NATIONAL ASSOCIATION

OF POSTAL SUPERVISORS

The Business
Case for
Continuing
Six-Day Delivery

1727 KING STREET SUITE 400 ALEXANDRIA, VA

(703) 836-9660 FAX: (703) 836-9665 napshq@naps.org
 January 2011
The Business Case for Continuing Six-Day Delivery

Since March, 2010 the Postal Service has promoted several cost-saving
measures, including reducing the number of delivery days from the current
six-days per week to a five-day delivery structure. The National Association
of Postal Supervisors believes that the Postal Service must develop new ways
to become more profitable, but a reduction in delivery days is not the
appropriate answer to the Postal Service’s problems. Better options are
available.

The start of five-day delivery for the Postal Service should be the last resort,
not the first. Five-day delivery is rife with devastating outcomes for postal
customers and the Postal Service itself. The better course lies in
Congressional action that restructures the Postal Service’s pension and
health benefits payment obligations. Such actions will restore the Postal
Service’s financial stability and remove the need for five-day delivery.

The Postal Service Faces Dire Financial Challenges

Congress has annually mandated a six-day delivery schedule since 1983. At

first glance, one would conclude that reducing a postal delivery day is a
promising way to cut costs, as it could save the Postal Service at least $3
billion a year, according to former Postmaster General John E. Potter in
testimony before a House subcommittee in 2010.i

Those savings are tempting in light of the Postal Service’s financial situation.
In September, 2010 the Postal Service ended the fiscal year with an $8.5
billion net loss.ii It faces continued losses in the current year, along with
serious questions over its liquidity, including whether it will have enough
cash to meet current obligations by the end of this fiscal year, in September,
2011. Chief among those obligations is the requirement imposed on the
Postal Service by the Postal Accountability and Enhancement Act of 2006 to
pre-fund retiree health benefits with payments of approximately $5.6 billion
each year through 2016. iii

Correction of Postal Pension Overpayments Would Restore the

Postal Service’s Health

Over the course of the last four decades, the Postal Service’s financial
condition has eroded primarily due to the overpayment of its actual pension
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obligations. These pension overpayments have worsened the Postal
Service’s financial condition far more than recent changes in the economy or
reductions in mail volume due to the substitution of electronic
communication. The Postal Service’s Inspector General reported in 2010
that the U.S. Postal Service, since 1971, has overpaid its pension obligations
to the Civil Service Retirement System (CSRS) by as much as $75 billion.iv
The Inspector General found that the actuarial methods used to determine
CSRS pension costs for postal employees have been inequitably split
between the Postal Service and the federal government since 1971 when the
Postal Service was created. The Inspector General also found that the Postal
Service has overpaid roughly $6.8 billion into the Federal Employees
Retirement System (FERS).v

In light of these profound accounting and payment errors and the Postal
Service’s perilous financial condition, common sense suggests taking the $
75 billion that the Postal Service overpaid to the Civil Service Retirement
System and its nearly $7 billion surplus in the Federal Employees Retirement
System, and crediting those amounts to the Postal Service. This would be
more than enough to cover the liabilities the Postal Service faces for its
future retiree health benefits.

In fact, in the last Congress, Sen. Tom Carper (D-DE), Sen. Susan Collins (R-
ME), and Rep. Stephen Lynch (D-MA) each introduced measures (respectively
S. 3831, S. 4000, and H.R. 5746) to set in motion a process to direct the
Office of Personnel Management to correct the methodology for calculating
Postal Service obligations to these pension funds and to transfer the
overpaid amounts to the Postal Service for its use in satisfying its future
retiree health benefit obligations. But the three measures did not advance,
in part because of concerns by some that transferring funds from the CSRS
to the Postal Service would diminish financial assets held by the Civil Service
Retirement and Disability Fund, thereby indirectly increasing the federal
deficit. (Note, however, that these amortization-related payments would not
“score” for budgetary-recognition purposes.)

Correction of Postal Pension Overpayments Should Not Increase the

Deficit

We remain unconvinced that an intergovernmental transfer of funds from the

federal treasury to the Postal Service – an independent establishment within
the federal government – will increase the federal deficit. This transfer of
funds is intended not to expand federal spending, but only to right an
administrative wrong. Fair dealing between components of the federal
government should not permit incorrect and unjustified payments in the
billions of dollars by one federal component – in this case, the Postal Service
– to the federal treasury, as directed over the course of decades by other

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federal components, first the Civil Service Commission and then the Office of
Personnel Management. Moreover, these payments by the Postal Service
were originally provided by postage ratepayers to fund benefits for postal
employees, not non-postal federal employees. Fairness to the Postal Service
and its ratepayers mandates the transfer of these overpaid funds.

This colossal and continuing accounting mistake carried out by executive

branch authorities beckons immediate correction by the Congress.
Resolution of this error through the restoration and transfer of the correct
amount of funds back to the Postal Service will provide sufficient assets to
return the Postal Service to financial stability. It will satisfy the Postal
Service’s greatest financial obligation, the prefunding of its future retiree
health benefits through 2016, as required by the 2006 postal law. It will also
remove the otherwise pressing need to pursue deep cuts in service,
including the realignment of the current six-day delivery schedule. That is
why we regard the proposed move to five-day delivery as a last resort, not
the first.

