Exigent Rate Increase Decision A Win For Mailers
The Postal Regulatory Commission issued an order on September 20 to clarify how close the causal connection must be between an exigent rate adjustment and the circumstances that led to its proposal. This decision hopefully marks the final chapter in the Postal Services July 6, 2010 bid to increase postage rates by an average 5.6%, far more than permitted by the CPI cap.
Following the September 30, 2010 rejection of the Postal Service's exigent rate increase proposal by the Postal Regulatory Commission, the Postal Service appealed the decision to the U. S. Court of Appeals for the District of Columbia Circuit. In July 2011, the court remanded the case to the PRC and directed it to determine "how closely the amount of the adjustments must match the revenue lost as a result of the exigent circumstances."
In the PRC's order resulting from the remand, it stood by its position that the "due to" provision imposes a strict causation standard. Accordingly, any exigent rate increase must be limited to the ":net adverse financial impact of the exigent circumstances." That means the Postal Service cannot recover losses resulting from electronic diversion and other non-exigent causes of declining revenue.
In order to make its case the Postal Service is not required "to quantify such impact with absolute precision, but must a) under the circumstances presented, justify its quantification through supportable methods commensurate with the amount of the proposed adjustment; b) demonstrate that the amount of the proposed adjustment does not exceed the net adverse financial impact of the exigent circumstances."
In a press release announcing the decision, the PRC said "the Commissions interpretation reaffirms that the price cap is the cornerstone of the Postal Accountability and Enhancement Acts ratemaking system and is intended to provide clear incentive for the Postal Service to improve efficiency and reduce its cost, and that the exigency provision is intended as a narrow exception to it."
The PRC remand decision also affirmed that any exigent rate increase must be "reasonable and equitable and necessary to enable the Postal Service, under best practices of honest, efficient and economic management," to continue providing necessary service.
The Postal Service has until October 4 to file a statement with the PRC indicating whether and how it wishes to pursue its exigent increase proposal. If the Postal Service proposes to pursue the exigent increase proposal based on the record as of September 30, 2010, interested parties will have until October 18, 2011 to respond.
The Postal Service, under new leadership since the exigent increase proposal was filed in July of last year, has assured mailer representatives that it does not intend to pursue this proposal. However, President Obama recently proposed allowing the Postal Service to implement the exigency increase, overriding the PRC's decision. (see piece below on Presidents postal proposal) As the great Yogi Berra said, "it ain't over til it's over."
Congressman Danny Davis Steps Up For Nonprofits
The House Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy met on September 21 to consider H.R. 2309, the Postal Reform Act of 2011. The bill was introduced by Congressman Darrell Issa (R-CA), chairman of the Committee on Reform and Government Oversight, and Congressman Dennis Ross (R-FL), chairman of the subcommittee.
The five hour meeting provided a good picture of the significant differences between Republicans and Democrats on how to address the postal financial crisis. Most of the major provisions of the Postal Reform Act were challenged by Democrats on the subcommittee. In the end, all the challenges were defeated and the bill was approved intact.
One particular challenge by the Democrats, championed by Congressman Danny Davis (D-IL), merits special attention. Mr. Davis moved to strike Section 403 of the Postal Reform Act, a provision that would eliminate preferred nonprofit postage rates.
Since 1951, the rates for nonprofit Standard Mail have been set by law below the corresponding commercial Standard Mail rates. Special nonprofit rates have reflected a judgment by Congress that the discounts were a cost-effective way of providing needed public services at lower cost than government would incur. Congress also believed that reduced nonprofit rates would strengthen our civil society, and promote the kind of democracy envisioned by James Madison and other founding fathers. The idea was to promote a diversity of organizations that were neither government entities nor for-profit businesses.
In the six decades since then, Congress and Presidents have repeatedly affirmed these policies. In 1970, the Postal Reorganization Act, which transformed the former Post Office Department into the U.S. Postal Service, explicitly preserved reduced rates for nonprofit mail through an annual "revenue foregone" appropriation. In the early 1990s, while changing the mechanism for funding nonprofit rates, Congress rejected proposals to eliminate them. The current formula for calculating the nonprofit rate discounts was enacted in 2000. It was the product of a consensus agreement jointly negotiated and supported by the nonprofit sector, the commercial mailing industry, and the Postal Service itself. The Postal Accountability and Enhancement Act of 2006, which extensively rewrote much of Title 39, left the formula for calculating nonprofit rate discounts essentially unchanged.
We do not disagree that out-of-control Postal Service costs need to be reined in. With mail volume declining at an ever-increasing pace, Postal Service costs must be reduced substantially. We support many of the Postal Services proposals to reduce cost, including the proposal to eliminate Saturday mail delivery. Sure a move to five-day delivery would mean some sacrifice for nonprofits, but its far better than large postage rate increases to pay for excessive costs.
