Postal Service Reform: Why? And How?

In July the President’s Commission on the U.S. Postal Service issued its recommendation that the agency be reformed, citing the potential loss of first class and advertising mail volume as reasons for change. The reform horizon set by the commission was for the next 20-30 years — not the next century — because we cannot foresee the changes in communications and commerce that are coming. And privatizing the USPS was not an option for the commission. It believes that the switch from a government service to a private enterprise for mail delivery would jeopardize the universal mail service that Americans need and want.

With that very brief background, let’s look at the recommendations:

  • A board of directors should replace the board of governors. The business acumen of a corporate board would help steer the Postal Service to a more businesslike, efficient operation. The new board would have three members appointed by the president, with the remaining eight appointed by the board itself. Of course, the board would appoint the postmaster general, who would also become a member. There would be fewer meetings and less micromanaging of the agency.

  • A Postal Regulatory Board should replace the Postal Rate Commission. The new PRB would have three members, appointed by the president, and would have significantly greater powers than the PRC, including subpoena power.

  • For the time being, the postal monopolies should remain. The PRB, however, should review and adjust the scope of the monopolies from time to time. This would remove from the Postal Service control over the scope of its monopolies.

  • The PRB should review the scope of universal delivery and make any necessary adjustments.

  • The Postal Service should have authority to adjust rates for competitive classes of mail, such as Parcel Post, without any approval or review. But rates for these classes must not be cross-subsidized by revenue from other classes of mail.

  • The Postal Service should have authority to adjust the rates for noncompetitive classes of mail, such as first class and standard, provided the rates do not increase above a rate ceiling established by the PRB. The rate ceiling would be an inflation index less a productivity factor. The PRB would have an after-the-fact review of the new rates in these circumstances — that review would take 60 days.

  • The Postal Service should have authority to enter into negotiated service agreements, including agreements to maintain or increase volume, without prior outside review.

  • The Postal Service should expand work-sharing to minimize the combined Postal Service/mailer costs to collect, transport, and deliver the mail.

  • The Postal Service should voluntarily follow SEC requirements for its financial reporting.

  • The USPS should have the flexibility to adjust its mail-processing network. To remove the USPS from political pressure that would follow any decision to close or consolidate mail-processing facilities, there should be a “base closing” type of commission established to report to Congress for an up-or-down vote on a package of proposed closings and consolidations.

  • The Postal Service should be able to close a retail post office solely for economic reasons provided the closing would not diminish the offering of postal services (including retail) to the community.

  • The Postal Service should use all technology and contracting available to increase the availability of retail postal services to the public.

  • The Postal Service should have the flexibility to “right-size” its work force to meet the changing delivery needs of the country, especially in light of the reductions in mail volume.

  • The collective-bargaining process mandated by law should be adjusted to include a mediation stage and to have the PRB review and calculate wage premiums.

  • The Postal Service should adopt corporate best practices for its procurement process.

  • The Postal Service should not be liable for retiree costs based upon military service. As with all other federal agencies, the Treasury pays for military time credit for retirees under Civil Service Retirement. This is almost $30 billion that could accrue to the USPS and, by extension, to mailers in the form of fewer or lower postage rate increases.

As you can well see, the USPS can implement many of the recommendations, such as SEC reporting and corporate best practices for procurement, without any congressional action. Mailers should push the Postal Service to enact these reforms ASAP. We have a window of opportunity and should take advantage of it.

The reforms that require congressional approval do not have universal support. Sen. Thomas Carper (D-DE) said he did not support the recommendation covering the collective-bargaining system. Rep. John McHugh (R-NY) raised concerns over the same recommendation, and the AFL-CIO passed a resolution opposing it. And many have raised opposition to the recommendation to allow local post offices to be closed without any oversight.

Mailers supporting reform of the Postal Service must express that support publicly and ask Congress to move reform legislation forward now. But before you ask for legislation from your elected representatives, you must know what you want — in Washington terms, “what’s the ask?” You cannot ask for “postal reform.” You have to be specific, and you have to choose your battles carefully.

Which of the recommendations are most important for your business? For example, how important are the collective-bargaining recommendations to your business? If USPS can right-size the work force, the collective-bargaining process changes are not paramount.

Should mailers use their ask for closing post offices? The Government Accounting Office has determined that the closing of retail post offices could save $200 million — not enough to try to fight members of Congress.

Mailers should focus on the recommendations that will bring the greatest change. In my personal view, the major recommendations include a rate-setting change that allows the USPS to adjust rates to meet market demand but rate increases below inflation.

Another priority is negotiated service agreements. Many catalogers use package delivery services other than the Postal Service for fulfillment. Those who ship large volumes of packages negotiate the service and price. The USPS should have that same flexibility.

My next priority would be the “base closing” commission for closing and consolidating mail-processing facilities. And Iwould next support outside review of service to ensure that the agency does not degrade service instead of reducing costs.

Finally, Congress should adopt entirely the recommendation that the Postal Service not be liable for the costs of military time for its retirees.

That would be the extent of my ask. As for mailers, my ask is threefold: 1) Push the postmaster general to make the recommended changes that are in his power — and to make them ASAP; 2) Determine what you would ask your representative to pass as legislation; and, 3) Ask — loudly!

Jerry Cerasale is senior vice president for government affairs for the Direct Marketing Association in Washington.

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