The postmaster general of the United States, Patrick R. Donahoe, will retire on Feb. 1, as announced by the United States Postal Service on Nov. 14. The current USPS COO, Megan Brennan, a 28-year veteran with the agency, will step up to the CEO and postmaster general role. For the business-to-business take on the news, as well as on other current topics regarding the postal service, ABM turned to ABM/SIIA postal counsel Jack Widener.
Why is the postmaster general retiring?
The reason Donahoe offered is that labor negotiations are approaching, and he does not want to negotiate those discussions only to have his successor dealing with the outcomes. But part of the reason is also possibly that he felt Congress would not be passing any legislation in the near future, and he grew weary of waiting for that to occur. Postal reform legislation would have been the final piece that would have allowed him to complete his restructuring plan for the Postal Service. If that had occurred, with four years as PMG and 39 total years in the Postal Service, he would have achieved his major goal as PMG and could retire on a high note. But it appears Congress has no immediate plans to move forward with comprehensive legislation and, in fact, may add limitations on the Postal Service’s ability to reduce operational costs (see Legislative and Network Rationalization topics, below).
Perhaps Pat Donahoe’s greatest achievement is his leadership in restructuring operational functions within the Postal Service, which has resulted in billions of dollars in savings annually. As described above, his greatest disappointment, and ours too, is not being able to convince Congress of the need to pass comprehensive postal legislation to control costs. He needed legislation to change health care coverage plans, eliminate or reduce the retiree health benefits payment of about $5.7 billion annually and lower the Federal Employee Retirement System payments. He also needed legislation to change delivery from six to five days.
So the end of 2014 is a good ending point for Mr. Donahoe, and it ia an interesting time for an incoming PMG to take up the reins of the Postal Service.
Is Megan Brennan a good choice?
I believe she is an excellent choice. As COO, she has been the person who led the group that identified and implemented the operational cost reductions that have taken place. Many of us have known her for years and appreciate her willingness to go out and talk with customers, listen to criticism of the organization, respond honestly and follow up. We may not always agree with her decisions, but she has earned a high level of trust and respect from industry. She has always been a friend to publications, especially in these times when those revenues continue to decrease.
As an alternative, the Board of Governors could have gone outside the Postal Service for a replacement, and we have supported that at times in the past. It has not always meant greater success, though, and at this point in time it may be a wise decision to transition to someone from within, especially with the credentials Megan brings to the table.
What do the USPS’ finances look like for fiscal year 2014?
The Postal Service presented a summary for fiscal year 2014, which ended in September, at the Board of Governors meeting today.
- The net loss was $5.5 billion and includes a $5.7 billion payment due for retiree health care benefits which they again defaulted on paying.
- Operating revenue increased $569 Million from 2013.
- Operating expenses decreased by about $41 billion.
- Total Mail volume decreased by 1.8%.
- What are the current hot topics on the legislative front?
In summary, nothing positive is happening on Capitol Hill heading into a new Congress. There was some hope that legislation might be brought forward in the lame duck Congress, but the various disagreements have led Senate leadership with no hopes of brokering consensus on reform legislation.
That said, it is a possibility that legislation could pass to place a moratorium on closing postal facilities (see network rationalization below). This would not be a stand-alone piece of legislation, but rather a rider on an appropriations bill providing direction to the Postal Service. SIIA/ABM oppose such a moratorium, but it could prove to be politically popular enough to pass.
What about network rationalization?
The Postal Service implemented a plan in 2011 to close about 230 processing facilities, not local post offices, as a result of decreasing mail volume and revenues. In 2012 and 2013 they closed about 141 facilities and determined the savings were $865 million annually. In 2014 they froze the process hoping legislation would be enacted. Congress as a group is sensitive to closings so the Postal Service wanted to avoid any distractions as they were working on postal legislation.
In July of this year they announced they would complete the 82 consolidations in 2015 with a projected savings of $750 million annually.
How does this affect ABM/SIIA members?
On the positive side, network rationalization has the potential to take $750 million in costs out of the system. That helps in avoiding more exigent rate increases and will have a positive, but small, benefit on periodical cost coverage.
On the negative side, there will likely be some disruption in service as the changes are made and the potential of permanent disruptions due to having fewer processing facilities. However, if history is an indicator from the previous closings, there will be negligible problems.
Are we supporting this effort?
ABM/SIIA’s position has been supportive of these measures in the past, and we continue to think it would be a net positive for members. Even though there are risks to service levels, we feel we must support the Postal Service in its efforts to “right-size” based on decreasing mail volume and runaway costs facing the UPSP. This has become even more important as Congress is not likely to take any legislative actions that would take additional costs out of the system. Short of legislation, this is one of the last options available to reduce costs and reduce the pressure on rate increases.
What other service considerations should we know about?
Periodicals: As part of network rationalization critical entry times (CET) are changing for Periodicals. A critical entry time is the time when you have to arrive at a postal facility to receive the service standard for the zip code your mail is going to. These CETs are changing to earlier in the day, from 4 p.m. (bundle sort required) and 5 p.m. (no bundle sort required) to 11 a.m. and 2 p.m. respectively. This means to receive the same service you will have to arrive at the facility before the new CETs.
First Class: According to the Postal Service there should be very little changes in the delivery of First Class Mail.
Why are the CETs changing?
The principal benefit of the new CET’s is that they will allow the Postal Service to expand its nightly processing window, smoothing out the peak volume load over more of the workday, thereby reducing the number of processing locations needed in the network.