic and cost-

ly. The Postal Service should return to an organiza-

tional structure based on a smaller number of geo-

graphic regions. (The Postal Service was expected to

announce a reorganization of its management struc-

ture on March 25, 2011.)

The Government Accountability Office has noted

that, by consolidating its field structure, the Postal

Service would eliminate needless bureaucracy, save

costs and operate more efficiently. The Postal Service

needs to apply the same rigorous cost-cutting scrutiny

to its upper-management ranks as it applies to middle-and lower-management.

The Postal Service Clearly Needsto ModernizeFor the foreseeable future,Americans will continue to

demand services that ship and deliver hard-copy com-

munications and packages to businesses and house-

holds. But demand for hard-copy communications

also will continue to decline, as more and more

Americans turn to the Internet.

American businesses will continue to

find value in hard-copy advertising

mail that is delivered to homes across

America. Priority Mail and package

servicesin competition with the

private sectorwill remain an

important part of the Postal Services

product offerings. But the revenues

these products alone will generate

likely will not be enough to sustain

the infrastructure needed to sustain universal postal

services across America.

Thus, the Postal Service will need to generate addi-

tional revenues in innovative ways. Congress should

provide the Postal Service with wider flexibility to

enter new markets and introduce new products that

reflect changing customer needs and tastes. This

should involve the introduction of products and ser-

vices that expand the definition of mail.

The Postal Service requires the vision, resources and

know-how to develop these products. Partnerships

with the private sector are key to assuring that the

Postal Service leverages new technology to create

cutting-edge electronic mail products.

The parallel experience of the U.S. intelligence com-

munity in tapping new technologies is instructive. In

1999, Congress created a not-for-profit investment

firm to identify, adapt and deliver innovative technol-

ogy solutions to support the missions of the U.S.

intelligence community. That technology develop-

ment arm, called In-Q-Tel, has engaged over the

past decade with entrepreneurs, growth companies,

researchers and investors to deliver technologies thatprovide superior capabilities for government and the

intelligence community. To date, In-Q-Tel has

engaged with more than 175 companies and delivered

more than 260 technology solutions to the intelli-

gence community.

The Postal Service needs its own In-Q-Tel to achieve

leverage that connects technology advances to

improvements in communications, including and

going beyond hard-copy mail itself. Congress should

be the catalyst for creating such a

non-profit investment firm for thePostal Service to better help it truly

modernize.

ConclusionThe current business model of the

Postal Service is outdated and out of

touch with the future needs of

America. Todays United States

Postal Service needs to become

tomorrows United States Communications Service.

Without a larger electronic footprint that bridges the

tangible and virtual worlds of logistics and communi-

cations, the future of the Postal Service is narrowed to

unattractive alternatives.


The Postal Service

will need to gener-

ate additional rev-

enues in innovative

ways.


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SummaryIncreasing public concern over the size of the federal

budget deficit and ballooning debt is drawing atten-

tion to federal mandatory and discretionary spending

and taxes. NAPS believes the nation must restore fis-

cal order through a combination of cuts in mandatory

and discretionary spending, as well as restoring fair-

ness in our nations tax code.

No taxpayer dollars are used to run the Postal Service

operations or compensate its employees. Cuts in the

pay or retirement benefits of postal employees will

not reduce the federal deficit. The key to successful

deficit and debt reduction lies in shared sacrifice by

all Americans.

Deficit Reduction Is Necessary and InevitableHeightened public concern over the size of the feder-

al budget deficit and expanding public debt is focus-

ing attention on federal mandatory and discretionaryspending and taxes. NAPS believes the nation must

restore fiscal order to its financial health through a

combination of cuts in mandatory and discretionary

spending, as well as restoring fairness in our nations

tax code.

Budget cutting is never easy. Just as the Postal Service

has cut costs and reduced the size of its work forceat

a rate greater than any other component in the federal

governmentso Congress must make tough choices

about what it wants to preserve and what the nation can

learn to live without. We need to reduce our federal

budget deficits to help ensure our children and grand-

children can look forward to a brighter future.

