Consolidation Necessary Step in RealignmentMay 14, 2006
For years, lawmakers have been urging the U.S. Postal Service to cut costs, in the interest of both taxpayers and mail users. It’s ironic, then, that in a climate of ever-rising stamp prices, just when the USPS has made a bold move in the right direction, some Members of Congress are trying to trip it up.
Last fall, the Postal Service began implementing a redesign of its distribution network. The plan would eliminate as many as 250 mail processing centers by consolidating operations into fewer, larger, facilities.
At least 10 consolidations are already completed or in progress. Estimates suggest that each consolidation could save the Postal Service millions of dollars. The Postal Service has estimated that a single consolidation in Washington State could save it $1.2 million a year.
This effort is crucial for an organization that is not in sound financial health. Its traditional cash cow – First Class mail – is declining. Productivity gains have ground to a halt, even under a Postmaster General with a strong track record cutting costs. Labor expenses, however, are skyrocketing despite a shrinking workforce.
The Postal Service has now accumulated over $80 billion in unfunded liabilities, a cost that could ultimately fall to taxpayers.
In the past, USPS has tried to solve its money problems by raising stamp prices on its captive market. Until electronic alternatives came along, this strategy was lucrative, since the postal monopoly’s consumers had nowhere else to take their bills, letters and greeting cards.
In the long-term, though, continuous price hikes can’t save the USPS. First Class mail volume is falling, and raising prices is just likely to drive customers away even faster. That means that cutting costs is crucial for the survival of the Postal Service.
In the shorter term, meanwhile, cutting costs could save letter mailers from more rate increases. The price of a First Class stamp has already gone up from 37 to 39 cents this year, and the Postal Service just filed for another, larger increase this month.
Against this discouraging backdrop, Postmaster General John Potter deserves much praise for his streamlining measures. The consolidation plans may not be perfect, but the USPS has been responsive to criticism.
Last year the Government Accountability Office issued a study calling for the Postal Service to bring more clarity and accountability, and improved assessment criteria, into its realignment plan. The Postal Service has said it will follow all three recommendations.
Instead of supporting USPS management, unfortunately, many politicians are fighting the consolidations.
Senator Tom Harkin of Iowa is complaining that the Postal Service has not sufficiently studied the impact consolidations will have in Sioux City. Senator Herb Kohl of Wisconsin, has exhorted the USPS to gather more community input before going ahead.
Others are griping too. In two recent letters to the Government Accountability Office, 14 Democrats and 6 Republicans, said they had “concerns about the way the USPS is carrying out the realignment,” and that they were “not convinced that USPS is following the recommendations made” by the GAO.
One of these, Washington Congressman Brian Baird, meanwhile, said he considered going so far as to attach an amendment to a budget bill, in which he would have required that a mail processing facility in his district stay open. Fortunately, he couldn’t find a suitable bill.
Congress can’t have it both ways.
On the one hand, it has put heavy pressure on the Postal Service to fix its finances. It has required the USPS, for example, to set money aside to pay down its unfunded liabilities. It also approved House and Senate postal reform bills, which are now in conference, that call for increased regulatory oversight to try to improve accounting transparency.
On the other hand, individual members seem bent on preserving Postal pork in their districts.
One alternative would be for lawmakers to consider establishing a process similar to the military Base Closure Commissions. Over four rounds, BRAC overcame similar resistance from hometown officials and saved taxpayers tens of billions of dollars.
Meanwhile, while these individual Congressmen may be saying what their constituents want to hear, Congress should remember that a healthier Postal Service will benefit all Americans.
Don Soifer is executive director of the Consumer Postal Council in Arlington, Va.