Postal Service proposal to break contracts is blasted by unions

August 12, 2011

Unions reacted furiously Friday to a proposal by the Postal Service to lay off 120,000 workers by breaking labor contracts and to shift workers out of the federal employee health and retirement plans into cheaper alternatives.

Labor experts and other unions also sounded the alarm that any move by Congress to break postal contracts would further wound an already ailing labor movement, much as President Ronald Reagan’s firing of striking air traffic controllers did in 1981.

Although the postal unions enjoy collective bargaining rights beyond those of regular federal workers, other unions said the proposal could set an economy-wide example at a time when organized labor is under pressure from cost-cutting governors and employers.

“When you break a contract, basically what you’re saying is that we have left the era of good-faith bargaining and negotiation and entered into employer unilateralism,” said Bill Fletcher of the American Federation of Government Employees.

Postal workers have made many concessions to lower costs in an age of dwindling mail volume, postal unions said. The service’s real problem, they said, is that Congress in 2006 stuck it with the requirement that it pay, over 10 years, enough to cover the cost of 75 years worth of future retiree benefits — at a cost of more than $5.5 billion a year.

Legislation to lessen that burden, as well as a request to save $3 billion by eliminating Saturday service, is stalled in a divided Congress, leaving the service deep in the red with the next big retiree health payment due in seven weeks.

“Do I hold out hope that Congress can do anything? No,” said Cliff Guffey, president of the American Postal Workers Union, one of four postal unions. “It’s the same group that almost brought this country to collapse over the debt ceiling.”

The Postal Service’s proposal is the latest turn in an increasingly urgent battle over what to do with a storied institution that is struggling with stiff competition, declining demand in a digital age and a conflicted identity.

Since 1970, the Postal Service has operated as a quasi-private monopoly that receives virtually no taxpayer support but is hamstrung in competing with companies like FedEx and UPS because it cannot raise prices above a certain level, must maintain minimum levels of service and must now make the annual retiree payments.

Experts said the proposal to break open labor contracts was probably a negotiating stance to force Congress to take action in loosening the service’s constraints. Agency spokesman David Partenheimer said as much in a statement Friday night.

“The strategy, as explained by the postmaster general, is to act on what is within the Postal Service’s control because we can’t change what’s in Congress’s control,” he said. “Everything is on the table, and Congress has not provided solutions to give the Postal Service a sustainable business model. If we put options and proposals out there, it’s at least a starting point rather than waiting for Congress to come up with proposals.”

On Capitol Hill, congressional aides said their bosses would address the Postal Service’s woes first thing after the August recess.

Lawmakers have been entertaining two contrasting solutions. Rep. Darrell Issa (R-Calif.), chairman of the House committee that oversees postal issues, wants to put the Postal Service under the direction of a receiver board that could break contracts and sell assets.

Rep. Stephen F. Lynch (D-Mass.) and Sen. Thomas R. Carper (D-Del.) have proposed bills that would give the agency more freedom to close post offices and allow it to make the $5.5 billion payments from a separate pension surplus. These bills have drawn some Republican support.

An Issa spokesman said the congressman welcomed the new proposal but was still opposed to alleviating the $5.5 billion payments because doing so would make it more likely that taxpayers would eventually have to pick up some of the retiree costs.

A Carper aide cast the proposal as a negotiating gambit. “We’ve known for a long time it’s pretty serious, that they’re trying the best they can to let the broader world know ‘things are serious and we’re looking at serious measures to combat this situation,’ ” the aide said.

Since mail volume began to plummet with the 2008 recession, the Postal Service has cut costs by almost $10 billion and shrunk its workforce through attrition and early retirement plans by 212,000, to 563,000. The agency announced in July that it hopes to mothball 3,700 unprofitable post offices on top of 700 other planned closures.

New contracts signed this year gave the agency more flexibility to schedule work during busy times. But it continues to hemorrhage money and is on track to lose $9 billion by the end of the fiscal year in September, including the retiree payment.

Critics of the system argue that a restructuring like the one proposed this week is the only solution. The Postal Service spends 80 cents of every dollar on labor costs, the legacy of strong unions and a business focused on door-to-door service.

Unlike most other federal workers, postal employees have collective bargaining rights for wages and benefits. Congress sets pay levels and benefits for most other federal employees under the General Schedule. Postal workers contribute a smaller share of their salary to their health plan than other federal workers, and all enjoy the most generous pension in the federal system.

That is not sustainable, said George Mason economist Christine Pommerening. “There is little choice other than structurally changing the labor force . . . and a change in the benefits structure,” she said.

The Postal Service’s proposal would shift new employees into a 401(k)-type savings plan and into a new health plan overseen by the agency. The Postal Service says it would need to break open contracts to do the layoffs, since most of its union contracts restrict layoffs to workers who have served less than six years. The layoffs would be done by 2015.

James Sauber, chief of staff for the National Association of Letter Carriers, rejected this, saying current contracts allowed for thousands of layoffs. His union is set to negotiate a new contract this month, and the Postal Service could bring up its demands then.

“All of these issues can be discussed at the table,” he said. “We’re very puzzled why they would drop a bomb on the process before it got out of the gates.”

Kate Bronfenbrenner, a labor expert at Cornell University, said that for Congress to approve breaking labor contracts would be unprecedented. But Kerry Korpi of the American Federation of State, County and Municipal Employees said the proposal was in keeping with the times.

“We’ve seen politicians around the country . . . who are using the economic crisis as an excuse to take away our members’ rights and benefits,” she said. “The specific recipe might vary, but this looks like the same cookbook.”

Rep. Dennis A. Ross (R-Fla.), who chairs the subcommittee overseeing postal issues, said he saw the postal proposal as “encouraging” — and a “model for other government agencies in how to adapt to the 21st century.”

Lisa Rein covers the federal workforce and issues that concern the management of government.
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