This article first appeared in the St. Louis Beacon, Sept. 16, 2011 - WASHINGTON - Trying to limit its massive losses, the U.S. Postal Service announced a plan Thursday to close hundreds of mail-sorting centers across the country in a move that would save money but would cost postal jobs and would likely slow mail deliveries.
Under the plan, the Postal Service is studying the feasibility of closing mail processing centers in Cape Girardeau and Springfield, Ill., and moving their mail volume to postal centers in the St. Louis area. Also being scrutinized for possible closure are sorting facilities in Springfield, Mo., and in Carbondale, Centralia, Quincy and Effingham, Ill.
"We expect service standards to change" for mail delivery as a result of the planned consolidation, said Valerie Welsch, a Postal Service spokeswoman in St. Louis. For example, she said, first-class mail that now takes a day or two to be delivered might take two or three days -- depending on its destination.
Officials said they plan to review 252 of the Postal Service's 487 mail-processing facilities in the next three months, with the goal of reducing the total number of such mail centers below 200 by the year 2013. If implemented, the changes would lead to the elimination of 35,000 mail-processing jobs.
"We are forced to face a new reality today," said Postmaster General Patrick Donahoe in a statement. "First-class mail supports the organization and drives network requirements. With the dramatic decline in mail volume and the resulting excess capacity, maintaining a vast national infrastructure is no longer realistic."
Welsch said the impact of those proposed changes on postal workers in the St. Louis region was unclear, depending on mail trends and whether closing the Cape Girardeau and Springfield, Ill., sorting facilities would send enough added mail to the main St. Louis processing center downtown and the Network Distribution Center in Hazelwood to maintain employment there.
But there is bound to be congressional opposition to the plan to close more than half of the Postal Service's processing centers. U.S. Rep. Jo Ann Emerson, R-Cape Girardeau, whose district includes Cape Girardeau, said Thursday that she strongly opposed closing that processing facility -- as well as the separate proposal to close many rural post offices.
"Closing the distribution center in Cape Girardeau is not a certainty, but it would absolutely mean a delay in the mail for customers" in southeast Missouri, Emerson said in a statement. "There is no reason a birthday card sent from Dexter to Poplar Bluff should have to go through St. Louis, but that is how things would work in the absence of the Wilson distribution center."
Emerson argued that "the extra time and expense of trucking local mail to other centers would add to delivery time in our region, on top of other service reductions being considered by the Postal Service's leadership."
The leaders of postal unions and associations -- including the American Postal Workers Union and the National Association of Postal Supervisers -- said they would oppose the consolidation plan.
Rep. William Lacy Clay, D-St. Louis, said Friday that he is cosponsoring a bill championed by Rep. Elijah E. Cummings, D-Md., that would grant the Postal Service a 90-day extension on its required $5.5 billion pre-payment to the retired postal employee health benefit fund, which is due at the end of this month.
"Transforming the U.S. Postal Service into a viable business model for the 21st century is absolutely essential," Clay said. "This bill gives Congress some time to consider positive steps that will put the postal system back on stronger financial footing while maintaining our historic commitment to universal mail service for every American."
Under a 2006 law, the Postal Service is required to make accelerated annual payments to fund its anticipated retiree health-care costs fully. Clay said that mandate creates an enormous "cash-flow crunch" and makes the postal service less competitive.
"Our bill will ensure that the postal service and Congress have sufficient time to work together on comprehensive legislation to improve the postal service's long-term viability," he said.
Read the Beacon's Earlier Story Below:
WASHINGTON - "Neither snow, nor rain, nor heat, nor gloom of night" can stop the Postal Service from delivering mail, the saying goes. But the threat of default, a possible $10 billion loss and the relentless recession are threatening to slow it down a bit.
Last week, Postmaster General Patrick R. Donahoe warned that the Postal Service -- perilously close to its $15 billion borrowing limit with the U.S. Treasury -- is in danger of defaulting on its obligation to pay $5.5 billion into a retiree health-care fund by this month's end.
While no one on Capitol Hill expects mail delivery to stop cold when October arrives, it is unclear whether Congress will address the multi-billion-dollar stamp problem with the usual band-aid fix -- or change the law to allow the post office to untangle itself from red tape so that it can make better business decisions.
