Hopeful, Wary Mailers Study Postal Reform Draft

Mailers are scrutinizing a 126-page postal reform draft bill that four members of the House of Representatives released this week to overhaul the U.S. Postal Service. Introduction of the bill and its markup are expected next week.

The biggest concern initially is that the draft lacks language regarding the Civil Service Retirement System, though the draft says it is forthcoming.

“It's hard to measure the value and the impact of this proposal until we see exactly how they are going to deal with these issues,” said Neal Denton, executive director of the Alliance of Nonprofit Mailers. “For mailers, the [CSRS] resolution is going to have a dramatic impact on the size and timing of the next rate case.”

However, Denton views the bill's introduction as generally positive.

“In the last several years, we have been trying to move a postal reform bill forward and have not gotten one out of committee,” he said. “I believe there might be a chance to get a reform bill out of committee this year. That would be a huge step.”

The draft does not specifically address aspects of last year's CSRS legislation, which reduced the amount of money the USPS pays into the retirement fund. The postal service also is required to place savings — more than $3 billion a year — in an escrow account starting in 2006 and to fund CSRS benefits earned by postal employees during their military service, a $27 billion obligation.

Postal officials have argued that the USPS should not pay for the military benefits, and they want to abolish the escrow account. If these issues don't go in the postal service's favor, rates could rise even higher than the double-digit amount that is expected. Without the $3.2 billion from savings in 2006 — when the next rate increase is expected to take effect — the USPS has said that rates likely will increase 5.4 percentage points on top of the amount needed to cover increased costs.

The Direct Marketing Association also voiced initial support for the draft last week, though it still is reviewing the specifics. At first glance, it resembles H.R. 4790, a House postal reform bill that died in committee in 2002, said Jerry Cerasale, senior vice president of government affairs at the DMA. However, unlike that bill, “there seems to be some momentum within Congress around postal reform this time, [but] getting something through is hard. A lot of speed bumps are still ahead.”

The “Postal Accountability and Enhancement Act of 2004” aims to position the USPS to operate in a more business-like manner. It includes many provisions suggested by the President's Commission on the U.S. Postal Service last year, including mandated transparency regarding the agency's finances, costs and operations.

In general, the draft legislation addresses several issues:

· Modern rate regulation: Shifting the basis of the Postal Rate Commission to a system designed to ensure that rate increases generally don't exceed the annual change in the Consumer Price Index. This applies only to market-dominant products such as First-Class mail, Periodicals and Standard mail.

· Combine market disciplines with regulation: Combining market mechanisms with PRC regulation to govern the rates of competitive products. The USPS would get additional pricing freedom but would lose favored legal treatment for such products.

· Limits on the postal monopoly and non-postal products: Requiring the USPS to offer only postal services and define exactly what constitutes “postal services.” The bill also revises the postal service's authority to regulate competitors.

· Reform of international mail regulation: Clarifying the authority of the State Department to set international policy in this area, applying customs laws equally to postal and private shipments and giving the USPS the authority to contract with airlines for transport of international mail.

· Strengthen the PRC: Giving the PRC “teeth” by granting it subpoena power and a broader scope for regulation and oversight. The PRC would be renamed the Postal Regulatory Commission.

· Establish a basis for future reforms: Mandating several studies, including a comprehensive assessment of the scope and standards for universal service.

The draft was circulated by House Government Reform Committee chairman Tom Davis, R-VA; ranking minority member Henry Waxman, D-CA; committee postal panel chairman John McHugh, R-NY; and ranking minority panel member Danny Davis, D-IL.

Senate Governmental Affairs Committee chairwoman Susan Collins, R-ME, and Sen. Thomas Carper, D-DE, also are expected to introduce postal legislation this month.

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