Phasing out the nonprofit rate discount, however, would punish nonprofit mailers---and the people they serve---for the Postal Services failure to control its own costs. We think that this would be illogical and unfair.
Below is the statement of Congressman Danny Davis as he made a motion to strike the nonprofit rate elimination provision of the Postal Reform Act of 2011. We are grateful for Congressman Davis leadership in attempting to remove a provision that would severely damage nonprofits all across the nation.
The Postal Regulatory Commission issued an order on September 20 to clarify how close the causal connection must be between an exigent rate adjustment and the circumstances that led to its proposal. This decision hopefully marks the final chapter in the Postal Services July 6, 2010 bid to increase postage rates by an average 5.6%, far more than permitted by the CPI cap.
Following the September 30, 2010 rejection of the Postal Service's exigent rate increase proposal by the Postal Regulatory Commission, the Postal Service appealed the decision to the U. S. Court of Appeals for the District of Columbia Circuit. In July 2011, the court remanded the case to the PRC and directed it to determine "how closely the amount of the adjustments must match the revenue lost as a result of the exigent circumstances."
In the PRC's order resulting from the remand, it stood by its position that the "due to" provision imposes a strict causation standard. Accordingly, any exigent rate increase must be limited to the ":net adverse financial impact of the exigent circumstances." That means the Postal Service cannot recover losses resulting from electronic diversion and other non-exigent causes of declining revenue.
In order to make its case the Postal Service is not required "to quantify such impact with absolute precision, but must a) under the circumstances presented, justify its quantification through supportable methods commensurate with the amount of the proposed adjustment; b) demonstrate that the amount of the proposed adjustment does not exceed the net adverse financial impact of the exigent circumstances."
In a press release announcing the decision, the PRC said "the Commissions interpretation reaffirms that the price cap is the cornerstone of the Postal Accountability and Enhancement Acts ratemaking system and is intended to provide clear incentive for the Postal Service to improve efficiency and reduce its cost, and that the exigency provision is intended as a narrow exception to it."
The PRC remand decision also affirmed that any exigent rate increase must be "reasonable and equitable and necessary to enable the Postal Service, under best practices of honest, efficient and economic management," to continue providing necessary service.
The Postal Service has until October 4 to file a statement with the PRC indicating whether and how it wishes to pursue its exigent increase proposal. If the Postal Service proposes to pursue the exigent increase proposal based on the record as of September 30, 2010, interested parties will have until October 18, 2011 to respond.
The Postal Service, under new leadership since the exigent increase proposal was filed in July of last year, has assured mailer representatives that it does not intend to pursue this proposal. However, President Obama recently proposed allowing the Postal Service to implement the exigency increase, overriding the PRC's decision. (see piece below on Presidents postal proposal) As the great Yogi Berra said, "it ain't over til it's over."
Congressman Danny Davis Steps Up For Nonprofits
The House Subcommittee on Federal Workforce, U.S. Postal Service and Labor Policy met on September 21 to consider H.R. 2309, the Postal Reform Act of 2011. The bill was introduced by Congressman Darrell Issa (R-CA), chairman of the Committee on Reform and Government Oversight, and Congressman Dennis Ross (R-FL), chairman of the subcommittee.
The five hour meeting provided a good picture of the significant differences between Republicans and Democrats on how to address the postal financial crisis. Most of the major provisions of the Postal Reform Act were challenged by Democrats on the subcommittee. In the end, all the challenges were defeated and the bill was approved intact.
One particular challenge by the Democrats, championed by Congressman Danny Davis (D-IL), merits special attention. Mr. Davis moved to strike Section 403 of the Postal Reform Act, a provision that would eliminate preferred nonprofit postage rates.
Since 1951, the rates for nonprofit Standard Mail have been set by law below the corresponding commercial Standard Mail rates. Special nonprofit rates have reflected a judgment by Congress that the discounts were a cost-effective way of providing needed public services at lower cost than government would incur. Congress also believed that reduced nonprofit rates would strengthen our civil society, and promote the kind of democracy envisioned by James Madison and other founding fathers. The idea was to promote a diversity of organizations that were neither government entities nor for-profit businesses.
In the six decades since then, Congress and Presidents have repeatedly affirmed these policies. In 1970, the Postal Reorganization Act, which transformed the former Post Office Department into the U.S. Postal Service, explicitly preserved reduced rates for nonprofit mail through an annual "revenue foregone" appropriation. In the early 1990s, while changing the mechanism for funding nonprofit rates, Congress rejected proposals to eliminate them. The current formula for calculating the nonprofit rate discounts was enacted in 2000. It was the product of a consensus agreement jointly negotiated and supported by the nonprofit sector, the commercial mailing industry, and the Postal Service itself. The Postal Accountability and Enhancement Act of 2006, which extensively rewrote much of Title 39, left the formula for calculating nonprofit rate discounts essentially unchanged.
