On Thursday, May 24, the D.C. Circuit issued its decision in the exigency rate case appeal. On the central issue in the case, the court ruled with the Postal Regulatory Commission and the mailers that the requirement that an exigent increase be "due to" the exigent circumstances requires a causal nexus between the exigency and the increase. While agreeing on that central issue, the court sent the case back to the Postal Regulatory Commission to flesh out how tight the nexus must be, especially when the Postal Service's losses have multiple causes.

    What happens next? The Postal Regulatory Commission will establish a procedural schedule for handling the remand from the court. It is common for administrative agencies to solicit comments from parties on the issues remanded by the court, and if the PRC provides that opportunity the Alliance and other mailer groups will submit comments. The court did not set a deadline for a further PRC decision, and the upcoming process could take several months to complete.
     
    PRC Tells USPS To Include Nonprofits in Promotion
    The Postal Regulatory Commission issued an order on May 17 approving the Postal Service's request for a mobile barcode promotion temporary price adjustment. The order, however, "directs the Postal Service to make the discount available to nonprofit mailers that comport with all the other program requirements."
    The Postal Service filed its special promotion request with the Postal Regulatory Commission on April 12, requesting an upfront 3% discount on Standard and First-Class mail letters and flats that include a two-dimensional barcode that can be read or scanned by a smartphone. The proposal by the Postal Service excluded nonprofit Standard mail from the promotion.
    On May 2 the Alliance of Nonprofit Mailers filed comments with the Postal Regulatory Commission on the Postal Service's proposal, taking exception to the exclusion of nonprofit mail from the promotion. The Alliance expressed general support for the promotion, saying it "is the kind of low-risk experiment that the Commission should encourage."
    However, the Alliance pointed out that the exclusion of nonprofit mail is inconsistent with law. We noted that nonprofit mailers encountered discrimination in Docket No. MC78-2, when the Postal Service implemented presort discounts immediately for the commercial categories of third-class (now Standard) mail, but phased in the discounts for corresponding nonprofit categories. That discrimination led to a court appeal, National Easter Seal Society for Crippled Children and Adults v. USPS, with the Court of Appeals finding that this disparity in treatment constituted undue discrimination in violation of 39 U.S.C Section 403(c) "absent some reasonable ground for differential treatment."

