Senate Passes USPS Bill; House OK Up Next

The Senate passed a bill this week allowing the U.S. Postal Service to scale back some of its pension payments, a move that could keep rates steady until fiscal 2006.

The bill — S. 380, the Postal Civil Service Retirement System Funding Reform Act of 2003 — passed under unanimous consent. The House is expected to approve S. 380 on April 8.

If approved, the bill will go to President Bush’s desk for a signature, which is expected to come before April 14, when Congress is scheduled to adjourn for recess.

“This is probably the biggest thing that has happened in the mailing industry in the last 15 years,” said Lucie Naphin, director of government relations at R.R. Donnelley. “Mailers now know they have rate stability three years in advance, for sure.”

Naphin said the kind of planning and forecasting that DMers will be able to do if the bill is signed into law is unprecedented.

“Mailers won’t have to always think in the back of their minds, ‘Am I going to get 12 to 18 percent taken out of my bottom line because the postal service is raising rates?’ This just gives people a sense of calm,” she said.

Naphin also said that given the current economy, the news is “our own stimulus package. It’s a great shot in the arm for the industry.”

The move to reduce the contributions came after reviews by the federal Office of Personnel Management and the General Accounting Office found that the USPS was paying too much into the Civil Service Retirement System, which covers employees who joined the agency by 1983. It found the agency was on course to overfund its pension obligations by $71 billion.

The bill requires the postal service to use some of the savings to pay down its $11.2 billion debt in fiscal years 2003, 2004 and 2005. Other savings would be used to continue funding retiree health benefits and hold postal rates steady until 2006. It could not use the money to pay bonuses to its executives.

The postal service estimates that it would save $2.9 billion in fiscal year 2003 and $2.8 billion in FY 2004 through lower contributions.

The savings could not come at a better time. The uncertain economy has kept mail volumes flat, USPS chief financial officer and executive vice president Richard Strasser told the USPS’ Board of Governors at last week’s monthly meeting.

Volume from Nov. 30 to Feb. 17 was unchanged, though he said productivity gains and expense reductions enabled expenses to come in $559 million below plan. Net income was $645 million for the quarter, $285 million over plan. Year-to-date revenue totaled $32.8 billion with expenses of $31.1 billion, leaving a net income of $1.65 billion.

However, slight increases in advertising mail and packages were unable to offset the decline in First-Class and other mail. It also does not appear that the postal service will reach its volume or revenue targets for Quarter 3, he said.

Naphin said the next step the mailing industry will focus on is comprehensive postal reform.

“This gives the presidential commission and the mailing industry the time to put together a great reform package, which the postal service definitely needs,” she said.

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