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Many Opinions on Fixing the USPS

One industry official testifying before Congress on postal reform said, “Everybody knows what needs to be done.” Really? After reading much of the recent testimony on reform, it seems that a whole range of opinion exists on what needs to be done.

We need to remember that the existing postal reform legislation has been in place, relatively unchanged, since 1970. If past is prologue, we should assume that new legislation, if enacted, will be with us, relatively unchanged, for a long time.

Therefore, the mailing industry must do all it can to ensure that the legislation addresses the real problems of the U.S. Postal Service. And the No. 1 problem is that it delivers less First-Class mail to more addresses. Every indication is that this trend will accelerate. Since First-Class mail accounts for more than half of USPS revenue, the trend is ominous.

Every element of postal reform needs to be examined from the perspective of this overriding problem: reductions in revenue and increases in costs. With that perspective, let’s look at elements of reform under discussion, starting with universal service.

Everybody talks about universal service being a backbone of the USPS. Be that as it may, the degree of service provided is something that must be looked at. As I’ve noted before, New York City and perhaps other cosmopolitan areas once received twice-a-day delivery service. Obviously, that’s no longer the case. Today, in my view, more changes need to be made in terms of delivery days or type of delivery service.

As an example of today’s postal delivery mentality, I refer to an article in the Escape section of the Feb. 2 New York Times. The article refers to mail delivery service along the “watery reaches of the Sacramento-San Joaquin delta” in California. The story portrays the river route postman who “braves duck blinds, hidden sand bars and fog so thick that he can barely make out the bow of his own boat” to deliver mail along a 700-mile stretch of navigable water.

I’m not suggesting that eliminating this particular delivery will save the USPS a ton of money. However, there clearly seems to be a widespread delivery mentality that often ignores any rational cost basis. Perhaps some of this derives from real or anticipated congressional pressure. In either case, the postal service must be given flexibility to address the high cost of its delivery network.

The second issue that must be addressed is employee benefits. Labor expense, to no one’s surprise, is by far the largest component of postal costs, accounting for 75 percent to 80 percent of postal expense. Also, to no one’s surprise, benefits including pension, healthcare and workers’ compensation are by far the fastest-growing component of labor costs.

Yet some would suggest that benefits should continue to not be part of the collective bargaining process. If the USPS has any chance to control its costs, benefits must become part of the collective bargaining process. For example, opportunities exist to bargain for reduced benefits for future employees versus benefit changes for current employees. Remember, this could be the last “reform” package for 35 years.

Another element that should become part of reform is what I’d call “taxation without representation.” The USPS currently overpays its employee pension contribution into the federal treasury by several billion dollars yearly. It also contributes to the Defense Department budget by picking up pension expense for former military personnel now working for the postal service.

For example, suppose a 15-year veteran leaves military service and applies to join the postal service. He would get postal hiring preference, and when he joins the USPS his full pension obligation would become the postal service’s, including that part of his government pension incurred during military service. It goes without saying that many postal employees have military service.

A second element of taxation deals with nonprofit rates. In the recent past, Congress subsidized nonprofits’ postage rates by more than $500 million annually. Then Congress eliminated the subsidy but mandated the continuation of nonprofit postage rates.

The only subsidy remaining was $29 million per year for 40 years, to pay mainly for free mailing for the blind but also for free mailing privileges for citizens living outside the country when they vote in elections. The president’s budget has eliminated this subsidy. If the budget stays as proposed, the USPS will be forced to take a charge of about $1 billion. Congress, as part of reform legislation, cannot require the postal service to continue to bear these burdens.

Lastly, most reform packages under consideration more clearly define the responsibilities of the Board of Governors and a newly empowered and named Postal Regulatory Commission. In several situations the new commission would have final say over USPS actions, just as a typical federal regulatory commission would. Accordingly, it is assumed that nominees to this commission would have regulatory, legal, economic or other backgrounds commensurate with the new duties and responsibilities of the regulatory commission.

It’s unclear what the proposed legislation would do about current commissioners of the existing Postal Rate Commission. Potentially they could continue to serve on the new commission.

Therefore, it came as a bit of a surprise that the administration nominated Dawn A. Tisdale to an open seat as a PRC commissioner, for a term expiring November 2006. Tisdale retired from the postal service as postmaster of Smithville, TX, which has a population of 3,901, according to texasescape.com. Before then, Tisdale was a letter carrier in Austin and a vice president of a National Association of Letter Carriers branch.

It’s true that a Tisdale term, if the Senate approves the nomination, would last only a couple years, though many commissioners serve an additional year because new nominations often are delayed. But the point is, with all due respect to Tisdale, the political process often seems to demonstrate little respect for the importance of the postal service to the economy of this country. Let’s see how importantly the powers that be – Congress, the administration and the mailing industry – deal with postal reform in the weeks ahead.

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