• on Mar 30th, 2009 in Finances: Cost & Revenue | 15 comments
    As Pushing the Envelope noted 8 weeks ago, the Postal Service is facing a severe financial challenge. There are concerns the Postal Service could end this year without enough cash to pay all of its bills. The Postal Service attributes its problems to two major factors: (1) the long-term erosion of high-margin First-Class Mail volume because of electronic diversion and (2) drastic volume losses due to the current recession. The Postal Service has asked Congress to
    • Allow for a slower rate of funding of its retiree health benefits.
    • Give the Board of Governors the flexibility to move from 6-day to 5-day delivery.

    Other options for the Postal Service include

    • Raising the Postal Service’s debt limits — The law currently prevents the Postal Service from ending the year with more than $3 billion in additional debt. Moreover, the Postal Service’s total borrowing is limited to $15 billion. These debt limits were last raised in the early 1990s. If they were raised, the Postal Service could borrow additional money at very low interest rates from the Federal Financing Bank. If volumes continue to fall, however, would the Postal Service be able to pay back its debt in the future?
    • Raising rates — The Postal Accountability and Enhancement Act capped rates for most mail classes at inflation as measured by the Consumer Price Index. The Postal Service could file a special “exigency” rate case at the Postal Regulatory Commission to permit additional rate increases beyond the cap. Can the Postal Service raise sufficient additional revenue by raising rates or would higher rates simply accelerate volume loss and cause total revenue to decline even further?
    • Cutting costs — The Postal Service has undertaken to cut $5.9 billion in costs in FY 2009, yet some cost cutting measures such as closing post offices or consolidating facilities face political opposition. To what degree can the Postal Service cut costs without reducing service? Some private sector companies have started laying off workers, but many Postal Service employees are protected from layoffs under collective bargaining agreements.
    • Appropriations — Congress could provide the Postal Service with additional revenue to carry it through this difficult period, yet the federal budget deficit is rapidly expanding. There may be limited public appetite for providing the Postal Service with additional funds.

    What do you think? What are the best options for the Postal Service to meet its current financial challenge?

  • on Mar 23rd, 2009 in Delivery & Collection | 37 comments

    Mail volume plummeted 4.5 percent — or 9.5 billion pieces — in fiscal year (FY) 2008. Reduced mail volume allows the Postal Service to combine delivery routes to maximize efficiency and reduce workhours, overtime, and other expenses. The Postal Service is seizing this opportunity by consolidating more than 87,000 city delivery routes — which could affect as many as 50 million addresses nationwide. Consolidating routes means some customers will receive their mail at a different time — earlier or later in the day. It also means the customer could have a different letter carrier who will have to become familiar with a new delivery route.

    There were more than 211,000 city carriers delivering mail to 87 million residential and business city delivery points at the end of FY 2008. On average, each carrier’s route has 500 to 700 delivery points. A carrier’s day involves two types of work: sorting mail in the office and delivering mail on the street. In the past, carriers typically spent several hours each day at the post office sorting mail for their route into delivery order. Now, machines sort most letter mail into delivery order automatically, and fewer pieces of mail means it takes less time for carriers to sort mail at the post office. This leaves carriers more time “on the street” allowing them to reach more delivery points.

    On the street, the length of time a carrier takes to deliver mail on a route depends on factors such as the number of delivery points and the distance between them as well as mail volume. For instance, a carrier can deliver 10 letters to an address almost as quickly as 1 letter. More than 400,000 new city delivery points were added in FY 2008. When adjusting routes, the Postal Service must consider both mail volume and delivery points — including new delivery points — to build a route with 8 hours of work.

    bar chart showing city delivery points FY 2005: 85,804,626; FY 2006: 86,292,173; FY 2007: 86,882,476; FY 2008: 87,285,380

    The Postal Service also relies on carriers to help ensure addresses on their routes are accurate by reporting vacant and abandoned buildings. If a carrier has 30 delivery points on her route and a 20-delivery-point apartment complex is torn down, it will reduce the route to 10 delivery points. Approximately 20 delivery points could be added to the carrier’s route.

    Do you think consolidating city delivery routes will have a positive effect on the Postal Service’s bottom line? Why or why not? Will it be difficult for carriers — particularly those who walk their routes — to spend more time on the street?

  • on Mar 16th, 2009 in Labor | 15 comments
    The federal government has two main retirement systems. Most employees hired since 1983 fall under the Federal Employees’ Retirement System, known as FERS. Unlike their counterparts under the old system called CSRS (Civil Service Retirement System), FERS employees do not receive any service credit for their unused sick leave upon retirement. As a result, there are concerns that some FERS employees may try to use up as much of their sick leave balance as they can prior to retirement — a practice often called the “FERS Flu.” Because FERS employees are expected to comprise almost the entire federal and Postal Service workforce by 2014, a widespread outbreak of the FERS Flu could have serious consequences. This past December, approximately 1,400 readers of FedSmith.com participated in an on-line survey regarding their attitudes about sick leave usage in the Federal Government. One survey response should raise concerns. Readers were asked, “Is it ethical for a federal employee to use sick leave without having an authorized medical reason for using the leave?” Fully one-third of respondents stated that this was fully ethical, while an additional 11 percent were unsure. Another on-line poll of federal employees was even more troubling. Of the more than 1,100 FERS respondents, more than 75 percent said they planned to use as much sick leave as possible during their last year before retirement. A Congressional Research Service analysis of payroll data on nearly 500,000 employees showed that FERS employees eligible to retire used nearly 35 percent more sick leave than comparable CSRS employees.
    FERS Flu...Is it catching? woman reclining in a hammock

    While the FERS Flu is a problem throughout the federal government, it could be particularly acute for the Postal Service for two reasons. First, much of what the Postal Service does is very time-sensitive. For example, if a letter carrier takes a day of sick leave, someone must perform the work in place of the absent carrier. Often, the Postal Service must replace that work at the higher overtime rate. Second, because Postal Service managers have set aggressive goals to minimize sick leave usage, many FERS Postal Service employees have accumulated very large sick leave balances, and will therefore, have large amounts of sick leave available to use. Legislation that would give service credit to FERS employees for their unused sick leave has been proposed in the current Congress. This legislation passed the House of Representatives during the 110th Congress, but was not taken up by the Senate. What do you think about the risk of FERS Flu for the Postal Service?