    The Alliance filing went on to point out that the Postal Service's proposal offered no explanation for the exclusion of nonprofit mail from the promotional discount. In response to an informational request from the PRC Chairman, the Postal Service said the three supposed justifications for the exclusion were: 1) 2D barcodes have more potential for commercial mail, because it involves the sale of products, than for nonprofit mail; 2) more limited program would be quicker and simpler to implement; and 3) nonprofit Standard Mail rates are "already reduced."
    The Alliance responded that the "Postal Service offers no support for the assumption that nonprofit mailers are less likely to have an interest in the 2D barcode." In fact many nonprofits use Standard Mail to market products, just as commercial mailers do. Other uses of nonprofit Standard Mail---including fundraising, education and other mission-related communications---would also be enhanced by the ability to offer access to other targeted on-line information through the use of 2D barcodes.
    We then said that the second Postal Service justification would effectively nullify the National Easter Seal Society court
    decision by allowing discrimination against nonprofit mail in any circumstance. "Limiting the scope of an experimental rate in order to expedite its implementation is certainly a permissible goal. If the Postal Service chooses to limit an experiment for this reason, however, the restriction on access may not be accomplished by discriminating against nonprofit mail."
    And the third justification would likewise nullify the protection against discrimination for nonprofits. "Nonprofit rates are, by definition, lower than the corresponding commercial rate categories. If that fact were sufficient to justify discrimination, discrimination against nonprofits would always be lawful--- a position squarely rejected in National Easter Seal Society."
    In the Postal Regulatory Commission decision, it "finds, consistent with the Easter Seal case, that the Postal Service has not articulated a rationale to justify the differential treatment of nonprofit mailers in this promotion. The Commission directs the Postal Service to make the discount available to nonprofit mailers that comport with all the other program requirements."
    The Alliance also noted that nonprofit mailers generally plan their mailing campaigns months in advance; and it may be too late to make use of a discount program that will end in August. However, we sought a decision from the Commission that should make clear that "its approval of the promotional program proposed in this docket does not set a precedent for the exclusion of the nonprofit categories if the promotional program is extended or made permanent." We are pleased that the Commission, citing the Easter Seal case, found that the Postal Service had not justified the proposed differential treatment of nonprofit mailers.
    Senator Carper Introduces Retooled POST Act
    At the May 17 hearing before the Senate postal oversight subcommittee, Chairman Tom Carper announced that he had introduced an updated version of the Postal Operations Sustainment and Transformation Act, or POST Act. The legislation, if passed and signed into law, would bring many needed reforms both in the short- and long- term to address the Postal Service's perilous financial condition.
    Postmaster General Pat Donahoe testified at the hearing and described the ever worsening financial picture. In the second quarter of Fiscal Year 2011, January- February-March, the Postal Service lost $2.2 billion. Projecting ahead the Postal Service expects to lose about $8.3 billion for the entire fiscal year, or roughly the same amount it lost in the last fiscal year. Unlike last year, however, the Postal Service will be unable to make its legally required $5.6 billion retiree health benefit prefunding payment on September 30, and may not be able to pay its routine pension and workers compensation-related payments. And if that's not dismal enough, the Postal Service will also reach its debt limit of $15 billion by the end of the year.
    Unlike last year when the Postal Service suggested it might be unable to meet its year-end payment obligations, there is no doubt this year. And beyond the year-end payment obligation dilemma, the Postal Service's growing cost/revenue differential dictates major structural changes for the organization to survive.
    Senator Carper's POST Act addresses the retirement fund overpayment and allows the Postal Service to use it for the required retiree health prefunding payments. Once that obligation is satisfied, the overpayment funds could be applied to pay workers compensation obligations and to retire debt owed the Treasury.
    The POST Act also seeks to "take Congress out of the day-to-day management of the Postal Service." Central in that design is the elimination of the legal requirement to maintain 6-day mail delivery and greater freedom to right-size a bloated postal infrastructure. As evidenced by the questions posed by some Senators at the hearing, these aspects of the POST Act remain controversial with elected officials.
    Although it will be challenging for members of the House and Senate to agree on an appropriate fix to the postal problem, it's hard to imagine the Obama Administration and Congressional leadership allowing the Postal Service to default on obligations to the Treasury. Should that pressure result in a deal to address the crippling health prepayment obligation, it will likely come with tough conditions that address major structural problems.
    We are fortunate to have Senator Tom Carper providing leadership on this thorny postal problem.
    President Obama Nominates Acton and Taub for PRC
    President Obama has nominated Mark Acton and Robert Taub to serve as Commissioners of the Postal Regulatory Commission. Mr. Acton, if confirmed by the Senate, will serve a second term as Commissioner and Mr. Taub, if confirmed by the Senate, will serve a first term.
    Commissioner Mark Acton has served on the Postal Regulatory Commission and its predecessor the Postal Rate Commission since August 2006. He is currently the Vice Chairman. Prior to his appointment, Mr. Acton served as Special Assistant to the Chairman of the Postal Rate Commission. He has an extensive professional history of active involvement in the public policy arena, including more than five years handling legislative and regulatory concerns as Staff Director for the Republican National Committee Counsel's Office. He attended the University of Louisville and has an MBA from the University of Maryland.
    Robert Taub is currently the Special Assistant to Secretary of the Army John McHugh. Prior to this position, Mr. Taub spent considerable time working in the House of Representatives, including serving a decade as Chief of Staff to then-Congressman McHugh. He has extensive expertise with postal policy and was instrumental in developing the 2006 Postal Accountability and Enhancement Act. Mr. Taub served for 12 years on the House Committee on Oversight and Government Reform in a series of senior positions, including service as Staff Director on its postal oversight subcommittee. Prior to his work in the House of Representatives, Mr. Taub was a senior analyst at the Government Accountability Office for seven years. Robert Taub received his B.S. and M.A. in political science from American University.
     
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