Moreover, we see for a host of reasons, perilous problems for the Postal
Service should five-day delivery become a reality. These problems involve
the precedent that would be set by the potential loss of exclusive access by
the Postal Service to mailboxes, the disastrous consequences of delay to
mailers and customers in the delivery of time-sensitive parcels and mail, and
the vicious downward spiral in mail volume that likely would come about as
users of the mail begin to resort to other means of delivery.

Precedent Will Be Set by the Loss of Exclusive Access to Mailboxes

by the Postal Service

The Postal Service has a little known, but highly protected privilege that
gives it the exclusive right of access to customer mailboxes. The United
States Congress originally passed the Private Express Statute in 1792, to
“establish Post Offices and Post Roads.” The Private Express Statute
created a governmental monopoly for the carriage and delivery of letter
mail, and ensured that this monopoly can be enforced. The Private Express
Statute, found in 18 U.S.C. § 1693–1696 and 39 U.S.C. § 601–606, is
implemented under Title 39 of the Code of Federal Regulations Parts 310 and
320. These provisions generally forbid all carriage and delivery of letter mail
by private organizations. The Private Express Statute only applies to letters
and not other mailable items such as parcels or periodicals.

Were the Congress to abandon six-day delivery, the likely and ultimate
outcome would be attempts to either relax or eliminate the provisions
providing exclusive access to mailboxes, initially just for Saturday’s, but
eventually for other days as well. Ultimately, we would see a total end to the

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Postal Service’s exclusive ability to deliver to the mailboxes of all the homes
and businesses across the country.

What would happen if anyone could place items, flyers or other material in
your mailbox? First, you would be besieged with unsolicited papers,
paraphernalia and solicitations that would be delivered directly to your door
slot, doorway or curb-side mailbox by some unregulated stranger who could
be hired by-the-day without any background checks. These “carriers” may
even possess a criminal background. The individual from the Unknown
Delivery Company would not have had a required background check or
assurance of a clean criminal record, something mandated of all postal
employees. In addition, their work would not be monitored regularly by
postal management.

If the Unknown Delivery Company was short a few delivery people on a given
day, depending on where they needed help, they could simply go to one of
many storefront businesses that provide workers who show up each morning
looking for a day’s pay or, like here in the Washington, D.C. suburbs, a
company could merely stop by any street corner where you can easily find
an undocumented worker willing and able to deliver mail, or do about
anything else, just to get a day’s pay.

Did you know that the Postal Service carries and delivers millions of dollars
worth of prescription medicine to addresses throughout the country every
day? The sanctity of the mail is something that we all take for granted. But
all that peace of mind could be lost with the relaxation of the Private Express
Statute. If someone other than you and your letter carrier can get into your
mailbox, you’d better make sure that you get to your mailbox at the same
time your mail is delivered or you might not get it at all.

The Postal Service also has exclusive access to office building mailrooms and
locked boxes in apartment buildings. Postal letter carriers tend to know
when you are away at work or are gone on vacation. This type of information
shouldn’t become known to others.

Delay in the Delivery of Time-Sensitive Parcels and Mail Could Be

Disastrous

The cycle of collecting, processing and delivering mail is similar to a

scheduled bus or train route. There is an origin and a destination. The trip
can be as short as a couple of city blocks or as far as from Hawaii to Bangor,
Maine. With the mail, all along the way are intermediate stopping points --
processing facilities, as they are known in the postal world -- that make up
the infrastructure of today’s Postal Service. The transportation infrastructure

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of the mail must run every day on a precise schedule in order for mail to
move from one point to another in accordance with established delivery
standards that are in place throughout the country.

In the five-day model with the elimination of Saturday delivery, the routing of
the mail would be interrupted every weekend. In 2011, with seven Monday
holidays, there will be seven times when mail will not be delivered from
Friday until the following Tuesday. That can equate to extended delays in
delivering time-sensitive mail, like prescription medicine, which so many of
our elderly rely upon for their health.

Major drug store chains use the mail for most of their mail-order prescription
services that are paid through health insurance plans. The Veteran’s
Administration uses the mail to deliver virtually all prescription medicine. The
interruptions in the transportation cycle that would no doubt occur with the
loss of a delivery day would be disastrous to customers who rely on the mail
for their health care needs. Should there be a need to have delivery on
Saturdays without the Postal Service providing this service, additional
surcharges would be collected by the Postal Service’s competitors (they
already have them) and those costs would be passed on to the customer.

The business community would also be adversely impacted by a reduction in

delivery days. Although surveys taken of customers by the Postal Service
appear to point to support for the five-day plan, the business community that
provides over 80% of mail volume into the postal system is not as enamored
with the plan as we may be led to believe. When the public is offered the
survey choice – between a postage rate increase and a reduction to five
delivery days – the preference for dispensing with a delivery day is
understandable.

