(by Jennifer Levitz, The Wall Street Journal, WSJ.com) HOLMES MILL, Ky. – The U.S. Postal Service plays two roles in America: an agency that keeps rural areas linked to the rest of the nation, and one that loses a lot of money.
Now, with the red ink showing no sign of stopping, the postal service is hoping to ramp up a cost-cutting program… Beginning in March, the agency will start the process of closing as many as 2,000 post offices, on top of the 491 it said it would close starting at the end of last year. In addition, it is reviewing another 16,000 – half of the nation’s existing post offices – that are operating at a deficit, and lobbying Congress to allow it to change the law [which says “no small post office shall be closed solely for operating at a deficit”] so it can close the most unprofitable among them. The law currently allows the postal service to close post offices only for maintenance problems, lease expirations or other reasons that don’t include profitability.
The news is crushing in many remote communities where the post office is often the heart of the town and the closest link to the rest of the country. Shuttering them, critics say, also puts an enormous burden on people, particularly on the elderly, who find it difficult to travel out of town.
The postal service argues that its network of some 32,000 brick-and-mortar post offices, many built in the horse-and-buggy days, is outmoded in an era when people are more mobile, often pay bills online and text or email rather than put pen to paper. It also wants post offices to be profitable to help it overcome record $8.5 billion in losses in fiscal year 2010.
A disproportionate number of the thousands of post offices under review are in rural or smaller suburban areas, though the postal service declined to provide any estimate on how many beyond those slated to begin closure in March might ultimately close or which ones are being targeted. “We want to make the smartest decisions possible with the smallest impact on communities,” Dean Granholm, vice president for delivery and post office operations, said in an interview. He said the agency is identifying locations that are operating at a deficit and looking “for the opportunity to start the process of closing.”
In addition to reducing employees – it has cut staffing by a third since 1999 – the postal service has sought for years to deal with financial woes by raising rates or cutting services, such as a proposal to drop Saturday delivery. It has also talked in the past about closing a much smaller number of post offices. But while closures have been “on the table” in the past, this push is the agency’s most serious yet, Mr. Granholm said, and is drawing widespread interest from a cost-cutting Congress. Still, shutting down post offices is often politically unpopular: elected officials in several communities have already written the Postal Regulatory Commission protesting planned closures.
Eighty-three specific post offices were approved for closing during the three months ending Nov. 15, more closings than in any quarter in the agency’s history, according to the postal service. In addition, 408 post offices where service has been suspended for various reasons won’t reopen amid the fiscal crisis, Mr. Granholm said.
Some of those suspensions are being contested by the Postal Regulatory Commission, independent from the postal service and reporting to Congress, which is investigating whether the postal service has been illegally using reasons such as lease expirations to close small, underused branches. The agency has denied wrongdoing.
While paring down is a common survival tactic for organizations these days, efforts by the postal service to do so routinely raise alarms because many citizens see post offices as an essential public service. Postal service dates to the founding fathers, with Benjamin Franklin serving as the first U.S. postmaster general and the Constitution explicitly authorizing Congress to establish post offices. Critics in Washington argue the postal service should reduce what they say is too much spending on employee benefits before resorting to closures.
Some lawmakers say closing post offices is the wrong answer. Sen. Susan Collins (R., Maine) says the agency should instead cut waste in its ranks. Although the postal service has cut its work force through attrition in recent years, it is still weighed down by overly generous employee benefits, she says.
Postal workers pay “significantly” lower premiums for their health and life insurance plans than other government employees because of union agreements, according to a September study sponsored by the Office of Inspector General. The report said the postal service could save $700 million this year alone by asking employees to pay more. The report, however, also said the postal service’s contribution into employee benefits has started to decline, and that more reductions are planned as a result of recent union agreements.
“One of my frustrations is that the first approach the post office seems to take is to reduce service…when instead it needs to tackle a benefit structure that is too expensive, and it needs to look for ways to stay in business and deal with the digital age,” says Sen. Collins.
Communities that lose post offices will still get deliveries, either at homes or at clusters of mailboxes set up in town, and there are multiple options for getting postal services, including stamps by mail, said Mr. Granholm of the postal service. Also, he says, many rural dwellers already travel to nearby cities for groceries and other services. “Why can’t they go there for the post office?” he says.
Under U.S. law, mail delivery is a “basic and fundamental” government function meant to “bind the nation together” by providing service to “all communities” at a reasonable price. The nation’s philosophy of universal postal service has resulted in stamp prices that are among the lowest in the industrial world and post offices from the far reaches of Alaska to easternmost Maine. Yet more than half lose money and “are located in areas where people no longer live, work or shop,” U.S. Postmaster Patrick Donahoe testified to the Senate in December.