"The Postal Service is in a crisis today because it operates within a restrictive business model and has limited flexibility to respond to a changing marketplace," Donahoe told the Senate Homeland Security and Governmental Affairs committee last week.
Saying the Postal Service needs to slash its budget by about $20 billion by 2015 to return to profitability, Donahoe told senators: "We need the ability to operate more as a business does. This applies to the way we provide products and services, allocate resources, configure our retail, delivery and mail processing networks and manage our workforce."
The postmaster general's warning created a stir on Capitol Hill, where a slew of competing bills is emerging -- ranging from a Democratic plan to grant a 90-day reprieve from the Sept. 30 payment deadline to a Republican proposal that would give postal leaders more power to cut costs by shutting down underused post offices and requiring more workers to retire early.
The stakes are high. Donahoe told senators that failure to act could be "catastrophic" to the U.S. economy because the thousands of companies that "are deeply invested in the mail" employ about 8 million Americans and generate more than $1 trillion in business a year. In fact, he said, the "mailing industry" accounts for about 7 percent of the GDP.
Nationwide, the Postal Service has about 560,000 career employees (down from 776,000 10 years ago) and nearly 32,000 post offices and "retail locations." They handle 563 million pieces of mail a day, delivering mail to 151 million different addresses.
The "gateway district" that includes the St. Louis region has 932 post offices and 13,400 employees (of which 10,791 are career employees). So far, the Postal Service has said it is examining the possibility of closing as many as 153 of those post offices, including central and northeastern Missouri and southern and central Illinois. (The total number of vulnerable post offices in Missouri is 167.)
On Friday, Sen. Tom Carper, D-Del., called on President Barack Obama to take "immediate and dramatic action" to help rescue the Postal Service from default. The White House is mulling its options, and so are numerous lawmakers.
Missouri Senators Weigh in
At last week's Senate hearing, Sen. Claire McCaskill, D-Mo., told Donahoe that she worried that 85 percent of the possible post office closings in Missouri "are in counties of less than 50,000 residents."
Calling such post offices "a lifeline for rural Missouri," McCaskill wrote later that she told the postmaster general "how much Missouri's rural communities depend on the postal service" and emphasized the importance of a fair and open process in deciding on closing or consolidating post offices in the state.
In a column, McCaskill wrote that "solving the fiscal woes of [the Postal Service] must be a collaborative and comprehensive process .... For many Americans -- especially those lacking access to broadband internet at home -- the postal service is a lifeline, social network, a conduit for news and vital link."
One of McCaskill's comments at the hearing -- suggesting more efforts to encourage letter-writing -- was lampooned by Comedy Central's Jon Stewart on "The Daily Show."
Saying that she wasn't sure if "there has been a marketing campaign about the value of a written letter," McCaskill suggested: "I really believe that if somebody would begin to market the value of sending a written letter to someone you love, you might be surprised on how you could stabilize first-class mail."
The next day, Stewart skewered McCaskill's suggestion, commenting with mock seriousness: "So over the past 30 years, the country - nay, the world - has been moving inexorably toward electronic communication and your solution to this is not to adapt the post office to the convenience and efficiency of these changing circumstances but to spend public monies urging us to reverse the tide?"
Despite Stewart's ribbing, a spokesman for the Postal Service told the Beacon on Tuesday that "we will be rolling out some advertisements soon that will focus on the mailing side" -- encouraging more people to use the mail system. "But we know that first-class mail won't ever return to the level that it used to be."
Hurt by emailing, internet banking and other "mobile payments," the Postal Service's first-class mail volume has dropped sharply -- down to an estimated 73 billion pieces of mail this year, as opposed to nearly 104 billion letters in 2001.
"The Post Office still has an important place in our society, [but] it is a different place than it was a decade ago, and a dramatically different place than it was two decades ago," said Sen. Roy Blunt, R-Mo. "It's fine with me if people write more letters ... [but] anything like that would be at best a short-term boost."
Blunt told reporters last week that the best way to rescue the Postal Service is to give it the tools to evolve into a more businesslike and competitive system. "Congress needs to let the postal board of governors run the postal system," said Blunt. "They're going to have to make some of the same kinds of decisions that the private sector's been making in America for a long time. What can we afford to do? How can we be more competitive?"
