Sunday, February 28, 2016

What's Wrong with Postal Banking?

Video: Mr. Tree tells Erik Cagle "No" to USPS banking.
In my video debut Friday, I praised postal officials for resisting the urging from various quarters that they enter -- or, rather, re-enter -- the banking business.

(The video, an interview with Erik Cagle of Printing Impressions, is a real hoot for lovers of bad puns, even though it addresses the serious topic of the USPS's future.)

The idea of having the USPS provide more financial services than just selling money orders has noble intentions: Many poor people and rural residents have inadequate access to banks. Sen. Elizabeth Warren (D-Mass.) says more than one-quarter of U.S households are "unbanked" or "underbanked" -- that is, at least partially reliant on expensive nonbank financial services like payday lending and check cashing.

But the proponents have avoided answering several key questions:

  • Who would pay for the upfront investment in equipment, technology, and employee training? Because of Congressional accounting games, the Postal Service can barely keep its head above water and is unable to borrow any money. As I noted in the video, it operates thousands of inefficient delivery vehicles that are well past their intended life and have "an annoying habit of bursting into flames without warning. The USPS is slowly replacing those. It has no access to additional capital.
  • What does the Postal Service know about running a bank? The regulations, the security issues, and the information systems to run a nationwide bank are daunting. And USPS salary caps would prevent it from hiring the kind of people who would know how to create and run such a bank.
  • Why do you think the USPS would be able to thrive where private enterprise fears to tread? If the only financial institutions that can make a go of it in poor areas charge usurious interest rates, why do you think the Postal Service could thrive by making lower-interest loans? The Postal Service's only competitive advantage is that it already has buildings and staff in underbanked locales. But 21st Century financial institutions are built more on bytes than bricks.
  • Who will pay if the USPS's banking efforts go sour? There's only one answers, which the proponents won't admit: Mailers. I haven't heard anyone propose government appropriations to help the Postal Service's banking efforts or federal guarantees to cover it for unexpected losses. The only way the USPS could sustain losses, or even make significant investments, in a banking venture would be to hit its customers with another "exigent" surcharge. If Congress wants a program to help the underbanked, it should have the cojones to appropriate the money -- not pay for it with a back-door tax on Forever Stamps and mail-dependent industries.
The Postal Service has its hands full adjusting to declining volumes of traditional mail, ramping up its package-delivery business, and just trying to pay its bills. The last thing it needs is to be distracted by a risky venture that is unrelated to its core business or its expertise.

Thursday, February 25, 2016

Hell Will Freeze Over on April 10

Crow crapping on a dead tree.

That's my supper you're looking at.

The U.S. Postal Service announced the unthinkable today: On April 10, it will actually reduce the postal rates on most mail, including Forever Stamps, by more than 4%.

On April 11, you should expect a disaster of biblical proportions. Fire and brimstone from the sky, dogs and cats living together in peace -- that kind of stuff.

I've been predicting for more than a year that this wouldn't happen -- that somehow the temporary "exigent" postal increase would somehow become permanent. I even invented a word, "temporarely," noting that "temporary taxes or fees rarely expire."

The USPS did manage to win a legal battle that extended the surcharge, to the tune of a billion or so bucks that came out of mailers' hides. And it seemed to get widespread backing in Congress for making the surcharge permanent. But good luck getting Congress to actually approve anything these days except the naming of post offices.

The Postal Service, of course, isn't exactly going gently into the dark night of lower rates: "This mandatory action will worsen the Postal Service’s financial condition by reducing revenue and increasing its net losses by approximately $2 billion per year," its announcement whined.

Yeah, but at least the cafeteria at L'Enfant Plaza isn't serving crow, which will soon be the only item on the menu here at the Dead Tree Edition Research Institute.

Saturday, February 20, 2016

Slower Service, Higher Costs: USPS's Phase II Debacle

Slide from a Jan. 2015 Phase II speech
The U.S. Postal Service’s aborted attempt to save money by consolidating its processing facilities backfired: It actually increased costs in 2015, USPS officials recently acknowledged.

Higher transportation expenses from Phase II of the USPS’s “Network Rationalization” effort more than wiped out the program’s savings on labor and parts, the the Postal Service told the Postal Regulatory Commission. The result was a net cost increase of $66 million.

Though they had to go back to the drawing board, postal officials have indicated they will resume Phase II later this year.

The agency loosened its service standards, mostly eliminating overnight delivery, as part of launching Phase II in January 2015. But the USPS suspended the program, including further facility closures and layoffs, after a few months amid public outcry over mail deliveries being even slower than anticipated.
Facilities slated for closure in Phase II
Postal officials had expected Phase II to go as smoothly as Phase I, which they estimate is yielding $865 million in annual savings. Phase II was supposed to close 82 sortation facilities, eliminate 15,000 jobs, and save another $750 million annually.

But Phase II was more complicated than Phase I because it “not only included facility consolidations, but also involved a one-time, fundamental shift in the operating window that was implemented at all mail processing sites across the entire country on the same day,” the Postal Service explained to the PRC this week.

“To implement this phase of the initiative, the Postal Service was required to realign its processing complement work schedules." Because the work at mail-processing facilities varies greatly by time of day, the schedule changes meant that thousands of employees suddenly had to learn new tasks simultaneously.

"The effects of this change in the operating window had a much greater impact on service than was anticipated, but it was a one-time event that is not likely to be replicated,” the USPS filing continued.

As a result, the USPS suspended any further consolidations “until the service could be stabilized. Those stabilizations are still ongoing, and consolidation efforts continue to be withheld.”

In other words, the Postal Service plans to move forward with Phase II but realizes it still has work to do to get ready.

Related articles:

Saturday, February 13, 2016

Postal Service Revs Up Its Hiring

The U.S. Postal Service hopes to bring on 125,000 new employees this year, continuing a recent hiring binge caused by the agency's blossoming package-delivery business.

The agency hired 117,000 new workers during Fiscal Year 2015, virtually all of them into non-career positions, postal officials said Thursday in a document presented to the Postal Regulatory Commission.

“The Postal Service still has a continued need to hire 125,000 non-career employees in FY16 to maintain the appropriate levels,” the USPS document says. “Continued hiring of non-career employees (including PSEs [Postal Support Employees] and MHAs [Mailhandler Assistants) is necessitated by conversions to career positions and current attrition rates.”

Among last year’s new non-career workers, 52,000 have left the USPS (including 22,000 short-term, peak-season hires), 5,000 were converted to career positions, and 60,000 were still in non-career positions at year-end.

The USPS ended FY2015 with nearly 492,000 career employees and 130,000 non-career workers, both numbers slightly higher than a year earlier. The payroll continues to grow: The Postal Service ended December with 7,000 more careerists and 4,600 more non-career workers than it had a year earlier.

An e-commerce-driven surge in package deliveries, plus the addition of such new services as Sunday delivery, are fueling the hiring binge and employment growth. It’s a huge turnaround for an organization that cut an average of 21,000 workers annually between 2000 and 2013 and rarely had to hire new ones. And it runs counter to government and news-media reports predicting further USPS cutbacks.

Growing pains
The growth is also causing new headaches for the USPS.

“Recruiting for City Carrier Assistants (CCAs) is a challenge in some regions due the physical nature of the position and extreme outdoor environments, as well as local economic conditions,” the report said.

The wave of new hires has been blamed for everything from higher work-related accident rates to increased problems with delivering poorly addressed mail. The USPS has struggled to orient, train, and equip the new hires – sometimes, for example, failing to provide cold-weather gear to rookie carriers.

Related articles: