The U.S. Postal Service is proposing cutting its workforce by 20% and withdrawing from the federal health and retirement plans in order to find lower-cost benefits for its employees.
The USPS has lost $20 billion over the past four years, including $8.5 billion in 2010 alone as mail volume declined 20%. In a notice informing employees of proposed layoffs and benefit changes entitled “Financial crisis calls for significant actions,” the USPS said that, “We will be insolvent next month due to significant declines in mail volume and retiree health benefit pre-funding costs imposed by Congress.” The USPS is facing the equivalent of Chapter 11 bankruptcy.
While the unprecedented proposal would break labor contracts and put tens of thousands of government employees out of work, a “Workforce Optimization” document outlining the USPS plan says that “exceptional circumstances require exceptional remedies.” The document notes that a significant amount of First-Class mail volume has been lost, never to return, decreasing revenue for the service that has maintained an unnecessarily large workforce and, as the document implies, has been far too generous in its health and retirement packages. The document explains the reasons for declining revenue thusly:
“Hardcopy communication of all types continues to shift to digital alternatives. More people are paying bills and
transacting business online. Advertisers are switching from print to internet and mobile channels. And, while online purchases have increased the volume of packages, this part of the Postal Service’s revenue stream is not large enough to offset overall mail volume trends.”
In a second document outlining proposed changes to health and retirement benefits, the USPS explains that it must reduce health benefit and pensions costs, which account for a third of its labor expenses. The plan would withdraw 480,000 pensioners and 600,000 active employees from the Federal Employees Health Benefits Program and place them in a new program administered by the Postal Service. The plan would also withdraw a significant number from the Civil Service Retirement System and the Federal Employees Retirement System.
The USPS has already eliminated 212,000 positions over the past 10 years, and recently announced plans to close 3,700 branch offices. The Postal Service also asked Congress to allow mail to be delivered only five days a week instead of six and to change a requirement that it pre-fund retiree health benefits, all in an attempt to reduce spending.
Of the more than 7 million people employed by the USPS, about 543,400 people are in career positions, of which the Postal Service hopes to cut 120,000 by 2015 in addition to the 100,000 it expects to cut by attrition. But the plans have met with fierce opposition from the American Postal Workers Union for obvious reasons, and since they would be in violation of union contracts that contain layoff restrictions protecting employees who have given six or more years of service, the plan would require new legislation allowing the USPS to break their APWU contracts.
But Fredric V. Rolando, president of the National Association of Letter Carriers, has said that, “The Congress of the United States does not engage in contract negotiations with unions, and we do not believe they are about to do so.” Of course, that remains to be seen. Republicans are more likely to support the measure than Democrats, who count organized labor among their allies, though parties on both sides of the aisle might recognize the Postal Service’s critical financial situation and the need to make cuts somewhere.