The Financial Death Spiral of the United States Postal Service ...Unless?

By Grady E Griffin

Grady E. Griffin knows all too well that the United States Postal Service is on the verge of financial collapse.

It continues to lose billions of dollars per year, and it has reached its maximum federal borrowing limit of $15 billion. Meanwhile, total liabilities are approaching $100 billion.

Griffin, who worked for the Postal Service in numerous roles, proposes common-sense solutions to the Postal Service’s most pressing problems.

These solutions and other fixes are popular among working-level employees, but many managers, union officials, labor specialists, contract compliance officials, advocates for grievances, and arbitrators who make a living off interpreting complicated contracts continue to oppose them for selfish reasons.

Tens of thousands of jobs are at stake, and a valuable service that the public relies on could be eliminated forever unless stakeholders overhaul the Postal Service.

• Language: English
• Publisher: Lulu Publishing Services
• Release date: Jan 12, 2016
• ISBN: 9781483443416

Book preview

THE

FINANCIAL DEATH SPIRAL

OF THE UNITED STATES POSTAL SERVICE

…UNLESS?

Bloated bureaucracy

Entitlement mentality

Out-of-control Union demands

No accountability

No enforceable productivity standards

Refusal to change

Denial

Result: The death spiral is complete

GRADY E GRIFFIN

Copyright © 2015 Grady E Griffin.

Photos by the author.

All rights reserved. No part of this book may be reproduced, stored, or transmitted by any means—whether auditory, graphic, mechanical, or electronic—without written permission of both publisher and author, except in the case of brief excerpts used in critical articles and reviews. Unauthorized reproduction of any part of this work is illegal and is punishable by law.

ISBN: 978-1-4834-4340-9 (sc)

ISBN: 978-1-4834-4342-3 (hc)

ISBN: 978-1-4834-4341-6 (e)

Library of Congress Control Number: 2015920560

Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

Any people depicted in stock imagery provided by Thinkstock are models, and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

Lulu Publishing Services rev. date: 12/23/2015

CONTENTS

1)   The Postal Reorganization Act of 1970: The Beginning of the End

-   Public Misunderstanding

-   Board of Governors

2)   Out-of-Control Grievance Payouts / Union Greed

-   Who Pays for the Time to File Grievances?

3)   Protecting the Worst of the Worst

4)   Pay Incentive for how Long an Employee Remains on the Clock

5)   Evaluated Routes

-   A Virtual Elimination of Overtime

-   Elimination of Penalty Overtime

-   Employees Buy-In

-   Improved Delivery Service (Early Delivery)

-   Reduction in the Workforce (Craft and Supervision)

-   The Evaluated Process is Already Tested and Proven

-   The Elimination of Millions of Dollars Due to Article 8 Payouts

-   A Reduction in Arbitration Cases

-   A Reduction in Hours used for Grievance Handling

-   Elimination of Contract Compliance Positions

-   Elimination of the Current Route Evaluation Process (3999)

-   The Evaluated Route Structure is Already in Place

6)   OIG Report / the $10 Billion Blunder

-   The Cover-Up

-   Continuation of the $10 billion Blunder

7)   Follow-Up OIG Report

8)   The Wasteful Bureaucracy

-   Wasted Travel and Resources

-   Senior Executive Pay Rate

9)   The Postal Accountability and Enhancement Act

10)   A Lack of Senior Management Accountability

11)   The Dire Predictions

12)   The Blame Game

13)   A Lack of Vision

-   Throwing Money at the Problem

-   Mixed Messages

14)   The Solutions

15)   The New Look: United States Postal Service after Solutions are implemented

16)   Conclusion

ACKNOWLEDGMENTS

I want to thank my wife, Belle, for standing by me for 42 years and counting. She has been my inspiration during good times and bad. Thanks to my kids and my wonderful extended family. Also, thanks to a few postal friends for inspiring me; Angie, Mike, Corey, Brian, Monique, Cheri, Stella, Tom, Paul, Jan, Javier, Joan, John, DC, Lionel, Doug, Joe, Dana, Craig, Reggie, Yul, Shaun, Anna Liza, Maryann, Yu Chin, Jerry, Jim, Ron, Washington, Rich, Lynn, Sabrina, Danita, Mary, Michelle, Mell, Sandy, Brad, Chad, Roger, Randy, Marvel, Wendy, Loretta, Lorraine, Phyllis, Zarita, Suzanne, Sue, and Calvin. You guys are great and I really appreciate you.