We do not disagree that out-of-control Postal Service costs need to be reined in. With mail volume declining at an ever-increasing pace, Postal Service costs must be reduced substantially. We support many of the Postal Services proposals to reduce cost, including the proposal to eliminate Saturday mail delivery. Sure a move to five-day delivery would mean some sacrifice for nonprofits, but its far better than large postage rate increases to pay for excessive costs.
Phasing out the nonprofit rate discount, however, would punish nonprofit mailers---and the people they serve---for the Postal Services failure to control its own costs. We think that this would be illogical and unfair.
Below is the statement of Congressman Danny Davis as he made a motion to strike the nonprofit rate elimination provision of the Postal Reform Act of 2011. We are grateful for Congressman Davis leadership in attempting to remove a provision that would severely damage nonprofits all across the nation.
Congressman Danny Davis (D-IL)
Mr. Chairman, I have an amendment to strike Section 403 of H.R. 2309. Section 403 will phase out postage rates that facilitate the ability of nonprofit organizations, churches, and other faith-based institutions to effectively do charitable work in America in helping the poorest and the neediest people. Given this tight economy and high unemployment, nonprofit organizations and faith-based institutions are called upon to do more to ease the burden of our citizens afflicted with diseases, mental and physical disabilities, disaster, drug addictions, reentry, homelessness, and poverty. How can these organizations that provide so much assistance to others be called upon to share again a high cost burden that taxes their efforts. This is just not fair nor the right thing to do, let alone to imagine!
Mr. Chairman, I have an amendment to strike Section 403 of H.R. 2309. Section 403 will phase out postage rates that facilitate the ability of nonprofit organizations, churches, and other faith-based institutions to effectively do charitable work in America in helping the poorest and the neediest people. Given this tight economy and high unemployment, nonprofit organizations and faith-based institutions are called upon to do more to ease the burden of our citizens afflicted with diseases, mental and physical disabilities, disaster, drug addictions, reentry, homelessness, and poverty. How can these organizations that provide so much assistance to others be called upon to share again a high cost burden that taxes their efforts. This is just not fair nor the right thing to do, let alone to imagine!
We must be cognizant of how Section 403, rate preferences for nonprofit advertising of H.R. 2309, will impact our wonderful nonprofit and faith-based organizations who receive charitable contributions from the average citizen to help others. For example, this provision would cost the March of Dimes Foundation an additional $1 million in postage expenses in the first year of implementation. As a result, the Foundation would have to drastically cut mail volumes across the board, which in turn would mean dramatic losses in donor support. As you may know, the March of Dimes direct mail program is the second largest source of funding within the organization, which provides life-saving research efforts for women, infants and children. Last year, the American Lung Association mailed about 40 million pieces of mail that cost approximately $6.3 million in postage. Section 403 would equate to a rate increase for the American Lung Association of 35 percent. According to the American Lung Association, this imposed rate hike would significantly cut back their mail volume and significantly reduce their donations to fund research projects to improve treatments and find cures for more than 37 million Americans. There are many more examples of how Section 403 would hinder the efforts of many nonprofit and faith-based institutions from helping people through charitable donations.
Let me reiterate the importance for not supporting the provision Section 403 of H.R. 2309. The Congress established nonprofit postage rates in 1951. Those preferred nonprofit rates have been reauthorized by Congresses and various Presidents until this day---60 years later. The reason is simple---nonprofit organizations provide needed support and services for the American people---programs that government cannot provide. In these difficult economic times, nonprofits are being called upon to provide even more support for a growing number of Americans. The mail remains a vital means for nonprofits to communicate and raise precious contributions needed to continue their missions. It is illogical and unfair to eliminate nonprofit postage rates---resulting in massive postage rate increases. It would cripple nonprofits and sharply reduce their ability to benefit American society. At this time when so many Americans are suffering, we should not penalize nonprofit organizations that are providing crucial and needed support.
President Obama Proposes Plan To Help Postal Service
President Obama last week proposed a savings plan entitled: Living Within Our Means and Investing in the Future---The President's Plan for Economic Growth and Deficit Reduction. Included in the plan was the Presidents proposal to address the Postal Service financial crisis.
Noting that "absent legislative intervention, USPS will be insolvent by the end of September 2011," the President said "bold action is needed to ensure that USPS can continue to operate in the short-run and achieve viability in the long-run."
To that end President Obama proposed:
Restructure Retiree Health Benefit pre-funding in order to accelerate moving these Postal payments to an accruing cost basis and reduce near-year Postal payments.
Provide USPS with a refund over two years of the $6.9 billion surplus in Postal contributions to the FERS program.
Reduce USPS operating costs by giving USPS authority, which it has said it will exercise, to reduce mail delivery from six day to five days.
