*Henderson Vows USPS Will Seek Lower Periodical Rate Increase

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The U.S. Postal Service will reduce the 15 percent magazine rate increase the agency filed with the Postal Rate Commission, Postmaster General William J. Henderson said.


Henderson -- who is required by law to meet with the senate subcommittee every year to report on the health of the agency -- also told subcommittee members this month that he supports nonprofit mailer legislation and that the agency is working hard to monitor sweepstakes mailings to make sure they are not duplicitous and in violation of the Deceptive Mail Prevention and Enforcement Act.


Sen. Thad Cochran, R-MS, chairman of the Senate Subcommittee on International Security, Proliferation and Federal Services, held the hearing.


Henderson said that he is committed to reversing the rate increase for magazine publishers from 15 percent to 8 percent, 9 percent or 10 percent. This was the first time Henderson said publicly he is committed to this goal.


While this is good news for direct marketers, Rita Cohen, vice president of economic and legislative analysis at the Magazine Publishers Association, Washington, is skeptical, especially since the USPS updated its test-year forecast July 7 at the request of the PRC. The USPS incorporated actual fiscal 1999 cost data into the rate case and updated its 2001 forecasts to reflect inflation and the recent increase in gasoline prices. This update added $560 million to the agency's overall costs.


"Henderson has been saying consistently that he would find $150 million in a reduction [of the agency's revenue requirement] that would turn into single digits for us," Cohen said. "But the USPS modified its filing in response to the commission asking them to update their numbers, and that, I think, will make it more challenging to reach a single-digit rate increase."


Cohen, however, added, "We are still trying to work cooperatively with the postal service to identify what we can do to present to the commission that a single-digit increase will be enough."


During the hearing, Henderson also demonstrated his support for S. 2686, a bill designed to improve the process of establishing postal rates for nonprofit and reduced-rate mailers by establishing a structured relationship between nonprofit and commercial postal rates. It was introduced last month by Cochran and Sen. Daniel K. Akaka, D-HI, the ranking minority member of the subcommittee.


When asked by Cochran if the changes in the law are appropriate to avoid unpredictable rate changes for nonprofits, and if Henderson supports the adoption of S. 2686, Henderson said "absolutely. We think it's essential to the health of nonprofits to pass that piece of legislation."


Henderson also replied to a request from Sen. Carl Levin, D-MI, a member of the subcommittee, to track two sweepstakes mailings that he saw that he thought didn't meet the letter of the law. The mailings were solicitations from McCall's magazine and Reader's Digest. Henderson took the mailings and said he would check with the USPS' lawyers and get back to Levin's office as quickly as possible to make sure they were not illegal. He also said that since the law went into effect in April, the USPS has issued three subpoenas.


Finally, Henderson said that despite a prosperous economy, the agency faces a tough financial year ahead.


He said that while the USPS begins the century with the best performance, planning, technology and management systems in its history -- combined with low inflation, high employment and the country's longest economic expansion -- the latest revenue figures place the USPS more than $400 million short of its $100 million net income target for the year. In addition, he said, the agency has forecast a potential shortfall of $700 million to $800 million in total operating revenue for the year.


Henderson said that in order for the USPS to thrive in the future, the agency needs more pricing freedom; the ability to move products to the market faster; greater investment opportunities, as opposed to investing just in treasury notes and securities; an ability to negotiate with large customers; and management reform.

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