While government owned, the postal service is an independent agency supported primarily by postage fees, though it’s allowed to-and does-borrow from federal coffers. Mail traffic, particularly the more lucrative first-class mail, peaked in 2006 at 213 billion pieces, then fell 20% by 2010. … [W]ith fewer people sending letters, mail volume could fall further to 150 billion pieces, an unprecedented decline, in the next 10 years, according to a September study sponsored by the Office of Inspector General.
Along with shifting consumer behavior, the agency is saddled with billions in unusually burdensome retiree health costs, the inspector general said. Historically, the postal service, which employs 532,800 workers, paid for retiree health benefits when they came due. But postal reform law passed by Congress in 2006 mandated the agency to plan ahead by pre-funding retiree health benefits at around $5 billion a year for 10 years starting in 2007. “No other federal agency or private sector companies have a similar burden,” Mr. Donahoe testified. …..
The pre-funding obligation contributed heavily to recent record losses, and has forced the postal service to borrow from the federal government to meet shortfalls, he said. The agency now owes the U.S. Treasury $12 billion, and said it expects to max out its statutory $15 billion line of credit by the year’s end.
In towns losing post offices, some citizens believe they are paying for mismanagement at the agency. “From what I understand, the upper crust in the post office gets plenty of money, but they can take away what we have,” says Ruby VanDenBerg, who is 86, and lives in Prairie City, S.D., a ranching community of more than 100 farms. The post office officially closed on Dec. 30 after 102 years. Ms. VanDenBerg now drives 40 miles to a post office.
The Prairie City post office cost $19,000 a year after revenue, says the postal service, which blamed “safety deficiencies” for the closing. Residents say the problem was a faulty furnace, and say they offered to make repairs themselves but were ignored. They have appealed the closing with the Postal Regulatory Commission; their case is under review.
Prairie City postal clerks kept a pot of coffee brewing and posted birth and death notices. “That was the gathering place for people to come in the mornings, have a cup of coffee or a can of pop, and visit, but we don’t have that no more,” says Daniel Beckman, a recently widowed farmer. “All that’s left in the town now is just a church; it’s totally depressing.”
The closing also crimped an informal local method for delivering medicine to isolated corners of the prairie, rural doctors and pharmacists wrote to the commission.
The area’s only major hospital and pharmacy is in Hettinger, N.D., 40 miles away and over the state line from Prairie City. Before, when an elderly person or farmer in Prairie City quickly needed an antibiotic or other medication, a pharmacist in Hettinger would rush prescriptions to the Hettinger post office, catching the mail carrier who each day traveled from Hettinger to the Prairie City post office.
The closing eliminated that direct route, and now Prairie City mail is sorted and delivered on a rural route out of Bison, S.D., delaying the delivery of medicine from Hettinger by two or three days, says Dr. Brian Willoughby, of West River Health Services in Hettinger.
“When they cut these services, there are multiple spinoff consequences for these older people out there in the middle of nowhere, but the bureaucrats sort of forget about that,” he says.
Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved. Reprinted here for educational purposes only. Visit the website at wsj.com.
1. Answer the following about U.S. post offices:
a) How many individual post offices are there currently in the U.S.?
b) How many post offices were scheduled to close last year?
c) How many post offices will be closed this year?
d) How many are under review for possible closure in the future?
2. a) For what reasons can a post office be closed under current law?
b) Under current law, for what problem can’t a small post office location be closed?
3. Who will be most affected by post office closures?
4. How much money did the U.S. Postal Service lose in 2010?
5. What other options will communities that lose post offices have for mail delivery?
6. For what reasons is the postal service unprofitable?
7. To get a job with the Postal Service, applicants must be 18 years old, or 16 years old with a high school diploma and have a basic competency in English. Postal employees (mail carriers, workers in the post office) earn an average salary of $20 to $24 per hour.
In addition, some of the benefits postal employees receive, per the USPS (U.S. Postal Service) website include: (usps.com/employment/compbenefits.htm)
- 10 days off per year for holidays (Memorial Day, Christmas, ect.)
- 13 vacation days per year [20 vacation days (4 weeks) after working at the post office for three years; 26 (over 5 weeks) vacation days after fifteen years of employment]
- 13 sick days per year
- 33 days off total per year for the first three years; 40 days off total per year after that; 46 days off after fifteen years of employment)
- a Life Insurance policy paid for by the Postal Service
- health insurance with most of the cost paid by the Postal Service
- retirement benefits including a pension, health insurance and disability insurance
The postal service has attempted to reduce their losses by cutting services, raising postal rates, and reducing the number of employees (not by firing any, but by not hiring replacements as employees retire).
The union has negotiated the benefits for employees listed above.
a) What do you think is the best way for the Postal Service address financial problems: close post offices in rural areas, reduce postal employees’ benefits, or another way? Explain your answer.
b) Ask a parent the same question.
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