USPS, Senators Butt Heads Over Reform

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Updated Jan. 27, 2 p.m. EST

The U.S. Postal Service intensified its efforts to block a postal reform bill this week after learning that the bill was moving quickly toward passage.

The bill, S. 662, was on the Senate calendar for consideration under its unanimous consent rule, which means that it could pass without debate under the condition that no senator objects. There was no indication as to when the Senate might act because of Supreme Court nominee Samuel Alito's confirmation process.

Senior postal service officials blasted the bill and several new amendments to it, saying it could cause a 20 percent rise in postage rates.

"We would have to go into an immediate rate case that will be larger than it has ever been, bordering on the 18 to 20 percent level," Richard Strasser, USPS chief financial officer and executive vice president, told reporters and postal insiders during a teleconference call. This is a larger rate increase than the one in the mid-single digits the USPS has led mailers to anticipate.

Such an increase would be contingent upon a House-Senate conference committee changing the Senate legislation to require the USPS to prefund retiree health benefits and retain a $27 billion obligation to pay for military retirement benefits for its employees to appease the Bush administration.

However, the agency's actions mystified many postal experts.

"Postal officials warned that passage of S. 662 would guarantee one last rate case under current law, followed by years of additional high increases," said Robert McLean, executive director of the Mailers Council. "Questions about how such increases would be possible under a price cap were answered by confusing rhetoric and warnings about the Statement of Administration Policy rather than the bill."

The bill, sponsored by Sens. Susan Collins, R-ME, and Tom Carper, D-DE, was approved by the Senate Committee on Homeland Security and Governmental Affairs for floor action in June.

"The postal service claims that S. 662 could lead to a 20 percent increase in [rates]," Collins and Carper said in a statement. "Nothing in the bill would lead to rate increases. In fact, S. 662 includes a strong rate cap that would prevent the postal service from raising rates each year by more than the Consumer Price Index." The bill also includes language to shore up USPS finances by "fixing its flawed pension formula."

Collins and Carper also questioned the USPS' last-minute effort, given that Postmaster General John E. Potter testified before the Senate committee in support of the bill.

Postal officials said they were concerned with two points in the Senate's changed bill. It used the terms "just and reasonable" when referring to the agency's rates and classification system. The language is a compromise Collins worked out with Sen. Christopher "Kit" Bond, R-MO. Lobbyists said this language would let small mailers challenge rates that they see as inequitable without slowing the rate-setting process. Bond originally wanted the language to say "fair and equitable."

The postal service said it objects strongly to this provision because it negates its ability to use the rate flexibility contained in the rest of the bill. The bill will keep the postal service tied to the current rate-making method, which is based on cost of service, while imposing a rate cap based on the Consumer Price Index.

"We would have no new ways to grow revenue and mail volume to continue to support universal service," said Tom Day, USPS senior vice president of government affairs.

Another provision ensured that the authority of the postal service's regulator to hear complaints does not unnecessarily overlap with the Board of Governors' managerial discretion. The USPS said this continues to allow the greatly empowered regulator to control its daily operations.

The Board of Governors also wrote the full Senate last week, expressing its opposition to the Senate bill.

"It is with regret that, in carrying out our fiduciary responsibilities and in keeping with our concerns that the postal service be able to provide the quality of service and reasonable rates to which the American people have become accustomed, we must oppose passage of this bill," the board wrote.

The USPS said it expressed similar concerns regarding the House version, H.R. 22, which passed last summer.

Also, Cox Target Media, which mails the Valpak envelopes, said yesterday that it still opposes the Senate's postal reform bill.

Valpak said its opposition is not based solely on the issue of rates. The Largo, FL-based company said the bill also would restrict the amount of worksharing discounts the USPS can offer. Further, the bill would extinguish the due process rights that mailers currently have to participate in the rate-setting process by challenging USPS requests for rate increases before they go into effect.

Melissa Campanelli covers postal news, CRM and database marketing for DM News and To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting

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