USPS to continue Saturday mail service into 2015

January 14, 2015

By Tonda F. Rush

CEO and General Counsel | NNA

Six-day mail service will continue through at least Sept. 30, 2015, unless Congress passes a bill this year overriding its 2014 actions, but that is unlikely.

Late on Dec. 13, the Senate overcame uprisings from its right wing, which was trying to stop President Obama’s immigration initiatives, and from its left, which was upset about the weakening of regulations on derivatives trading, to fund the government for the rest of the year.

The final appropriations bill contained no postal reform language. It mandated Saturday mail service and funded both the Postal Regulatory Commission at $14.7 million and the USPS Office of the Inspector General at $243.8 million.

National Newspaper Association President John Edgecombe Jr., publisher of The (Geneva) Nebraska Signal, said NNA was pleased that Saturday mail survived but deeply disappointed that sensible postal reform failed to catch hold.

“Postal bills are never easy. There are a lot of moving parts, and many stakeholders are in the conversation, including community newspapers that rely on the mail. We all agree change is needed, but there are fundamental differences of opinion on what the nation needs. NNA believes universal service must reign supreme. We are increasingly concerned that USPS is shifting its resources and attention to urban areas. That will harm our small towns and diminish rural Americans’ trust of the system,” he said.

The failure to adopt postal reform legislation means proponents of reform will have to bring their ideas to the 114th Congress this month. The most recent legislative efforts began with the 109th Congress in 2005, when NNA called for relaxation of requirements for USPS to set aside more than $5 billion a year to pre-fund retiree health benefits.

The 2006 Postal Accountability and Enhancement Act took more than a decade to accomplish. That law set an inflation-based price cap on postal rates, and also created the health benefit prefunding. The prefunding, a condition imposed by the Bush Administration, plunged USPS immediately into debt. It went from marginally profitable with .9 billion in net earnings in 2006 to a $5.1 billion loss in 2007 after the law took effect. USPS has not reported a black-ink finish since that time, although last year it was barely back in the black on operations alone, without the prefunding added in.

The Postal Service stopped paying the prefunding contribution in 2011 and began racking up debt—up to $40 billion now—owed primarily to the U.S. Treasury for the health benefits. Its financial officers say they see nearly $70 billion in obligations looming ahead.

Yet Congress has been unable to strike an acceptable deal that would set USPS back on track to solvency.

A coalition of mailers’ organizations, including NNA, and USPS’ four largest labor unions proposed a series of changes in summer 2014. The mailer/union deal would have required mailers to pay an additional 1 percent over each year’s inflation-based price hike. Unions accepted mandatory Medicare benefits for eligible workers, rather than the richer USPS health benefits. It would have prohibited further weakening of delivery standards, maintained six-day mail and permitted USPS to deliver wine and beer in states where such sales are legal.

Much of that bill was crafted from a reform bill proposed by Sens. Thomas Carper, D-DE, and Tom Coburn, R-OK, the leaders of the Homeland Security and Governmental Affairs Committee. But it did not incorporate provisions sought by USPS management, including a weakening of the Postal Regulatory Commission so that USPS’ own governing body could set rates and determine service levels. The deregulation in the Carper/Coburn bill was a deal-breaker for all the mailers’ groups, which objected that USPS would have no oversight to prevent abuse of its monopoly.

The Carper/Coburn and mailers’ bill also diverged on how to handle an unusual 4.3 “exigent” percent postage increase imposed last January atop the allowed 1.6 percent inflation for a total of 5.9 percent increase, which was responsible for USPS’s slim profits in 2014. Mailers and the Postal Regulatory Commission have agreed the 4.3 percent increase should not become part of the future rate base, to set a higher starting point for future inflation increases. USPS wants to keep the money in the base. Carper and Coburn agreed. That matter is now pending on appeal at the U.S. Court of Appeals for the District of Columbia circuit.

Other issues remain beyond consensus by the various groups, including reform of workers compensation rules throughout the federal workforce. Currently, a USPS worker injured on the job can remain on the workers’ comp plan for life, rather than shifting to the less-favorable pension or retirement funds. Sen. Susan Collins, R-ME, has set a goal of requiring the shift to pensions on retirement. But union opposition from beyond the postal workforce has ensnarled her proposals.

In addition, a proposal by most Democratic senators to keep USPS from closing an additional 82 mail processing plants in 2015—a proposal supported by NNA—was floated in the final days of Congress. Efforts to attach it to the final federal spending bill lost the support of both mailers and unions in the final days of the session because every moving bill also attracted the Carper/Coburn deregulation. In the end, the two provisions canceled each other out.

With the failure of Congress to act, USPS moves into its eighth money-losing year, continuing to warn its stakeholders that its cash flows are too thin for comfort, let alone sufficient to replace an aging delivery vehicle fleet. As the congressional inaction billows into the potential of another decade-long stasis, fundamental differences are arising about what the Postal Service will be. In the void, management’s own plans—driven by consultant advice—gradually move into action. Its vision: focus on advertising and packages in urban areas. That is where management sees the money. Absent a congressional mandate to the contrary, the path management sees may be the only one available.

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