INTRODUCTION

The United States Postal Service is on the verge of total financial collapse; however, this financial meltdown is completely preventable if the solutions in this book are implemented. I worked for the United States Postal Service for over twenty years. During this time, I worked as a city letter carrier, supervisor, manager, acting manager of post office operations, acting manager of customer service operations, and postmaster. I have also represented the postal service on numerous grievances that were filed by the unions. I wrote this book not to hurt the postal service, but to save the postal service.

Currently, the postal service is in a financial death spiral. A death spiral has different definitions depending on how the term is being used. In aviation, Wiktionary defines a death spiral as, the downward, corkscrew motion of a disabled aircraft which is unrecoverable headed for a crash. Wiktionary provides another definition as the situation or course of action of one on a path toward some sort of inevitable catastrophic failure. Both definitions describe the current financial fate of the postal service. The details outlined in this book will explain how the postal service got into its current financial state and has no chance of financial recovery under current policies. However, after the financial meltdown is explained, solutions will be presented that will bring the postal service back from the brink of financial disaster without a single penny of taxpayer help. A staggering $10 billion per year can be saved if the solutions in this book are implemented.

The United States Postal Service is suffering staggering financial losses. Estimates are losses in the $3 to $5 billion range for each year as far as the eye can see. The postal service has reached the maximum federal borrowing limit of $15 billion. In addition, the Postal Service chief financial officer (CFO), Joseph Corbett, recently disclosed that total liabilities are approaching $100 billion. The financial reports released for the first quarter of 2014 show a loss of $354 million. This is unbelievable when shipping revenues were up 14 percent. During the Christmas season, there were lines out the door in the retail lobbies. The postal service was flooded with packages to be delivered, but it still lost $354 million at the busiest time of year. Historically, the postal service is the most profitable during the Christmas season, which is used to help offset projected losses later in the year when profits go down. However, if the postal service can’t be profitable during the busiest time of year, then there is no chance it will recover from the financial death spiral under the current system.

In the second quarter of 2014, the postal service posted a $1.9 billion loss. The third quarter financial report that ended on June 30, 2014, was even worse with a reported $2 billion loss. Almost $2 billion was lost in the fourth quarter of 2014. You may have heard that postal service leaders are striving to reduce cost and increase revenue, but the financial reports that were released for the first quarter of 2015 show a financial condition even worse than 2014. The postal service is reporting that losses in the first quarter of 2015 were $754 million; this was certified by the postmaster general and the chief financial officer on February 6, 2015. This was a loss of an additional $400 million from the same period last year (SPLY). How could the staggering losses have gotten worse? The staggering losses continued in the second quarter of 2015, with the postal service reporting another $1.5 billion loss. The underlying reasons of these out-of-control losses will be explained throughout this book. The losses in the billions of dollars over each period (quarter) are so staggering that many executive leaders, union officials, politicians, and rank and file employees of the postal service have become numb to the amount of funds that are being lost. The attitude by many seems to be that the postal service will be around forever and paychecks will continue to go out every two weeks. Nothing could be further from the truth. What happens when the money runs out? Do the leaders ask for a taxpayer bailout? I don’t think so, because that will not fix the problem. It is important for you to understand that taxpayers don’t currently fund the postal service; instead, the postal service is required to be self-funded by the sale of postal products.

Many union officials argue that the entire financial problem is because of the Postal Accountability and Enhancement Act (PAEA) that was passed with bipartisan support of Congress in 2006. One of the requirements in the PAEA required the postal service to make regular payments into a Postal Service Retiree Health Benefits Fund (PSRHBF) to pay for retiree health costs. This was in part because the PAEA estimated the unfunded liability for retiree health benefits was $52 billion. The union officials argued that the postal service would be profitable if this had not been done. It is ironic that postal union officials constantly argue for increased benefits, but they have difficulty understanding retiree health benefits and don’t realize that arguing against the pre-funding could actually diminish the health care benefit of many employees. While the amount of the payments can be discussed and debated, the reasons for the health benefits fund is sound. The money for retired health care will have to come from somewhere, so it is logical that the postal service should be responsible for the health costs. Besides, the Postmaster General (PMG) made a decision not to pay into the PSRHBF since 2012, and the postal service has still reported the loss of billions of dollars each year since the payments stopped. One argument is that the postal service should have a pay-as-you-go health-care system. However, at the end of the day, the postal service is losing money, so decisions have to be made on what bills to pay. Would the decision be made to pay for health care at the expense of not being able to pay salaries? This would not be a good decision, because the postal service would then have to ask for a government bailout.

