EcommerceBytes-NewsFlash, Number 2666 - November 03, 2011     3 of 5

Senators Unveil Bill to Reform US Postal Service

By Kenneth Corbin

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A bipartisan group of senators introduced legislation on Wednesday that would undertake a sweeping restructuring of the U.S. Postal Service, aiming to put the ailing organization back on the path to financial stability.

The legislation, authored by Joe Lieberman (I-Ct.), Susan Collins (R-Maine), Tom Carper (D-Del.) and Scott Brown (R-Mass.), would address the Postal Service's financial woes on a number of fronts, including a refund of pension overpayments and reforms to the obligation to prepay employees' retirement health benefits.

The bill comes in response to the urgent situation confronting the Postal Service, which is facing a projected loss of $10 billion this year and has warned that it could become insolvent by the middle of next year if Congress does not act.

"We are not crying wolf here," Collins said at a news conference unveiling the legislation. "The Postal Service literally will not survive unless comprehensive legislative and administrative reforms are undertaken. Absent action, the Postal Service will not be able to meet its payroll a year from now."

The full Homeland Security and Governmental Affairs Committee, which Lieberman chairs, is scheduled to mark up the legislation next Wednesday. Collins is the ranking Republican on the committee.

The 21st Century Postal Service Act sets the goal of enabling the USPS to return to profitability by 2015, and takes aim at the biggest drags on its balance sheet.

The legislation would give the Postal Service access to the estimated $6.9 billion that it has overpaid to the Federal Employees Retirement System pension. A portion of that money would be channeled into buyouts and retirement incentives that would seek to reduce the Postal Service's workforce by 100,000 employees. The remainder would be used to pay down the Postal Service's debt to the U.S. Treasury and applied toward labor expenses. The Postal Service currently employs 557,000 full-time, career workers. It estimates that a workforce reduction of 100,000 would translate into savings of $8 billion a year.

The bill would not give the Postal Service access to the $55 billion it claims it overpaid to another pension fund, the Civil Service Retirement System. The Postal Service has asked for that money, but an administration review concluded that there was no overpayment.

There is a mechanism in the bill for the Postal Service to eventually scale down to five-day weekly delivery, as it has advocated, but the legislation attaches several conditions that would slow the transition.

First, it would bar the Postal Service from eliminating Saturday delivery for two years from the date of enactment. At that point, the organization would be required to demonstrate that it had taken every alternative step in its power to right the balance sheet and conduct an analysis identifying customers who would be disproportionately affected and offer strategies to mitigate the impact. Then the Government Accountability Office would conduct its own analysis of the Postal Service's financial situation, and the move to five-day delivery would only be permitted if the GAO determined it was necessary.

"What we want to do is to ensure that slashing or eliminating Saturday service is truly the last resort, not the first option. This is so important to our newspapers, to rural areas which lack access to broadband and to seniors who receive prescription medicines through the mail," Collins said. "We also are concerned that an immediate move to eliminate Saturday delivery would cause more and more businesses to leave the mail system, and once they're gone they're not coming back, and the Postal Service revenues would suffer yet another blow."

In a statement, the Postal Service said, "We are currently reviewing the provisions included in the bill to determine how it addresses our financial crisis and the need for a more flexible business model."

The bill also addresses potential rate increases, an issue that has drawn the interest of many members of the mailing community, including eBay, which recently called on sellers to add their name to a petition opposing legislative proposals that could lead to a hike in mailing costs.

Under the legislation introduced on Wednesday, the Postal Regulatory Commission (PRC) would be tasked with conducting an analysis of the Postal Service's product portfolio, cost structure and market position, to be completed within two years of the bill's enactment. After concluding that study, which would also entail a public hearing, the Postmaster General would have the option to raise rates for certain classes of service that recover less than 90 percent of their costs by 2 percent above the current rate of increase, which is tied to the rate of inflation.

The lawmakers acknowledged that the declining mail volumes necessitate that the Postal Service scale down both its workforce and its network of locations, but their bill stipulates a more comprehensive procedure of analysis, notice and comment for closing a processing facility or retail store. It also includes provisions for replacing door delivery with curbside service in certain areas.

Additionally, the bill would also authorize the Postal Service to offer non-postal products and services in the event that they met a series of criteria (including not creating unfair competition with the private sector) and received approval from the PRC. The bill would also allow the Postal Service to ship wine and beer as its private-sector competitors do.

Also included are a number of provisions relating to the labor costs the Postal Service bears. The bill would reform the workers' compensation system in place at the Postal Service and across the federal government to reduce payments made to people who are not likely to return to work. Under the current system, thousands of former federal employees above the age of retirement are receiving workers' compensation benefits. According to Collins, the Postal Service is still paying workers' compensation benefits to one former employee who is 99 years of age.

It would also amend the current pre-funding obligation for employees' retirement health benefits by shortening the amortization schedule to 40 years and lowering the portion of the benefits that must be covered in advance to 80 percent.

Under the legislation, the Postal Service would be authorized to enter into negotiations with its employee unions to devise an alternative health care plan to the current Federal Employee Health Benefit Plan. That new plan would only take effect if all parties agreed.

"We know that many of these proposals are going to be controversial," Lieberman said. "But without taking controversial steps like these, the Postal Service is simply not going to make it."

An alternative reform bill, backed by Rep. Darrell Issa (R-Calif.), cleared a House subcommittee in September on a straight partisan vote. A companion bill, introduced by John McCain (R-Ariz.), is pending in the Senate. Postal employee unions have roundly denounced the legislation as an assault on organized labor that would effectively privatize the Postal Service while making deep cuts in the workforce and facilities.

Collins said that her staffers have been meeting with Issa's office, and she and Issa have met once to discuss the issue.

The lawmakers emphasized that comprehensive reforms to the Postal Service are needed in short order, dismissing a more piecemeal approach or one that would entail more drastic reductions in service or rate hikes.

"The fact is that too many people still rely on the Postal Service for us to sit back and allow it to collapse," Lieberman said.

About the Author
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects for more than four years, most recently as the Washington correspondent for, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here .

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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