The Battle for the Postal Service: Postal Unions Go Postal
by Cheryl K. Chumley
Labor Watch, April 2012 (available as PDF)
Postmaster General Patrick Donahoe recently explained to Congress his plan to improve the U.S. Postal Service’s dismal financial shape. The plan includes “…a combination of aggressive cost reduction, rethinking the way we manage our healthcare costs, and comprehensive legislation to reform the business model of the Postal Service.”
Donahoe is a 35-year postal veteran selected for the job in 2010 by the bipartisan Postal Service Board of Governors. He proposes a five-cent increase in the first class stamp to 50 cents effective immediately. This one step alone could yield $1 billion in new revenue, according to the USPS. In addition, he has urged that home delivery be cut from six days to five, with no Saturday work for postal carriers.
In 2006 Congress passed the Postal Accountability and Enhancement Act, which requires the agency to pre-pay all its employees’ retiree health benefits in order to reduce the risk of unfunded liabilities at USPS. And while Donahoe is not urging Congress to repeal this plan – unlike the postal workers’ unions — he is trying to obtain congressional approval for the USPS to provide its own health care coverage. Doing so, he says, would allow Medicare to become the first option for about 480,000 retirees.
The Postmaster General says his agency needs to close as many as 3800 under-utilized postal facilities and reduce its work force by 155,000 by 2016, mostly by pushing those who are eligible into retirement. Donahoe estimates these reforms in total will save the U.S. Postal Service $20 billion a year by 2015.
Many of Donahoe’s cost-saving proposals have been under consideration by Congress for some time. Others, like increasing postal rates, have been ongoing for years. Nonetheless, changes to a government service that touches the daily lives of millions of citizens are bound to be controversial. Under public pressure even decisions thought to be finalized are apt to be re-opened for discussion.
For example, in December 2011 the USPS announced plans to cut 28,000 jobs and close 250 mail processing plants nationwide. But outcry and opposition led USPS to delay the plan until mid-May 2012. At a February budget hearing before Congress, the USPS again confirmed its plan to make these cuts unless legislators find another way to overcome the agency’s revenue shortfall. On February 23, the USPS increased its estimate of the number of jobs to be cut to 35,000. Many members of Congress opposed the plan. For instance, Maryland’s two senators, Barbara Mikulski and Ben Cardin, denounced USPS plans to consolidate postal processing operations in western and eastern Maryland by moving the work to facilities in Pennsylvania and Delaware.
Why so much back-and-forth? Why such difficulty in enacting cost-saving measures?
The principal stumbling block: The National Association of Letter Carriers (NALC). This AFL-CIO affiliated labor union has about 300,000 actively working and retired members in 2,500 branches—its name for union locals—in all 50 states, the District of Columbia, Puerto Rico, the Virgin Islands and Guam. More importantly, NALC’s national headquarters is in Washington, DC.
NALC has opposed almost every cost-cutting postal reform that’s been presented to Congress or advocated by the USPS. In January 2012 NALC and USPS went before a mediation panel after the two sides failed to reach a collective bargaining agreement. The union is demanding lifetime, no-cost health care and retirement benefits. But the Postal Service says it cannot accept the union’s terms if it is to maintain fiscal solvency.
Along with its smaller sister unions—the American Postal Workers Union (220,000 members), the National Postal Mail Handlers Union (47,000 members), and the National Rural Mail Carriers Association (120,000 members)—NALC lobbies in Washington to pass more federal laws expanding benefit programs for public employees. Lately, however, it has concentrated its attention on protecting its members’ jobs, privileges and benefits. These are the source of the union’s wealth and power. Members of Congress and the Postmaster General warn that the Postal Service will go bankrupt without reform. But the unions don’t see it that way.
The Legislative Battle
In June 2011 Rep. Darrell Issa (R-Calif.), chairman of the House Oversight and Government Reform Committee, introduced H.R. 2309, “the Postal Reform Act of 2011.” In September, Sen. John McCain (R-Ariz.) offered a companion bill, S.1625. Both bills were referred to committee; Issa’s remains under active consideration, while McCain’s has been sitting in Homeland Security and Governmental Affairs since Sept. 2011. Rep. Issa’s bill pursues many of the cost-cutting objectives proposed by the U.S. Postal Service – and then some. It would cut USPS delivery to five days and require the USPS to carry out its planned closures of post office and mail facilities.