To complicate matters, there is not a single proposed change at any level that will fix the financial problems of the postal service because these proposals do nothing to address the basic internal structure of the postal service. The current proposals by management, the unions, and Congress only put a Band-Aid on areas that need major surgery. There is no recovery from this inevitable end unless there are radical changes.

This book is more than just a stale repeat of old arguments that have been used by both the highest levels of management and the powerful postal unions. The discussion begins with the Postal Reorganization Act of 1970, which was really the beginning of the end. The redundant levels of high-paid managerial positions will be revealed, as well as the relentless pressure unions feel to defend the worst employees, which makes it almost impossible to hold any craft employee accountable for a simple fair day’s work for a fair day’s pay. This book also provides an insider’s view of the millions of dollars that are paid out on grievance settlements. The lack of accountability and lack of vision from both senior leadership and union officials will be revealed. After reviewing the wasteful bureaucratic postal service, common-sense solutions will be brought forward.

The solutions may seem simple, and they are, but breaking through the bureaucracy is a taunting task. Some of these solutions are:

• Getting paid for the work an employee does instead of how long the employee stays on the clock (a savings of approximately $2.5 billion per year);

• The elimination of layer upon layer of unneeded redundant management levels (another $3 billion in savings)

• Stopping the wasteful process of detailing high-paid officials across 67 districts;

• Stopping over $100 million in payments to settle grievances; and

• Firm accountability for both senior leadership and union officials.

In addition, the current process of senior leaders making poor decisions that cost the postal service millions of dollars with little to no accountability will be exposed. The postal service needs a complete overhaul, and the solutions are discussed in this book. Surprisingly, the solutions are very popular with the working-level employees, but many management officials, union officials, labor specialists, contract compliance officials, advocates for grievances, and arbitrators who make a living off interpreting complicated contracts will oppose the solutions for selfish reasons. The reason they will oppose the solutions is because at all levels the primary argument is to protect one’s own job even if it causes the demise of the postal service. Interestingly, most of the solutions for saving the postal service are already in place; they just need to be expanded to all areas. The postal service can save $10 to $11 billion per year, and the savings will increase every year. Without drastic changes, the postal service is doomed to go the way of the American steel industry, which went from being the number one steel industry in the world to being non-relevant. So which direction will the postal service go? Will it be the solution pathway, or will it be the current pathway, which is the death spiral with no way out.

CHAPTER 1

The Postal Reorganization Act of 1970: The Beginning of the End

President Richard Nixon signed the Postal Reorganization Act (PRA) into law on August 12, 1970. This act had bipartisan support and was passed by both the Senate and House of Representatives. The PRA established collective bargaining rights for the unions and at the same time required the postal service to be self-sufficient with the sale of postal products. There would be no more tax dollars propping up the postal service. All of this was to be done with the postal service operating similar to a private company. While this might have seemed like a good idea, it actually put a process in place that has brought the postal service to the brink of financial collapse. A requirement to operate like a private company, but with government oversight, out-of-control unions, a massive management bureaucracy, and little to no accountability at any level only had one possible outcome. The outcome, without major changes, is the completion of the financial death spiral that the postal service would experience in the near future. Maybe the senators and representatives who supported the act would change their vote if they could see the bureaucratic monster they created.

In 1970, a postal strike began in New York. At first, it was local, but it soon spread across the nation. Low wages and poor working conditions triggered the strike. At the time, the highest-paid craft employee received an approximate $8,800 annual salary. A modest increase in wages was proposed, but at the same time, other government officials were scheduled to receive as much as a 40 percent increase. This infuriated many union members and the strike was on.

