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Burrus: USPS Rate Policies Add to Fiscal Woes
Burrus Update 09-2009, Aug. 11, 2009
S. 1507 Action Alert |
On Aug. 6 I had the opportunity to testify before a Senate subcommittee regarding legislation that would modify the USPS payment schedule for future retiree healthcare benefits. The bill, S. 1507, would change provisions of the Postal Accountability and Enhancement Act of 2006 (PAEA), which required the Postal Service to deposit $75 billion over a 10-year period into a fund to guarantee payment of the employer’s share of healthcare premiums for future retirees.
(The APWU opposed the PAEA in 2006, noting that no other federal or private entity is required to pre-fund this obligation, and pointing out that the USPS would not have sufficient resources to make payments ranging from $5.4 to $5.8 billion each year for 10 consecutive years.)
In addition to modifying the retiree healthcare payment schedule, an amendment to S. 1507 was offered by Sen. Tom Coburn (R-OK) and adopted by the Senate Committee on Homeland Security and Governmental Affairs on July 29. The amendment would require that postal “interest arbitrators” consider the “financial health” of the Postal Service when ruling on contracts.
Although arbitrators routinely consider the financial health or the Postal Service, if the amended bill is passed into law, it would have a profound effect on negotiations. When we begin our next round of contract talks in September 2010, discussion will be overshadowed by this new requirement.
The Postal Service is expected to accumulate a deficit of approximately $7 billion in Fiscal Year 2009, and FY 2010 is likely to be just as bad. If the law includes a standard requiring the arbitrator to consider the Postal Service’s “financial health,” management will hold a distinct advantage in negotiations.
Over the 39 years of postal collective bargaining, the APWU has succeeded in improving wages, benefits and working conditions, and we are determined to build on this progress. If this provision is adopted into law, however, it would drastically change postal collective bargaining. Far into the future, the union and management would contest the application of the new standard.
The Question-and-Answer Brouhaha
In my testimony on Aug. 6, I informed the Senate Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security that free collective bargaining should not include qualifiers such as the one contained in the amended bill. The right of employees to collectively present their interests and to expect a fair result would be seriously impaired by the insertion of a standard to be considered above all others in an arbitrator’s final decision.
In response to an invitation by Sen. Joe Lieberman (ID-CT) that the unions offer a list of criteria that should guide arbitrators’ decisions – in addition to “financial health” — I responded that the APWU was reluctant to provide such a list because for every factor included, others would be excluded. Furthermore, the factors that are important today will be replaced by other factors in the future. Free collective bargaining confers to the parties the opportunities to identify issues of agreement and disagreement, and charges arbitrators to find a balance.
I also noted that current law does not require arbitrators to consider any particular factor. The law provides that “the arbitration board shall give the parties a full and fair hearing, including an opportunity to present evidence in support of their claims.”
I informed the lawmakers that unless the amendment is struck from the legislation, APWU will oppose S. 1507, even though the Postal Service desperately needs the financial relief included in the legislation. I encourage all APWU members to write, call, and e-mail their Senators and urge them to reject S. 1507 unless the assault on postal bargaining is removed.
During the question-and-answer session at the hearing, I informed the Subcommittee that postal management’s efforts to make the Postal Service more efficient and cost effective have excluded a major part of postal operations. Through the manipulation of postal rates, the Postal Service has encouraged the growth of a private-sector mail-processing network, which profits from workshare discounts. The USPS has also rewarded mailers for programming their computers to include postal bar codes on mailings, and for sorting mail prior to placing it in the postal system. I informed the Senate committee that this process reduced postage for large mailers as much as four times greater than postal salaries.
A spokesperson for the mailers has objected noisily to my comparison of workshare discounts to postal wages, and launched a personal attack. In response, I consider the source of the attack, and dismiss the rantings of one outspoken advocate of the legislation that imposed the crippling financial obligations of funding retiree healthcare over an accelerated schedule. (If responsibility for the Postal Service’s bleak financial future could be assigned to individuals, this person, who questions my arithmetic, would bear a disproportional share of the blame.)
The comparison of workshare discounts and postal salaries is as follows:
The salary of a Grade 6, Step G Mail Processor is: |
$21.84 per hour |
The productivity of a mail processing machine is: |
37,000 letters per hour |
The productivity of a Mail Processor, including allowances for computer and work set-up, clearing jams, etc. is: |
30,000 letters per hour |
The workshare discount for 5-digit bar-code is: |
10.5 cents per letter |
The postal cost of bar-coding each letter is: |
.075 cents per letter |
Two passes are required to bar-code and sort, so the combined postal cost is: |
.15 cents per letter |
Additional costs are added to bar-coding and sorting, including maintenance, cleaning, support and administration, so we add 50 percent of the production cost for each letter: |
.075 cents per letter |
TOTAL USPS COSTS FOR BAR-CODING AND SORTING BULK BUSINESS MAIL: |
.225 CENTS PER LETTER |
WORKSHARE DISCOUNT: |
10.5 CENTS PER LETTER |
By law, service must be universal, and rates must be uniform; in other words, each letter of the same weight and within the same class should pay the same postage. This legal requirement has been modified to reduce rates for major mailers by deducting the costs of work they perform prior to inserting mail into the mail stream. This is known as “worksharing.”
This process has been abused, and in the adoption of the PAEA of 2006, the APWU successfully argued that the legislation should include limits on the right of the Postal Service to establish discounts that exceed the “postal costs avoided.”
In each postal rate proceeding since the adoption of this APWU-supported amendment, the Postal Rate Commission has found that workshare discounts have exceeded the postal costs avoided and the workshare rates were not justified.
In response to these violations, instead of adjusting the rates upward, the Postal Service stopped measuring workshare discounts against the single-piece full rate, known as the “benchmark piece.” Regrettably, rather than enforce the law, the Postal Regulatory Commission has initiated a hearing to reconsider the cost allocation for workshare activity and other issues related to workshare discounts.
No rationalization can justify the Postal Service’s willingness to reduce postage rates in an amount that exceeds postal costs. In the efforts to increase revenue and productivity, one would expect a thorough review of all postal operations, including those activities performed by private mailers. It is unfair to force all of the adjustments on dedicated postal employees who represent the most efficient and productive mail-processing system in the world, and no amount of bombastic rhetoric can change the real cost of workshare discounts.
William Burrus
President