The bill would also establish a management board to oversee USPS financial plans, eliminate or reduce the postal rate preferences given to nonprofits and political committees, put limits on taxpayer contributions to the USPS employee life and health insurance plans, and revise the collective bargaining “rights” of USPS union workers.
The last item—the proposal to modify the Holy Grail of collective bargaining – is what outrages the postal workers unions most. But the unions don’t focus on this provision as they mobilize opposition to the Issa bill. Instead, they tug at the heart-strings of American nostalgia.
“It’s the end of mail delivery to your door,” wails the home page of NALC’s website: “You read that right. A proposal in Congress would end door-to-door mailbox delivery service for 90 percent of American households and businesses that now receive it. H.R. 2309, a bill that is headed for a vote in the full House of Representatives, calls for the dismantling of the U.S. Postal Service, one of America’s oldest and most beloved institutions that has served the nation for more than 235 years as provided by the U.S. Constitution.”
Such tear-jerking language does nothing to help USPS bring change to an agency that is hemorrhaging dollars. It is true that the U.S. Postal Service was organized by the first Congress in 1792 as an agency of the federal government. Even earlier in 1775 the Second Continental Congress named Benjamin Franklin the first Postmaster General. The postal worker unions trade on this ancient history to thwart postal reform.
However, in 1970, over forty years ago, the U.S. Postal Service was reorganized by statute as a semi-independent agency. It is now mandated to operate in a business-like way and to receive no taxpayer support. USPS is supposed to sell products and services that are paid for by its customers, not by taxpayers. This may explain why postage stamps increasingly feature popular celebrities (Elvis, Marilyn Monroe) and cartoon characters (“The Simpsons”). Starting this year, the Postal Service will drop its longstanding rule against depicting living persons on postage stamps. What’s next? Justin Bieber?
Rep. Issa and Postmaster General Donahoe are not isolated voices in supporting drastic reform to the postal service. In October 2011, the U.S. Government Accountability Office (GAO) released a report, Mail Trends Highlight Need to Fundamentally Change Business Model, which reported some striking findings:
“Long-term trends … strongly suggest that the use of mail will continue to diminish as online communication and e-commerce expand. By 2020, USPS projects mail volume will decline to levels not seen since the 1980s: Total mail volume is projected to decrease by 25 percent, First-Class Mail is expected to decrease by 50 percent, and Standard Mail volume is projected to remain flat. While dire, USPS’s projections could prove optimistic if communication continues to move to digital technologies as quickly as in the recent past. For the first time, in 2010, fewer than 50 percent of all bills were paid by mail. These trends underscore the need for USPS’s business model to undergo fundamental changes to reduce personnel and network-related costs.”
The GAO concludes that it is essential that the U.S. Postal Service be restructured. But the postal unions stand in the way. Their obstruction flies in the face of common sense cost-cuts and solid business practices based on market principles. To put it bluntly, there is no way to reconcile Rep. Issa’s bill with the position of the postal workers unions.
Stumbling-Blocks: The Postal Workers Unions
The oldest and largest postal union is the National Association of Letter Carriers. Formed in Milwaukee in 1889, NALC represents roughly 300,000 urban area mail carriers, two-thirds of whom actively work for the USPS. The rest are mainly retirees. NALC is a member of the AFL-CIO labor federation and the UNI Global Union, an international coalition of communications unions.
NALC is separate from the American Postal Workers Union (APWU), a forty year-old union, also affiliated with the AFL-CIO, that represents 220,000 working and retired postal employees who do not deliver mail. These are workers in clerical, maintenance, motor vehicle and support services positions. APWU also represents some 2,000 private sector mail workers.
APWU recently negotiated a collective bargaining agreement with the Postal Service that USPS believes will give it increased flexibility. However, NALC’s 2006-2011 national agreement expired last year and it has yet to be replaced. On Jan. 20, the union’s negotiations with USPS headed for mediation. Why? The union will not accept the USPS proposals for reform and cost-cutting.
“I am disappointed by the postal service’s decision [to halt contract negotiations],” said NALC president Fredric Rolando, in a written statement. “Now that the formal litigation process has begun, we will pursue a negotiated agreement through mediation and prepare to vigorously defend our members in interest arbitration, if it reaches that step.”