Striking was illegal in the post office, but the decision was made to strike anyway. This action caused major economic issues across the nation. At the time of the strike, there was no FedEx, UPS was not a serious competitor, and the Internet was just a dream in the future. The postal service had a virtual monopoly on letters, packages, and most written communication. It is doubtful that a strike today would have the same type of impact. The postal service no longer has a monopoly on packages; in fact, the postal service has become a minor player in the lucrative overnight deliveries; UPS and FedEx dominate this area. Even the monopoly of letter mail has been seriously reduced because of modern electronic communication. This is probably why there is a no-strike clause in all of the current national contracts that are fully supported by the unions. In addition, the unions now have everything they could ever desire, so a modern-day strike would be financial suicide. However, in 1970, the story was quite different, and the strikers held the upper hand.

On March 18, 1970, postal workers went on strike. There was an attempt to break the strike by using military personnel to case and carry the mail, but this was not in place long enough to have a serious effect on mail delivery. Politicians at the highest levels got involved to reach a resolution, and they gave into the strikers’ demands. The strike ended, on March 25, 1970 and as a result on August 12, 1970 the Postal Reorganization Act (PRA) was signed into law by President Nixon.

The initial reasons for striking were legitimate, but they have come and gone, and a monster has been created. A major agreement of the PRA was to give the unions collective bargaining rights. This has evolved into an environment where postal employees file thousands of grievances and total yearly payments to settle these grievances amount to millions of dollars being paid to employees who have not worked for it, and a labor environment that makes it almost impossible to take corrective action against poor-performing employees. The grievance process is so vast that it reaches from the union members, union stewards, multiple grievance steps, national business agents, a Contract Compliance Unit, arbitrators, and to the top union leadership in Washington, DC. Along with demanding payments to employees for things such as overtime worked by employees on the wrong overtime list, overtime hours not equitable, routes not properly adjusted, schedules not timely posted, supervisors performing craft duties, failure to hire replacement employees even though they are not needed, the union officials also defend the worst of the worst employees to get all discipline reduced or completely thrown out. Many of the grievances come from very complex contracts that allow employees to sign up for overtime on multiple types of overtime list at the beginning of a quarter (every three months). If management uses an employee that is not on the right overtime list a grievance is filed and a demand for money is issued by the union steward. The common themes are always to pay employees even though there was no work performed and to virtually never issue discipline. But, if discipline is issued, unions officials always make demands that the employees are made whole (paying the employee for any lost time). It does not seem to matter if the union member’s performance is poor or what he/she has done; the union defends its members no matter what. It also does not seem to matter to union officials if contract rules are violated as long as the union members are paid. This vast union bureaucracy ensures that union members will share in the hundreds of millions of dollars paid out each year as a result of grievances that are filed.

The Postal Reorganization Act made major changes to the postal service that included a requirement for the postal service to be self-sufficient by generating revenue from the sale of postal products and stop receiving federal funding. This meant that the postal service would have to act similar to a private company. The PRA requiring the postal service to be self-funding was now accompanied by the newly won collective bargaining rights. Many people argue that collective bargaining rights is a good thing. However, when $97 million is paid out in 2011, and $87 million is paid out in 2012 to settle grievances, and the Office of the Inspector General (OIG) states, Grievance settlements and payments has significantly improved since our prior audit (HR-AR-13-008), you can start to get an idea of the massive problems the out-of-control collective-bargaining process has caused. In 2013, the Postal Service paid $106 million to settle grievances (OIG Report HR-MA-14-008). The grievance payout for 2014 was higher than 2013. It is hard to imagine that the massive payments to settle grievances are routine in the postal service, but it is a normal and accepted practice for the employees who work for the postal service. Spending over $100 million each year to employees for not working is just another day at the office for union leaders and senior postal leaders. Even the OIG refers to payments of $97 million and $87 million as, significantly improved. To make matters worse, the $106 million paid out to settle grievances in 2013 is only the tip of the iceberg when it comes to the postal service wasting funds. Most employees are paid on an hourly basis without regard to productivity. The abuses with the hourly pay process in the city letter carrier craft cost the postal service at least $2.5 billion per year. What has caused the massive payouts to union employees?

The postal service has powerful unions. The biggest unions are the National Association of Letter Carriers (NALC), the American Postal Workers Union (APWU), the National