USPS Floats Big Cuts to Employee Pay, Leave and Benefits

Postal Service Floats Big Cuts to Employee Pay, Leave and Benefits
New postal workers would no longer earn a pension under preliminary business plan.
July 2, 2019
U.S. Postal Service
Retirement Benefits
Eric Katz
Senior Correspondent
The U.S. Postal Service, facing pressure from Congress to propose initiatives to ensure the agency’s long-term viability, is floating a business plan that would include significant cuts to employees’ take-home pay and benefits.

USPS included a hike to the employee contribution level for pensions in a first draft of a 10-year business plan presented to lawmakers and stakeholders, according to multiple people who were briefed on it, as well as phasing out pensions altogether for new hires in favor of a defined-contribution system only. The Postal Service is looking to cut the amount of paid time off employees receive by merging annual and sick leave and pitched a popular proposal with demonstrated bipartisan backing to require all postal retirees to enroll in Medicare as their primary insurance provider.

The mailing agency suggested it resume closures of mail processing plants, according to those briefed by management, a controversial practice it has used to reduce its vast physical footprint and shed workers. USPS stopped closing the facilities amid congressional pushback and intensifying talks for a legislative overhaul to the agency. Last year, the Postal Service inspector general found the agency realized just 5% of its projected savings from the consolidation plan.

USPS told those briefed on its plan that it was still subject to change. At a hearing in April, lawmakers grilled Postmaster General Megan Brennan on why the agency had failed to produce a 10-year business plan and indicated they would not move forward on legislative reforms USPS has said it desperately needs without first viewing the document. The details of the business plan were first reported by HuffPost.

Rep. Elijah Cummings, D-Md., who chairs the House Oversight and Reform Committee and helped usher an overhaul bill through the panel in the last Congress, said he planned to set a July deadline for the business plan and Brennan promised to meet it.

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Bipartisan legislation introduced to repeal USPS pre-funding mandate

Close-up of the Capitol’s dome with the US flag
On April 28, Reps. Peter DeFazio (D-OR), Tom Reed (R-NY), Xochitl Torres Small (D-NM), and Brian Fitzpatrick (R-PA) introduced the USPS Fairness Act (H.R. 2382) which would repeal the mandate that USPS “pre-fund” decades’ worth of health benefits for its future retirees, enacted through the Postal Accountability and Enhancement Act (PAEA) of 2006.As letter carriers know, the pre-funding mandate has cost an average of $5.4 billion annually since 2007 and is responsible for 92 percent of USPS losses over the last twelve years, and 100 percent of losses over the past six years. Were this burden not imposed, USPS would have recorded surpluses of nearly $4.0 billion since 2013.

Instead, the mandate has prevented the Postal Service from properly investing in its networks and infrastructure since it was enacted and even worse, the resulting financial losses are still used to both threaten core services that Americans rely on — such as door-to-door service, six-day delivery, and convenient post office hours – and to advance proposals to privatize the Postal Service and attack the jobs and rights of America’s postal employees.

As the heart of a $1.4 trillion mailing industry that employs 7.5 million Americans, the Postal Service links more than 159 million American households and businesses to each other seven days a week. It is essential to our nation’s voting systems and to multiple industries, communities and populations, including e-commerce; prescription drugs; the nation’s paper, publishing, and advertising businesses; and to millions of small businesses and tens of millions of citizens in rural, suburban, and urban communities across the country.

“NALC applauds Reps. DeFazio, Reed, Torres Small, and Fitzpatrick for introducing this bipartisan legislation as a crucial first step toward bringing financial stability to the most trusted and highest-rated agency in the federal government,” said NALC President Fredric Rolando. “The USPS is a national treasure and an essential part of the nation’s economic infrastructure. Congress caused this crisis when it passed the PAEA in 2006 and Congress can begin to fix it by passing the USPS Fairness Act.”

Should this legislation progress through the House and Senate, and then be signed into law, it will significantly improve the financial situation at the Postal Service. NALC is committed to working with Congress on any and all options that can bring financial stability to this agency so that it can then focus on much needed improvements to its networks and infrastructure (i.e. fleet replacement), as well as developing new and existing products and services.

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USPS Cuts 10K Positions After Five Years of Job Growth

 

Brynn Anderson / AP

USPS employed 634,000 people last fiscal year, according to a financial analysis released by the Postal Regulatory Commission on Monday, its lowest total since fiscal 2015. While the cash-strapped agency has trended toward a smaller workforce over the last two decades—it has slashed 300,000 career workers since 1999—its total number of employees has inched up each year since fiscal 2013.

The Postal Service has in recent years increasingly relied on non-career workers, such as postal support employees and mailhandler assistants, as a cheaper alternative to reduce labor costs as part of efforts to keep pace with shrinking mail revenue. The agency’s non-career staff had grown each year since fiscal 2010, increasing more than 60% by fiscal 2017. Even that cadre of employees shrunk last year, however, dropping by 4,000 employees.

 

USPS lost a net of $3.9 billion in fiscal 2018, despite seeing revenues increase by $1 billion. That included expenses outside of management’s control, such as funding for future retiree health benefits, as well as “controllable losses” from growing operational costs. Fiscal 2017 marked the first time in five years that the Postal Service failed to turn a profit on controllable operations.

Dave Partenheimer, a USPS spokesman, said the workforce cuts last year were necessary to fit with the agency’s new reality.

“Simply put, our workforce decreased to align with changes in mail volume,” Partenheimer said. He declined to predict whether there will be additional losses for the current fiscal year.

In an unusual move for the Postal Service in recent years, it made $1.8 billion in repayments on its $15 billion debt to the U.S. Treasury in fiscal 2018. It marked the first time since fiscal 2011 the Postal Service made such payments. PRC, the USPS regulator, said the mailing agency’s liquidity improved because it has not made payments toward its Retiree Health Benefits Fund since fiscal 2010. It has also declined to make required payments toward its unfunded pension liabilities.

USPS’ current liabilities total $89.3 billion, PRC said, dwarfing its $26.7 billion in assets.

While normal, first-class mail revenue continues to drop precipitously, overall revenues have grown as shipping and package income has surged. That has led, however, to a corresponding increase in transportation and labor costs. While the workforce shrunk year-over-year in fiscal 2018, total personnel costs grew by $1.7 billion. PRC also cautioned that the rate of growth in that sector is starting to decline.

Postal management is expecting some relief in 2019. The PRC approved new postal rates this year, allowing USPS to increase the cost of a stamp by 5 cents and raise the cost of its offerings across the board by an average of 2.5%. Those changes, according to Chief Financial Officer Joe Corbett, would have added nearly $1.7 billion in revenue if they were in place during fiscal 2018.

President Trump has proposed a $98 billion savings package through a slew of legislative reforms. In addition to a renewed push for offering postal employees lower pay and benefits, Trump has pushed changes recommended by the task force he created last year. Those include raising prices for mail and packages not deemed “essential,” reducing delivery frequency, outsourcing some mail processing and licensing access to individuals’ mailboxes.

 

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