Even with the consideration of the growth of electronic diversion of bill

payment, millions of dollars in bill payments are still received through the
mail by businesses. An elimination of a delivery day would result in
significant shrinkage in short-term interest realized when businesses process
their payments quickly from customers who use the mails to pay their bills.
Conversely, customers who are paying their bills through the mail will see an
increase in late fees when the delivery cycle is extended as a result of the
loss of a delivery day and their mail is received a day later by their creditors.

Local newspapers, who rely on the Postal Service to deliver their weekly
editions, particularly on Saturday, would suffer without Saturday delivery and
many grocery stores that rely on Saturday delivery to advertise their latest
sales to attract customers for weekend shopping would have to alter their
advertising campaigns.

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Nor is a cut in delivery days justified simply because of a decline in letter-
writing or a corresponding increase in e-mail and text messages. In fact,
huge numbers of jobs are reliant upon the mail. It is estimated that over 7.5
million people derive their livelihood directly from the mail -- from paper
companies, printers, publishers and graphics designers to mailing
preparation houses, software designers, clerks, carriers and postal
personnel.vi The consequences of a reduction in delivery days would be
significant.

The Postal Service is the linchpin of a $1 trillion mailing industry that

employs approximately 7.5 million Americans in fields as diverse as direct
mail, printing, catalog production, paper manufacturing, and financial
services.

While the use of technology has reduced personal communications through

the mail, it has also brought other types of business to the Postal Service.
There are new businesses that do not rely on brick and mortar storefronts in
this country and around the world. These businesses are computer based,
and they rely on mail services to deliver products that they sell over the
internet.

Five-Day Delivery Will Contribute to a Vicious Downward Cycle in

Mail Volume

These fast-growing segments of the business community will continue to rely

heavily on delivery services, like the Postal Service, to deliver their products
in a timely manner. If they grow to not rely on the Postal Service, beginning
with the unavailability of Saturday delivery, they will resort to other delivery
competitors who supply Saturday delivery, even at higher costs, ultimately
contributing to lower mail volume incurring further revenue losses for the
Postal Service.

The National Association of Postal Supervisors represents thousands of men

and women who work in the Postal Service as employees and managers. We
know how the mail works. We also know how tinkering with a system that
binds a nation together could end up as a disservice to all citizens regardless
of where they live; in rural America or the inner city. Changes in today’s
delivery systems could cost everyone not just in dollars but also in the way
commerce, communications and merchandise are received by every
business and every customer in this nation.

It’s said that you get what you pay for. The best postal system in the world
also remains the best bargain compared to other countries. We have
illustrated several of the ramifications that would ensue should the Congress
rush to adopt the position of the Postal Service to eliminate a delivery day.

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The reductions in service would find a way to touch virtually every citizen
and business in the country.

Congress Should Focus on Restructuring the Postal Pension

Obligations, Not Six-Day Delivery

We firmly believe that it is far wiser for the Congress to direct its attention
toward correcting the overcharges associated with the Postal Service’s CSRS
and FERS pension obligations, as recommended by the Office of Inspector
General of the Postal Service, than directing cuts in postal delivery days.
Correction of the CSRS and FERS overcharges would provide funds in the
billions of dollars sufficient to improve the Postal Service’s financial position
and return it from the brink of bankruptcy as well as satisfy its future retiree
health benefit obligations as mandated by the Postal Accountability and
Enhancement Act of 2006.

The Postal Service faces a challenging future, one that requires it to operate
in as business-like a fashion as much as possible. Operational changes and
reductions in service will continue to be necessary to bring costs in line with
revenue projections. Cessation of the Postal Service’s pension
overpayments to both CSRS and FERS – through legislative restructuring its
pension and retiree health benefit payments – will provide the most
immediate, responsible and comprehensive course of action. Again, we
reiterate, reducing delivery days should be the last resort, not the first.

National Association of Postal Supervisors

January, 2011

For further information on this subject contact: James F. Killackey III

Executive Vice President
National Association of Postal
Supervisors
703-836-9660, naps.jk@naps.org
_____________________________________________________________________________
The National Association of Postal Supervisors is a membership organization representing
over 35,000 active and retired supervisors, managers and postmasters who work for or who
retired from the United States Postal Service (USPS). The object of the Association is to
promote, through appropriate and effective action, the welfare of its members, and to
cooperate with USPS and other agencies of the federal government,

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i
Statement of Postmaster General/CEO John E. Potter before the Committee on
Oversight and Government Reform, U.S. House of Representatives, April 15, 2010.
ii
U.S. Postal Service, Media Release dated November 12, 2010.
iii
Postal Accountability and Enhancement Act, Public Law 109-435, December 20,
2006.
iv
Office of Inspector General, U.S. Postal Service, The Postal Service’s Share of
CSRS Pension Responsibility (Report Number RARC-WP-10-001, dated January 20,
2010).
v
Office of Inspector General, U.S. Postal Service, Management Advisory – Federal
Employees Retirement System Overfunding (Report Number FT-MA-10-001, dated
August 16, 2010).
vi
Sen. Susan Collins, Press Release dated December 2, 2010.