Allow USPS to offer non-postal products and increase collaboration with State and local governments.
Give USPS the ability to better align the costs of postage with the costs of mail delivery while still operating with the current price cap.
Permit USPS to seek the modest one-time increase in postage rates it propose a year ago.
Restructure Retiree Health Benefit pre-funding in order to accelerate moving these Postal payments to an accruing cost basis and reduce near-year Postal payments.
Provide USPS with a refund over two years of the $6.9 billion surplus in Postal contributions to the FERS program.
Reduce USPS operating costs by giving USPS authority, which it has said it will exercise, to reduce mail delivery from six day to five days.
Allow USPS to offer non-postal products and increase collaboration with State and local governments.
Give USPS the ability to better align the costs of postage with the costs of mail delivery while still operating with the current price cap.
Permit USPS to seek the modest one-time increase in postage rates it propose a year ago.
We are pleased that the President has proposed actions to deal with the Postal Service crisis. Restructuring the retiree health benefit pre-funding; refunding the FERS overpayment; eliminating Saturday delivery; and allowing the Postal Service to offer more products and collaborate with State and local governments are all proposals that we can support. However, the proposal to override the PRC's decision disallowing the Postal Service's exigent rate request is not something we could support.
Although the effect of the exigent increase on available price cap authority isnt entirely clear, the apparent intent is to allow the Postal Service to increase rates by an average 3.9% (the requested 5.6% minus the 1.7% implemented this past April). This would amount to about $2.5 billion a year, forever.
Should the Postal Service reverse its stated intention not to pursue the failed exigent increase request and be granted the authority proposed by the President, it would mark the first congressionally imposed postage rate increase since the enactment of the Postal Reorganization Act in 1970. And, as the Postal Services new leadership has acknowledged, it would accelerate the flight of mail volume out of the system.
There are also significant constitutional issues with the proposal that will be raised if it is seriously considered. In sum, this is not a good idea for many reasons.
Senate Confirms Acton and Taub As Commissioners
On the evening of September 26, the United States Senate confirmed the nominations of Mark Acton and Robert Taub to serve as Commissioners of the Postal Regulatory Commission. Mr. Acton will soon begin his second term as a Commissioner and Mr. Taub will return to the postal world to serve his first term as Commissioner.
On the evening of September 26, the United States Senate confirmed the nominations of Mark Acton and Robert Taub to serve as Commissioners of the Postal Regulatory Commission. Mr. Acton will soon begin his second term as a Commissioner and Mr. Taub will return to the postal world to serve his first term as Commissioner.
The Alliance is pleased to have both gentlemen confirmed as Commissioners. Mr. Acton has served with distinction in his first term and Mr. Taub is highly regarded after exemplary service with former Congressman John McHugh (R-NY). The Postal Regulatory Commission and the postal community are fortunate to have them on board during this challenging time.
Postal Community Loses a Beloved Statesman
Murray Comarow, Executive Director of President Lyndon Johnsons commission that provided the blueprint for the U.S. Postal Service, died on September 23. Murray was a mentor and friend to many in the postal community.
Murray Comarow, Executive Director of President Lyndon Johnsons commission that provided the blueprint for the U.S. Postal Service, died on September 23. Murray was a mentor and friend to many in the postal community.
Born in the Bedford-Stuyvesant section of Brooklyn to Jewish immigrants from Russia and Hungary, Murray came to Washington in 1939 to be an assistant messenger in the War Department. Although he had never been to college, Murray successfully completed an examination that allowed him to enroll at the National University School of Law. Taking night classes he graduated in 1942 and enlisted in the Army. After World War II ended, Murray returned to Washington and later served as legal counsel to a special committee charged with unearthing the roots of a major cheating episode at the Air Force Academy. He called that assignment the most painful professional experience of his life.
In 1967, while working as executive director of the Federal Power Commission, Murray was contacted by a representative of President Lyndon Johnson who told him the President needed his service as executive director of the Presidents Commission on Postal Reorganization. Murray told the representative he appreciated the offer but had no interest in the position. About a week later another representative contacted Murray with the same request from the President, and again Murray said thanks, but no thanks. When the third request came, Murray realized this was an offer he could not refuse.
Murray Comarow served as a mentor to many significant figures in Washington over the years. He had a great power of persuasion and charm that was infectious. A brilliant mind allowed Murray to challenge assumptions or "facts" in a way that only he could. One particular challenge was for the Postal Service to speak out boldly about what it wanted and needed. Frustrated over the continual timidity of postal leadership to seek change that would benefit the Postal Service and its customers, Murray told many Postmasters General and postal Governors to do it----"it's your job."
Were certain Murray was pleased that Postmaster General Pat Donahoe spoke out boldly in recent weeks about significant change needed to the Postal Services business model
