Alliance Report–March 6, 2024

5 takeaways from Biden’s nomination of Walsh

Last week we let you know that President Biden was planning to nominate Marty Walsh to be a Governor of the U.S. Postal Service. He is the Executive Director of the National Hockey League Players Association and former Secretary of Labor on President Biden’s cabinet.

  1. Biden appointees will dominate the USPS Board of Governors. If Walsh is confirmed by the Senate, there will be eight sitting USPS Governors. Six will be Biden appointees and two were appointed by President Trump. Four will be Democrats, three Republicans, and one Independent. Biden currently has the option to nominate replacements for the vacancy and Governor Hajjar in his holdover year. Also, Governor Martinez’s term ends in nine months.

When the Governors selected Louis DeJoy to be Postmaster General in 2020, all of them were Trump appointees. This anomaly came about because a senator had put a hold on all of President Obama’s nominees.

  • Anton Hajjar, Biden, Democrat, term ended 12/8/23, in holdover year until 12/8/24.
  • Roman Martinez, Trump, Republican, term ends 12/8/24.
  • Robert Duncan, Trump, Republican, term ends 12/8/25.
  • Amber McReynolds, Biden, Independent, term ends 12/8/26.
  • Daniel Tangherlini, Biden, Democrat, term ends 12/8/27.
  • Derek Kan, Biden, Republican, term ends 12/8/28.
  • Ronald Stroman, Biden, Democrat, term ends 12/8/28.
  • Marty Walsh, Biden, Democrat, term ends 12/8/29, if confirmed.
  1. Walsh is the highest-profile nominee to the postal board in memory. He is a savvy public servant who gets things done. He is not known for quietly going along with the status quo. Walsh also has the president’s ear more so than many USPS participants preceding him. If he thinks Biden needs to do something about USPS, Walsh will let him know.

A major complaint we and other mailers have had about the current set of Governors is their seeming automatic compliance with whatever Louis DeJoy wants. He has painted them into a corner where it is his plan or the highway. No questioning or disagreement with any aspect of the Delivering for America plan is acceptable.

Perhaps a strong Dorchester politician will stand up to the Brooklyn businessman dominating postal policy for the nation. If anything, the private discussions should be more interesting.

  1. The other side of the high-profile coin will be little time and attention to spend on USPS. We believe the Board of Governors already is substandard for what the USPS in crisis needs. The postal governors are very much part-time participants with other more full-time commitments. They are paid only $30,000 annually to participate typically two days a month. They have no staff support other than the people working for Louis DeJoy. Most of them jump into the arcane USPS environment that is challenging for even full-time players to master. None have prior experience as a postal employee, regulator, mailer, or mailing industry participant.

Marty Walsh has a heavy commitment as the leader of the NHL Players Association. No doubt Walsh has many other demands on his time as a leading democratic politician and union supporter.

The New York Post (Marty Walsh reaffirms commitment to NHLPA after USPS nomination) quickly raised the issue of Walsh’s commitment to the players’ union:

The headline in the Boston paper Friday screamed that the former mayor of Boston had been “tapped” to rejoin the Biden Administration.

This was pretty interesting stuff considering that this former mayor of Boston named Marty Walsh already has a full-time job as executive director of the NHLPA following his election to run the union just over 12 months ago.

Walsh replied that the union is his primary focus and the Postal Service assignment is very secondary and part-time:

“My first priority — my only priority — is running the NHLPA,” Walsh told Slap Shots Saturday morning. “And I actually feel that this elevates the PA to have this presence representing labor on this committee.

“This is a bipartisan committee that traditionally meets three to five times a year. It’s not uncommon for a union leader or league commissioner to sit on a Board of Directors. It won’t interfere in the slightest with my responsibilities with the PA.” 

“I was asked to serve,” said Walsh, who was mayor of Boston from 2014 until 2021 when he resigned to accept the post in Biden’s cabinet. “It’s hard to say no.” 

The USPS Board of Governors has a tradition of meeting almost monthly, much more than the three to five times a year that Walsh anticipates. The postal law allows for up to 42 days of paid service per year:

Each Governor shall receive a salary of $30,000 a year plus $300 a day for not more than 42 days of meetings each year and shall be reimbursed for travel and reasonable expenses incurred in attending meetings of the Board. Nothing in the preceding sentence shall be construed to limit the number of days of meetings each year to 42 days.

Walsh also reiterated to Politico his higher calling to the NHL Players Association and said he will serve USPS in a voluntary capacity:

Walsh told Playbook he’s not leaving his plum perch as the head of the NHL Players’ Association. And he said if he’s approved to the Postal Service board — which only meets a handful of times a year — he won’t take the $30,000 annual salary and will serve in a volunteer capacity.

  1. The postal unions must be ecstatic. Walsh is probably the USPS Governor most openly committed to labor unions in history. His commitment goes beyond his personal history of championing and leading the labor union movement. To the New York Post, Walsh said that his role on the Board of Governors will be “representing labor on this committee.”