The Presidents debt commission spotlighted the truth

that our nation is on an unsustainable fiscal path.1

Federal spending is continually rising and revenues

are falling short, requiring increasing borrowing to

make up the difference, spawning greater and greater

budget deficits.

Over the long run, as the baby boomers retire and

health-care costs continue to grow, the situation will

become far worse. The Presidents debt commission

has estimated that, by 2025, federal revenues will be

too small to finance spending and debt requirements.

In fact, revenues will be so relatively small they will

be able to finance only interest payments, Medicare,

Medicaid and Social Security. That will mean that

every other federal government activity, from nation-

al defense and homeland security to transportation

and energy, will have to be paid for with borrowed

money. At current rates, public debt will outstrip the

entire American economy, growing to as much as 185

percent of GDP by 2035.

Significant debt also will put America at risk by expo-sure to foreign creditors, especially China, who cur-

rently own more than half our public debt. Ironically,

the interest we pay foreign creditors increases their

standard of living and reduces our own.

The non-security and non-entitlement spending por-

tions of the federal budget constitute only 12 percent

of the budget. To tackle budget imbalances, Congress

needs to take aim at the largest and fastest-growing

areas of the federal budget: Medicare, Medicaid and

Social Security.

Deficit Reduction Should Not Take Aimat the Postal ServiceThe Postal Service was established by Congress in

1970 as an independent entity within the executive

branch of the federal government with a unique charter


Pursue Balanced Deficit Reduction and Preserve

Americas Commitments to the Postal Service

and Its Employees

1 The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform, Dec. 1, 2010.


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to operate as a self-sustaining commercial enterprise.

No taxpayer dollars are used to finance the operations

of the Postal Service or the compensation and benefits

of its employees. The Postal Service is entirely self-

supported by the postage it receives from its customers

for delivering mail, parcels and other products.

Responsibility for assuring the Postal Service lives

within its means lies with postal management. Cuts in

the pay or retirement benefits of postal employees will

not reduce the federal deficit.

How Postal Employee Compensation isDeterminedPostal Service officials negotiate with the postal

employee unions over wages, health benefits and work-ing conditions. Federal law requires that compensation

and benefits for rank-and-file postal employees be

determined by collective bargaining between postal

management and the four unions representing the

postal work force. The law provides that compensation

and benefits for Postal Service officers

and employees shall be comparable

to the rates and types of compensation

paid in the private sector, such as

delivery companies like Federal

Express and United Parcel Service.2

Pay for supervisors, postmasters and

other management employees is

determined through a consultation

process involving NAPS and the

two other management associations

and the Postal Service. The aim is to reach an ade-

quate and reasonable differential between first-line

supervisors and bargaining-unit employees that meets

or exceeds comparability standards.3 Within these

statutory salary limitations, the Postal Service contin-

ues to provide performance-driven pay actions in sup-

port of enhancing a performance-based culture.

Although the Postal Service is a quasi-independent

federal agency, all postal employees and retirees par-

ticipate in the same pension programs (Civil Service

Retirement System and Federal Employees Retirement

System) and the same federal health insurance pro-

grams as all federal employees, with important differ-

ences in health insurance overage.

Health insurance coverage for postal employees and

retirees is maintained through the participation of the

Postal Service in the Federal Employees Health

Benefits Program, the same program that covers fed-

eral employees and retirees (and members of

Congress and congressional staff). However, no tax-

payer dollars contribute to health insurance coverage

provided by the Postal Service to its employees.

The federal government pays 72 percent of the cost ofhealth insurance premium coverage for civil servants.

The Postal Service currently pays 78 percent of the cost

of health insurance of its rank-and-file employees, as

well as postal supervisors and postmasters. The differ-

ence in premium payments between civil servants and

postal employees is due to collective

bargaining between the postal unions

and management, in which greater

bargaining emphasis by the postal

unions has been placed historically

on preserving health insurance cover-

age than on pay demands. Collectivebargaining,however, is gradually nar-

rowing the difference between civil

service and Postal Service premium

coverage over time.