Comparing what the union wants with what USPS can afford, it is clear that arbitration is more likely a ‘when,’ than an ‘if.’
Here’s the process Rolando is describing: if no agreement is reached after a 60-day mediation period conducted by the Federal Mediation and Conciliation Service, the issues under dispute go before a three-member arbitration panel. One panel member is selected by USPS, one by NALC, and the third—the chairman—by both sides. While the existing collective bargaining agreement remains in place, the panel holds hearings, calls witnesses and listens to expert testimony before reaching a decision. This arbitration process could take months.
NALC wants lifetime, no-cost health care and retirement benefits for all NALC officers and employees. It won’t compromise. After all, this demand is in Article One of NALC’s 2010-2014 Constitution:
“The objects of the association shall be … to create and establish the NALC Life Insurance Department and the NALC Health Benefits Department … to establish a non-contributory retirement program for officers and employees; to sponsor a non-profit retirement housing facility in East Lake Wales, Florida, to be owned and operated by the National Association of Letter Carriers, Retirement, Educational, Security, Training, Incorporated – NALCREST.”
Currently, USPS employees are part of the federal government’s health care plan run by the Office of Personnel Management. USPS Postmaster General Donahoe wants to shift the bulk of nearly half-a-million retirees onto Medicare – a point of contention with the NALC and other postal workers’ unions. NALC is pushing for 100 percent coverage, at the expense of taxpayers, but that costly option doesn’t appeal to either USPS or Congress.
On February 23 Bloomberg reported “most of the [USPS] quarterly loss came from a U.S. law requiring the service to pay about $5.5 billion a year toward the health benefit costs of future retirees. To date, the USPS has contributed about $38 billion” into this fund.
“The agency had predicted it would reach its $15 billion debt limit last year until Congress deferred the 2011 retiree health benefit payment to this year. The Postal Service, which borrows only from the U.S. Treasury, said this month it has $2.1 billion in borrowing capacity this year,” the Bloomberg report continued.
To be sure, USPS borrowing capacity isn’t the same as money in the bank and operating on a deficit is not a good long-term business practice. But NALC is pushing USPS to take advantage of its peculiar hybrid character: quasi-governmental—its workers are federal employees—and quasi-independent. In an October 2011 article for National Review, Rep. Issa has described what amounts to a dilemma that the union is asking the Postal Service to exploit:
“Postal employees are federal employees. All federal pensions and retirement benefits are paid from the U.S. Treasury. Since the Postal Service’s operating costs are collected from ratepayers, the Postal Service pays the U.S. Treasury for the costs of federal pension benefits postal workers are legally entitled to receive. Even if the Postal Service cannot or does not make these payments, postal workers are still entitled to pension benefits from the federal government. So it’s ultimately taxpayers who get stuck with the bill if the Postal Service can’t pay Treasury for the costs of pensions.”
Sounds a lot like Fannie Mae and Freddie Mac, don’t you think? These two were set up as “government-sponsored entities” (GSE). They had corporate managements and shareholder owners but government backing. The cozy relationship eventually cost taxpayers about $150 billion.
Rep. Issa is determined to find ways to avoid another costly taxpayer bailout. When the government reorganized USPS forty years ago it awarded the agency independent status with a mandate to cover its own expenses and not rely on taxpayer dollars. The catch, of course, is that USPS employees are regarded as federal workers – able to unionize though prohibited by law from striking. NALC sits atop this golden perch, ignoring the profitability margins and economic realities that motivate the private sector. And NALC thinks its perch is secure. Who, it calculates, is really willing to shut down the post office?
How to Retire in Style
USPS workers have been promised generous pension and health care plans when they retire, and Congress tried to insure the solvency of those plans when it passed the Postal Accountability and Enhancement Act in 2006. The intent of the statute was commendable. By requiring USPS to pre-fund its retiree health care fund the law would make sure that each worker’s benefit was fully funded when the worker was ready to retire. That would prevent the Postal Service from reaching into taxpayer pockets for a retirement bailout.
According to an October 2011 CNBC report, the mandate has been working. “Thanks to these prefunding payments,” CNBC reported, “the Postal Service has greatly reduced its unfunded obligations for retiree health benefits. At the end of fiscal year 2010, these obligations were under $49 billion – a substantial sum, but much more manageable. If the Postal Service continues making its prefunding payments, its unfunded obligations for retiree health benefits will be around $33 billion by the end of the decade. And the postal service will be on course to pay these benefits over time.”