Blunt said such changes "may very well mean a different set of benefits for future hires than for current" employees. "I think we need to, as much as we can, let the Postal Service be the self-sustaining part of the federal government that was agreed to a few decades ago, when it was taken out of the political environment and put into the competitive environment."
Sen. Mark Kirk, R-Ill., told the Beacon on Wednesday, "I don't think we should let the Postal Service fail, but part of our effort should be loosening up labor and other restrictions imposed by Congress so that the Post office can have a full 21st-century business model that works.
"I think much of what has caused the Postal Service to fail, while UPS and FedEx have not, relates to the rigidity imposed by Congress."
Taking a view somewhat similar to Blunt's, Rep. Darrell Issa, R-Ca., is advocating legislation that would give more powers to the postmaster general to close post offices and retire employees and would also set up a new board to steer the Postal Service in the direction of profitability. Issa, chairman of the House Oversight Committee, told MSNBC's "Morning Joe" that he believes the Postal Service could retire and not replace as many as 200,000 aging employees in the next few years.
Taking a different approach is the ranking Democrat on the oversight panel, Rep. Elijah Cummings, D-Md., who proposed a bill Monday that would extend the Postal Service's Sept. 30 retiree-benefit payment deadline by three months to give Congress time to develop a better plan "to improve the Postal Service's long-term viability."
Cummings said congressional Democrats would be introducing other bills during that time that would propose various plans to raise revenues and reduce costs. In his plan, Carper has proposed allowing the Postal Service to end Saturday mail delivery, get a refund of its overpayments to federal retirement programs, and sell more products and services. Carper said he expects the White House to send a Postal Service proposal to the 12-member congressional "super committee" that is developing a long-term deficit reduction plan.
How Did Postal Service Get into Its Current Fix?
Over the last couple of decades, the Postal Service was able to make enough changes to survive the onslaught of competition from fax machines and delivery services such as UPS and FedEx. But the rise of email, internet banking and related "mobile payment" options in the last decade -- coupled with the severe recession that has depressed U.S. business -- has dramatically cut mail volume and profitability in recent years.
Even though it had $900 million in net profits as late as 2006, the Postal Services bottom line has been eroding ever since. This year, Donahoe warned that the Postal Service could face a net loss of as much as $10 billion. "Instead of buying stamps, many consumers pay bills online, send 'e-vites' to friends and family, and simply press 'send' when they want to communicate. These shifting customer habits will continue to add to the migration away from traditional first-class mail," he told senators. "In addition, the stagnant economy has held other mail classes to a flat or relatively modest growth pattern."
Without congressional action, Donahoe said, "The Postal Service faces default, as available liquidity at the end of this month will be insufficient to meet our financial obligations." He suggested a long list of changes, including streamlining its vast network of mail processing centers; eliminating some delivery routes; closing some post offices and expanding "alternate access" postal sites in retail stores; modifying delivery service standards; and asking to be allowed to more quickly adjust postal pricing.
Such proposals, coupled with Donahoe's suggestion that Congress allow the Postal Service more flexibility to promote early retirements and organize its own health care plan, have alarmed postal unions that otherwise have gone along with some changes.
"We have now reached the point in postal cost-cutting where further cuts are going to have a negative effect on service," said Cliff Guffey, president of the American Postal Workers Union, which represents more than 250,000 postal employees. "The Postal Service, having been engaged in several years of cost cutting, has become like the man whose only tool is a hammer. To him, everything looks like a nail."
Guffey told senators that, since 2008, the Postal Service has dropped by more than 110,000 employees (mostly through attrition) and cut its costs by more than $11 billion. "It is very clear, however, that the strategy of aggressively making cuts has passed the point of diminishing returns and has begun to be counterproductive," he contended.
A prime example, Guffey said, was the Postal Service's drive to close or consolidate small rural post offices and small stations and branches that are not profitable. "This is an area that deserves close congressional scrutiny," he said, in part because the union disagrees with how the Postal Service determines the profitability or value of post offices.
"There is much that can be done to make small post offices less costly and more effective than simply closing them," he said. "The new collective bargaining agreement between the APWU and the Postal Service makes provision for a less costly, more flexible workforce that will permit the Postal Service to operate post offices for longer hours -- keeping them open when people are able to use them."