ConclusionThe key to successful deficit and debt reduction is

shared sacrifice by all Americans. No one will be

enamored with all parts of a fair, comprehensive plan

that puts Americas fiscal house in order. The federal

budget cannot and should not be balanced on the

backs of its postal workers and retirees. Meaningful

deficit reduction should not violate the commitments

made to current employees and retirees.


2 39 U.S.C. 1003(a) provides: ... It shall be the policy of the Postal Service to maintain compensation and benefits for all officersand employees on a standard of comparability to the compensation and benefits paid for comparable levels of work in the privatesector of the economy.3 The law governing the Postal Service also provides that executives should be compensated at a level comparable to the private sec-tor. However, the Postal Reorganization Act precludes the ability to achieve a comparable standard due to legislated compensationcaps.

Cuts in the pay or

retirement benefits

of postal employeeswill not reduce the

federal deficit.


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Frequently Asked Questions About

NAPS and Postal SupervisorsWhat is NAPS?The National Association of Postal Supervisors (NAPS) is a

management association representing more than 33,000

active and retired postal supervisors and managers employed

by the U.S. Postal Service. Organized in 1908, NAPS exists

to improve the Postal Service and the pay, benefits and work-

ing conditions of its members. NAPS is a management asso-

ciation, not a union.

Who are typical NAPS members?Most are first-line supervisors and managers working ineither mail processing or mail deliverywhats called

operations. But NAPS also represents men and women

working in virtually every functional unit in the Postal

Service, including marketing, human resources, training,

corporate relations, law enforcement and health and safety.

Where do NAPS members live?NAPS members live in all 50 states (and virtually every con-

gressional district), as well as in Puerto Rico, the Virgin

Islands and Guam.

What legislative issues generally concern NAPS?NAPS devotes its greatest attention to legislation that pro-

motes the vitality and stability of the Postal Service. It also

supports legislation that assures fairness in the treatment of

federal and postal employees and retirees.

How have changes in the Postal Service impact-ed postal supervisors?Work-force downsizing and other challenges and changes

have dramatically impacted postal supervisors. Nearly 3,600

management positions were eliminated in 2009 alone.

Nonetheless, NAPS supports changes in the law, infrastruc-

ture and operations of the Postal Service that will modernize

and sustain the operations and products of the Postal Service.

Why is a postal organization concerned aboutfederal employee retirement and health bene-fits?Although the Postal Service is a quasi-independent federal

agency, postal employees and retirees participate in the same

pension programs (CSRS and FERS) and the same federal

health insurance programs as all federal employees.

How are the wages of postal supervisors set?While the pay of rank-and-file postal employees is negotiat-

ed through collective bargaining involving their unions, the

pay of postal supervisors and postmasters is determined

through a consultation process involving NAPS and the

two other management associations and the Postal Service.

Postal supervisors and postmasters do not receive annual

wage cost-of-living adjustments, as do rank-and-file employ-

ees. Salary increases for management employees are deter-

mined through a rigorous pay-for-performance system.

How do NAPS members participate in legislativeactivities?Approximately 600 NAPS members gather in Washington,

DC, every spring for a three-day legislative conference.

Much of that time is spent on Capitol Hill visiting members

of Congress. Throughout the year, postal supervisors remain

in touch with every representatives district office and every

senators state office, providing helpful information about

the Postal Service and its operations.

How can I reach a postal supervisor?Begin by calling NAPS Headquarters at 703-836-9660. Ask

for Executive Vice President Jay Killackey or another resi-

dent officer. NAPS also can provide you with the name of

either its legislative chair for the state you represent (for

Senate offices) or with the name of a local or branch legisla-

tive representative who votes in your congressional district

(for House offices).

How can I get information about NAPS quickly?For general information, visit NAPS' website: www.naps.org

For more detailed information, contact us bymail, phone or fax:

NAPS Headquarters

1727 King Street, Suite 400

Alexandria, VA 22314-2753

Phone: 703-836-9660

Fax: 703-836-9665


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National Associationof Postal Supervisors

1727 King Street, Suite 400

Alexandria, VA 22314-2753

Phone: 703-836-9660

Fax: 703-836-9665

Website: www.naps.org

naps legislative issues brief

Documents