NALC argues that the USPS reported revenue losses should actually be treated as profits. How so? NALC says in a Feb. 9 press release that without the pre-funding mandate, the Postal Service would actually have a $200 million net operating profit for the first quarter of 2012:
“[This] operational profit turns into red ink only when an external factor unrelated to mail delivery is considered—the 2006 congressional mandate that requires the Postal Service to pre-fund its future retiree health benefits over the next 75 years within a decade. That, along with a non-cash actuarial adjustment to the Postal Service’s workers’ compensation costs, is entirely responsible for the $3.3 billion “loss.” The pre-funding alone accounts for $3.1 billion of the quarter’s ‘loss.’”
NALC’s conclusion: Congress needs to back off its pre-funding mandate. In fact, NALC blames Congress for the Postal Service’s shaky financial condition.
“Congress created this problem, and Congress can fix it,” NALC asserts. “We urge lawmakers to address the pre-funding issue, as is called for in H.R. 1351, which now has a bipartisan House majority of 228 co-sponsors.”
H.R. 1351 is a bill called the “United States Postal Service Pension Obligation Recalculation and Restoration Act of 2011.” It was introduced by a Massachusetts Democrat, Rep. Stephen Lynch. NALC supports the bill’s provisions to recalculate how liabilities are figured in the USPS budget and reallocate “surplus” dollars to the retirement fund. The recalculation would “apply to allocations of past, present and future benefit liabilities between the USPS and the Treasury,” notes a summary of the bill prepared by the Congressional Research Service.
According to NALC, mistakes were made in the past. The bill will “address a decades-old accounting error that led the Office of Personnel Management to overcharge the Postal Service by billions of dollars for payments into the Civil Service Retirement System. [It] takes a big step toward making sure the Postal Service is treated in a fair and equitable manner, allowing it to overcome the very difficult financial challenges it currently faces.”
Rep. Issa dismisses this analysis of the pre-funding mandate. He says NALC is using scare tactics to end a pre-funding requirement that actually protects union members’ promised pensions by keeping UPSP liabilities in check.
“Postal workers who have been writing their members of Congress or protesting are just responding to the information that they have been given by their own union leadership,” Issa said, in an October 2011 CNBC report. “They have been told this money is not covering their benefits, but in fact covering benefits of people who haven’t been born yet.”
“That’s absolutely false. They have been told there is an overpayment in another pension account that could cover their retiree health care benefits. The nonpartisan GAO … has weighed in to clearly state that allegation is false. They have been led to believe outrageously false things about Congress “stealing” their money to pay for other things.”
Yet NALC won’t quit. It is determined to thwart reforms whether they come from Congress or from USPS management.
NALC Politics and Money
The union has toughened its position with its latest move. It has hired SEIU organizer-turned-investment banker Ron Bloom to come up with alternative proposals to save union jobs. As an adviser to President Obama, Bloom helped broker the General Motors and Chrysler bailout deals that arbitrarily protected union pension assets while sacrificing the legitimate interests of bondholders. For his services Time magazine named Bloom as one of “100 Most Influential People in the World”.
Who is Ron Bloom? A “pinstriped socialist,” answers CRC senior editor Matthew Vadum in a December 2011 article in Front Page magazine. Bloom “decided in the 1970s to devote his life to helping labor unions stick it to America’s corporations,” writes Vadum, author of “Subversion Inc.: How Obama’s ACORN Red Shirts Are Still Terrorizing and Ripping Off American Taxpayers.” As Obama’s “car czar,” Bloom excelled at wheeling and dealing. “Bloom was also reportedly instrumental in the administration’s push to double fuel-economy standards for automakers to 54.4 per gallon by 2025,” writes Vadum. “Now the National Association of Letter Carriers has hired Bloom, who left the White House a few months ago, to devise a strategy to fleece the financially struggling U.S. Postal Service.”
Bloom, NALC president Fredric Rolando, and Lew Drass, NALC director of city delivery, have big chips on their shoulders. Rolando, president since 2009 and a former letter carrier whose postal service career began in 1978, writes, “I got active in the union because of the antagonistic way management treated letter carriers.” Says Drass, “I have never liked bullies. I still don’t. I just couldn’t sit by and watch management pick on other letter carriers who couldn’t, or wouldn’t, defend themselves.”
