*Crucial Issues Face USPS as Fiscal Year Ends

The U.S. Postal Service is gearing up for a busy few months ahead as the Fall Postal Forum gets underway in Anaheim, CA, Sunday.

The agency is analyzing its end-of-year financials, beginning a program to cut administrative jobs, finishing its rate case negotiations and continuing talks with unions. These topics are expected to be among those discussed at the semiannual conference.

The agency's fiscal year ends Friday, but a USPS spokesman said its financial numbers would not be available for a few weeks because the books are tallied at the end of the month.

Postmaster General William J. Henderson, however, said last month that the agency could have as much as a $300 million deficit, even though the plan had been to finish the fiscal year with a $100 million surplus. The USPS last showed a loss in 1994, when it was $913 million in the red.

Henderson cited the decline in First-Class letters as a main reason for the expected deficit, along with extra costs related to workers' compensation, increased gasoline costs and a revenue shortfall.

However, he said advertising mail has rebounded this year. It had dropped last year as enthusiasm for Internet sales grew, but that market has not expanded as fast as business had anticipated and many have returned to advertising mail. In addition, the agency said it expects a 5 percent increase in Standard-A mail volume this fall.

The USPS also is preparing for job cuts. The agency's management committee earlier this year approved plans to cut 600 jobs from its headquarters, headquarters-related field units and other areas in September, the start of the USPS fiscal year. The cuts are part of the 20,000 postal jobs the USPS plans to eliminate in an effort to reduce costs by $100 million in each of the next four fiscal years.

Meanwhile, the omnibus rate case, R2000-01, which is before the Postal Rate Commission, is continuing. Direct mailers are watching it closely because their average increase would be 7.7 percent. The largest increase in this category — 14 percent — would be for some automation flats, or catalogs, because of the increased cost of processing flat mail. Direct marketers continue to hope that the requested rates will be lowered.

There may be some good news on the horizon. During the recent rebuttal stage of the case, USPS expert Carl Degan found evidence that could reduce costs for periodicals by $203 million. If the PRC accepts this figure, rate increases for periodicals could be less than 10 percent.

Mailers also seem to be arguing successfully for a reduction in the USPS contingency request, which amounts to $1.7 billion of the USPS' total $3.7 billion revenue request. If accepted by the PRC, that reduction should lower rates for all mail categories.

The PRC listened to rebuttal testimony during hearings that ended Sept. 1. Initial trial briefs that summarize the evidence over the past months are due next week. On Sept. 22, interveners can file reply briefs responding to their opponents' arguments in the initial briefs. This will conclude the case unless the commission orders oral arguments, which is unlikely.

The PRC is expected to finalize its decision on the rate case on Nov. 8 but has until Nov. 13 to do so. The rate increases are scheduled to take effect in mid-January.

The USPS and the National Rural Letter Carriers' Association also began negotiations this week for a new rural letter carrier contract. The NRLCA is the smallest of the four USPS unions, with a membership of 114,000 rural carriers.

The USPS also began talks last month with its two largest postal unions, the American Postal Workers Union and the National Postal Mail Handlers Union. Both unions' contracts expire Nov. 20.

The negotiation process allowing unions and the USPS to decide on new national agreements is based on collective bargaining rules under the National Labor Relations Act, which requires groups to begin formal negotiations 90 days before their contracts expire.

Direct mailers are watching the negotiations closely because 80 percent of all postal costs are labor related, including wages, benefits and salaries, so they directly affect postal rates.

In addition, marketers are wondering if the 2000-01 rate case will affect wages. For example, while the USPS has submitted its case request with wage projections within it already, unions might study the PRC's decision and try to increase their wage requests.

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