It’s not as though the postal unions need lots of outside help at this time. The DeJoy plan execution has been very careful to placate the unions so as not to incur the type of opposition he experienced in his first six months, or the degree of opposition the three previous PMGs faced when they tried to significantly reduce costs with network realignments, post office closures, and reductions in delivery days.

The rationale for Biden’s nomination of Walsh might have more to do with the president’s political strategy for the upcoming election than the need to help the postal unions.

  1. The nomination feeds rumors about the next Postmaster General. Recent reductions in the quality of service combined with record rate hikes have stoked opposition to DeJoy and his plan as well as calls for his replacement. Recently, over 80 members of Congress urged Biden to fill the two USPS Governor vacancies. Politico noted the central role the Governors play in hiring and firing PMGs:

Biden’s first Labor secretary will again have to go through a Senate confirmation process for the gig. If he wins a stamp of approval, he’ll have power in selecting the next postmaster general.

And that is reviving a perennial rumor in Boston political circles: that Rep. Stephen Lynch could succeed previously embattled Postmaster General Louis DeJoy. Lynch has clashed with DeJoy over the years, but credited him in 2022 for lobbying Republican lawmakers to support postal reforms championed by Democrats. Lynch’s office did not respond Thursday to a request for comment.

Lynch and Rep. Jim McGovern were among the 80-plus House Democrats who signed onto a letter last month urging Biden to fill two vacancies on the board amid complaints about slow deliveries and increased costs.

DeJoy has mentioned many times recently how hard it is to work with a board of directors that is often changing. That effort is only getting more difficult.

By September, 12,000 to 14,000 of the 31,000 post offices will not get an evening collection of outbound mail

The Postal Service is rushing out an initiative to save lots of money by not picking up outbound mail at post offices that are 50 miles or more from a Local Processing Center (LPC). The website Save the Post Office has been providing the best information on the Local Transportation Optimization (LTO) initiative. It recently provided an internal USPS PowerPoint presentation with details on the LTO scheme.

Although LTO is delaying the postmarking and movement of lots of First-Class mail and packages sent mainly by individuals and small businesses from mostly outlying and rural areas, it has not been subject to a formal advisory option by the Postal Regulatory Commission. Nor has USPS provided metrics or data showing how much the change in operations will save.

The Postal Service has argued that the LTO will not endanger USPS meeting its delivery standards that were lengthened earlier on during the Deliver for America era. Nevertheless, First-Class mail has been mired in the low-80% on-time area this year with the rollout of LTO. USPS blames other factors such as bad weather and the activation of new processing facilities.

Public officials have started raising serious concerns that LTO will threaten the effectiveness of voting by mail. Richmond, VA General Registrar Keith Balmer recently urged voters to not use voting by mail because of USPS delays. Richmond was one of the early implementations of LTO. Depending on the state, when a ballot is postmarked, scanned, or received determines whether it will be accepted. All are delayed by LTO.

LTO will affect nonprofit mailers negatively by First-Class response mail sent by donors, members, supporters, and subscribers entering the postal system a day later. Many already are seeing much slower response time to their mailings.

It’s great that the Postal Service is looking to its logistics system to save millions of dollars in cost. But doing so without any public input or public communication with mail senders is a bridge too far. It might be that the public policy purposes of our postal system outweigh this and other businesslike cost-saving initiatives. But so far, the public has little chance to weigh in on mail delayed by a day at 40% to 45% of our nation’s post offices.

USPS January results were not so bad

In the fourth month of FY 2024, revenue was up 3.7% and total operating expenses were down 6.3%. The Postal Service still posted a loss of $301 million in January bringing its year-to-date (YTD) loss to $2.373 billion which is $1 billion worse than planned and about $300 million south of the same period last year.

January market-dominant mail volume was off only 2.2%, but YTD was still down 8.3% in line with the official USPS forecast of -8%. Marketing Mail fell only 2.6% in January, much better than the YTD decline of 11.3%. Perhaps more political mail and better economic optimism are helping MM along. And maybe some are rushing mail out before the anticipated 7.7% plus rate hikes in July.

January competitive package volume jumped 5.9% bringing YTD to 5.7%. But package revenue is up only 4.7% and 3.1% YTD, reflecting the USPS strategy to buy volume with discount prices. Package shipping experts have cited a race to the bottom that will not end well for the sector.

We cannot end a financial discussion without reminding everyone that the USPS has brought on itself a volume crisis caused by record-high rate increases at a record frequency of 6 months.

Sources: USPS Cost and Revenue Analysis and USPS FY 2024 Integrated Financial Plan

The only years worse than the present two are the Great Recession and the pandemic. Otherwise, the average annual mail volume decline since 2008 has been 2.4%. USPS is price engineering -9% and -8%. And 7.7% to 10% rate hikes are coming this July.