Senate Committee Passes Postal Reform Bill

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The Senate Committee on Homeland Security and Governmental Affairs passed the Postal Accountability and Enhancement Act of 2005 out of committee by a 15-1 vote yesterday.


The legislation was similar to the bill introduced March 17 by Sen. Susan Collins, R-ME, chairwoman of the committee, and committee member Sen. Thomas Carper, D-DE.


It must now be considered by the Senate, but no date has been set.


The House is expected to consider its postal reform measure after the July 4 recess, according to postal insiders.


"The vote went as expected, and now we look forward to getting it scheduled for a vote by the full Senate," said Bob McLean, executive director of the Mailers Council, Arlington, VA.


Mailing industry experts see the Senate bill as a constructive step toward achieving comprehensive reform and an improvement over the version introduced by Collins and Carper last year when it was unanimously approved by the Governmental Affairs Committee.


Last year, neither the Senate bill nor the House version was deliberated above the committee level.


The Senate bill repeals a provision of the Postal Civil Service Retirement System Funding Reform Act of 2003 requiring that money owed to the U.S. Postal Service due to an overpayment into the Civil Service Retirement System fund be held in an escrow account. The account would require contributions of $78 billion over 60 years.


The bill proposes to use the escrow funds to pre-fund post-retirement health benefit obligations; pay down any outstanding debt to the Treasury; and hold down operating expenses and rate increases. The bill also returns to the Treasury Department the responsibility for funding CSRS pension benefits related to the military service of postal retirees. No other agency is required to make this payment retroactively.


Though these issues divide the Bush administration from some in Congress and the mailing community because of their costs and budget impact, Collins and Carper succeeded in lowering the legislation's cost to $500 million, which is $1 billion less than the House proposal. This was accomplished mostly by requiring the USPS to devote more resources to pre-fund retiree healthcare.


"For mailers -- especially nonprofit mailers reliant upon reasonable and predictable postal rate increases -- these two fiscal matters are the most important features in [the bill]," said Neal Denton, executive director of the Alliance of Nonprofit Mailers, Washington. "For the panel to approve a bill that draws such pointed opposition from the White House is a powerful act of courage for chairman Collins and the committee."


The legislation requires the USPS to establish a set of service standards for market-dominant products and to report to Congress a strategy for how it intends to restructure its infrastructure to reduce excess processing capacity and space. It also requires the postal service to report annually to Congress about its success in these areas.


The Collins-Carper bill also grants the USPS Board of Governors the authority to set rates for competitive products like Express Mail and Parcel Post as long as these prices do not result in cross-subsidy from market-dominant products.


It also would simplify the rate-setting process by applying CPI-based rate caps to "market-dominant" mail classes such as First Class and Periodicals, with the rates subject to a 45-day prior review period by the renamed Postal Regulatory Commission. The bill also lets the governors "bank" the unused portion of any given year's cap. This is designed to encourage the USPS to refrain from automatically using the full cap for every rate increase.


The bill also introduces new safeguards against unfair competition by the USPS in competitive markets. And it transforms the Postal Rate Commission into the Postal Regulatory Commission with enhanced authority to ensure that USPS management has greater latitude and stronger oversight. The commission would review proposed rate changes before they can be enacted. The PRC also would have the power to institute emergency rate increases under "unexpected and extraordinary circumstances," such as the anthrax attacks.


The Senate bill also requires the USPS to file with the Postal Regulatory Commission certain Securities and Exchange Commission financial disclosure forms.


The legislation also addresses employee compensation for top management, workers' compensation eligibility and requires a series of studies on other postal matters.


The bill now also includes an amendment by Sen. Joseph Lieberman, D-CT, the committee's ranking minority member. Like a similar provision in the House version of postal reform, Lieberman's amendment permits the USPS to seek additional review of the Office of Personnel Management's actuarial decisions by asking the Postal Regulatory Commission to conduct a review. The amendment requires OPM to review the actuary's report and reconsider its decision -- without requiring OPM to change its decision.


The USPS and proponents of this amendment think that OPM has used a defective methodology in allocating costs associated with retirees for pre-1971 service between the Treasury Department and the USPS. Last year, the USPS filed an appeal arguing that the methodology wrongly shifted $80 billion in obligations to the USPS.


The Collins-Carper reform legislation is endorsed by the National Association of Postmasters of the United States, National Rural Letter Carriers' Association, National Association of Postal Supervisors, Financial Services Roundtable, National Federation of Independent Businesses, National Retail Federation and the Coalition for a 21st Century Postal Service, which represents thousands of major mailers, employee groups, small businesses and other users of the mail.


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


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