Burton, McHugh Question USPS Overhead

Two congressmen asked the Postal Rate Commission this month to help them investigate the way the U.S. Postal Service defines attributable, or overhead, costs to each class of mail in its FY97 Cost and Revenue Analysis Report.

Rep. Dan Burton (R-IN), chairman of the House Government Reform and Oversight Committee, and Rep. John McHugh (R-NY), chairman of the postal subcommittee, deciphered during hearings last month that the report doesn't apply the “definitions of attributable costs used by the commission to develop rates in any of the recent rate or reclassification cases.”

The USPS, for example, always has reported costs to reflect its view of the way costs were attributable or not attributable to the classes of mail, but the rates — and those most recently increased in the recent rate case — are based on the commission's view of what costs are attributable.

“This can be confusing to mailers, especially since when the USPS disagrees with the PRC's reports, when it reports its costs at the end of the year, it may not include the commission's view,” said Steve Scharfman, general counsel at the PRC. “So, the rates are set on one assumption, and the costs reported do not reflect the theoretical basis for setting rates.”

By showing both definitions, mailers will be able to avoid confusion and understand how current and recommended rates meet the rate policies and criteria established by the PRC as opposed to how the USPS defines its revenues.

“When a mailer reads that the commission says Parcel Post rates are below cost, for example, and then looks at the USPS' annual report and sees numbers that show that the USPS is above cost, they will be confused,” Scharfman said. “Hopefully this will eventually help the USPS change the way it shows its costs in the annual report, but I don't think they will change any time soon.”

He said, however, that he sees it as a positive thing.

“If we get in the habit of having the costs that are shown annually to show the commission's methodology so that people can understand and track it, at some point the postal service may decide that it really doesn't need to keep something that isn't useful,” Scharfman said.

In a similar letter, the congressmen asked postmaster general William J. Henderson to ensure that the postal service provides the commission with “any information or data that it might need to comply with their request expeditiously.”

Scharfman is sure the USPS will comply with the request, as the PRC is doing.

“We will have to get them to assist us, and we have been in contact, and they will help,” he said. “Between us, we will comply with that request.”

Burton and McHugh have asked for the information by mid-September, with hopes that it will make base rates more understandable by the time H.R. 22, the postal reform bill, moves through the subcommittee and ends up on the House floor come this fall. Insiders say these clarifications will help people understand H.R. 22, since part of the bill divides postal services and products into competitive and noncompetitive categories and requires that attributable costs for both be at the same level.

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