Indeed, top union officials are eager to increase the UPSP workforce in order to unionize it. In the NALC “Branch Officer’s Guide to Finance and Administration,” (September 2009 edition), Rolando and NALC secretary-treasurer Jane Broendel write: “Most branches ask new letter carriers to join NALC at the first opportunity – during a presentation at the new carrier orientation meeting. Those who do not join immediately should be approached repeatedly by stewards and branch officers about joining the union.”
Talk about a hard sell. Then again, member dues are the lifeblood of labor unions. And NALC is no different. Look at some of the 2010 501c-5 tax forms (available on Guidestar.org) for NALC union locals. NALC-Branch 34 in Woburn, Massachusetts reports as its only source of income $1,056,237 in membership dues and fees. The same is true of NALC-Branch 214 in San Francisco, California, which reported total revenues of $1,358,985 with $1,331,579 in member dues and fees. The NALC branch in Buffalo, N.Y., reported total revenues of $555,415 and $491,085 was from membership dues and fees. The NALC-Buckeye Branch 78 in Columbus, Ohio, reported $381,900 in revenue with $370,422 from member fees and dues.
NALC works with the other AFL-CIO-affiliated unions representing Postal Service employees. For instance, if circumstances require it, a reciprocity agreement allows a mail carrier to easily switch membership from NALC, which represents city carriers, to the National Rural Letter Carriers’ Association. Likewise, if clerks in the American Postal Workers Union (APWU) change their work assignments, they may transfer their union membership to the National Postal Mail Handlers Union (NPMHU), a division of LIUNA, the Laborers International Union of North America.
That’s not to say that there aren’t occasional jurisdictional disputes between unions. For instance, in 2001 APWU, which represents mail “clerks,” and NPMHU, which represents mail “handlers,” went into arbitration. The grievance: which classification of worker should be assigned responsibility for scanning foreign mail on an Oakland, California, loading dock.
USPS Reform: A Realistic Goal?
What chance is there that taxpayers can be winners? Between the political infighting in Congress and collective bargaining disputes between the Postal Service and the unions, the prospects for Postal Service cost-cutting and pension and healthcare reform seem bleak.
After the Postal Service announced its plan to close or consolidate 223 processing plants over three years to save $15 billion, Cliff Guffrey, president of the American Postal Workers Union responded with a call to arms: “We must continue the fight.” Fearing workplace violence, the U.S. Postal Inspection Service has gone on the alert to any threats to the safety and security of postal facilities and workers. The National Rural Letter Carriers’ Association joined NALC in protesting cuts to mail delivery and it urged revision of the law requiring USPS to pre-fund postal worker retirement benefits. The Rural Letter Carriers also got busy gathering one million signatures to petition Congress to halt the closure of rural post offices. And NALC pressed USPS to abandon planned service cuts despite its financial hardships.
“NALC remains deeply concerned about any plans that would degrade our networks, reduce service quality or undermine our ability to develop new business in the future,” NALC president Rolando said in a written statement. As this publication goes to press, NALC’s contract dispute with the U.S. Postal Service is moving toward arbitration.
Cato Institute policy analyst James Bovard wrote this about the Postal Service:
“Mail service is becoming slower, more expensive, and less reliable. …
The United States Postal Service (U.S.P.S.) is probably the worst managed and one of the least honest corporations in America. One innovation after another has failed as the Postal Service struggles to enter the twentieth century. The service spends tens of millions of dollars each year to deceive the public about the poor quality of mail service. From mail delivery times to productivity increases to nine-digit zip codes, the Postal Service turns out reams of misleading information.
Americans are suffering a gradual extinction of mail service. In the past 15 years, the U.S.P.S. has intentionally slowed mail delivery, cut back on mail collection pickups, shortened the target zone for overnight delivery, reduced business deliveries, imposed strict requirements on the size of letters it will accept, and begun the abolition of home delivery. Congress is considering ending Saturday mail delivery.
The federal government has a monopoly on the delivery of first-class mail; as a result, the Postal Service is the country’s third-largest employer. Like all monopolies, the postal monopoly is abused, as the government forces people to accept increasingly worse service at ever higher prices.”
Bovard wrote this on February 12, 1985. Twenty-seven years later not much has changed.
Cheryl Chumley is a freelance journalist and frequent contributor to CRC publications.