Mailers Urge Congress to Reduce USPS Pension Obligations

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A solution to the pension obligations facing the U.S. Postal Service must be part of postal reform legislation, USPS competitors and representatives of the mailing community told a Senate Governmental Affairs Committee yesterday.


There are two main pension issues, both resulting from last year's Civil Service Retirement System Funding Reform Act:


· The shift in responsibility for military service retirement costs of USPS employees before they became postal employees from the Treasury Department to the postal service.


· Requiring the postal service to put CSRS savings into escrow pending congressional review starting in fiscal year 2006.


The USPS and mailers want responsibility for military pension benefits transferred to the Treasury and the escrow provision repealed.


"Singling out postal ratepayers to cover an obligation that benefits all taxpayers is unfair," said ADVO chairman/CEO Gary Mulloy.


ADVO is the postal service's largest user of Standard mail, paying about $500 million yearly in postage.


Speakers also called for more flexibility and cost control from the USPS.


Mulloy said ADVO's current strategy is to double its business in the next few years "by expanding the geographic coverage of what we do as well as increasing the frequency of what we do. This expansion could bring significant additional business and revenue to the postal service. However, we have already begun shifting a significant portion of our current volume to alternate delivery."


In just the three markets where ADVO now relies on its own private carrier delivery system, "we are delivering mail pieces that have more advertising, are heavier in weight, with equal readership and response to what we deliver through the mail and are achieving a savings of over $6 million per year compared to the cost of using the postal service," he said. Unless changes are made, "much of our future growth will continue to be shifted away from the postal service and to alternative delivery [methods]."


Direct Marketing Association president/CEO H. Robert Wientzen testified that the "post office and us, the mailing community, need to be set free from this cumbersome and unbelievably costly rate-making process that we have before us."


Wientzen also called for more negotiated service agreements between the USPS and mailers.


"Direct marketing is about arithmetic ... it's about the numbers," he said. "We use mail, rather than use e-mail, when mail works ... raising postage rates has never raised response rates. And in fact, that has made the postal service less competitive with these other media, and if we continue to raise them, we will make it even less competitive in the future. It is that simple."


Gary B. Pruitt, chairman/president/CEO of McClatchy Co., Sacramento, CA, testified on behalf of the Newspaper Association of America, which represents about 2,000 newspapers accounting for nearly 90 percent of the U.S. daily circulation.


He argued against USPS initiatives to increase direct mail -- including NSAs -- at the expense of newspaper advertising.


Pruitt cited a postal service experimental program several years ago called Auto Day that would have diverted automobile ads from the Milwaukee Journal into the mail. In addition, he said, last year in Iowa, postal service employees were making sales presentations to newspaper advertisers encouraging them to "move their business out of newspapers and into direct mail."


Pruitt told the panel to be wary of the postal service's plea for pricing flexibility.


Instead of NSAs, he said, newspapers favor "work-sharing arrangements that are available to all mailers, both large and small, that meet predetermined criteria for discounted rates based on cost savings."


Michael Eskew, chairman/CEO of United Parcel Service, said that though his company and the postal service compete, "UPS is responsible for over $230 million annually in revenues to the postal service."


Eskew said postal reform should include a focus on core mail services, cost management and a level playing field between the USPS and its competitors.


Fred Smith, chairman/CEO of FedEx, said the USPS "must be transformed into a fundamentally more flexible and responsive organization if it is to survive and prosper in the shifting social, commercial and technological conditions presented at the start of the 21st century."


He said FedEx supports modernization of the postal service and backs S. 1285, a postal reform bill introduced by Sen. Thomas Carper, D-DE, last summer that would stabilize mailing rates and maintain universal service, but with some recommended amendments.


A joint hearing of the Senate Governmental Affairs Committee and the House Government Reform Committee is set for March 23. Postmaster general John E. Potter is expected to appear.


Carper and Governmental Affairs chairwoman Sen. Susan Collins, R-ME, plan to introduce reform legislation in April.


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