The Postal Service's proposed 1.741% average postage rate increase package was recently approved by the Postal Regulatory Commission and will go into effect on April 17. Consistent with the Postal Accountability and Enhancement Act of 2006, mailers will see postage increases that are inflation-based (discounting the loop-hole that ignored deflation) and predictable.

Unlike the good old days of omnibus rate increase proposals that were quite large and took forever to hammer out at the Postal Rate Commission, this increase is just the opposite. It's not so large that it busts budgets, and it didn't take months to fight over. As we've said before, the new inflation-based rate making system is far superior to the old cost of service model.

Of course mailers are not out of the woods yet on the 5.6% exigent rate increase proposal that is under review in court.

Oral arguments are scheduled for March 15 and a decision is expected in the spring. We don't believe that new Postmaster General Pat Donahoe wants to implement that 5.6% increase if the court sides with the Postal Service, but the decision rests with the entire Postal Service Board of Governors, not just the Postmaster General.

We hope that the Board of Governors, which authorized the proposed 5.6% exigent increase, has changed its mind about the wisdom of the increase. Last year's skirmish over the ill-advised exigent rate increase proposal is not one that mailers or the Postal Service should want to revisit.
Budget Proposal Recognizes Postal Financial Problem
Although it's not the proposal requested by the entire postal community, President Obama's FY2012 budget proposal to Congress does recognize there's a postal problem. That's at least a start in the effort to engage the Administration to address the Postal Service's financial crisis. As the Alliance and four other mailer groups wrote to the President on February 7, he should direct the Office of Personnel Management to fix the financial problem administratively. Such a solution would help recreate lost jobs at a time the country sorely needs them.
The President's budget proposal regarding the Postal Service included the following.
"The Administration recognizes the enormous value of the Postal Service to the Nation's commerce and communications, as well as the urgent need for reform to ensure the future viability of USPS. Therefore, the Budget proposes specific short-term financial relief measures, grounded in principles of fiscal responsibility as well as sound financial management, and the Administration will work with the Congress and postal stakeholders to secure necessary reforms. As to the structure of relief, the Budget would improve USPS financial condition by returning to USPS surplus amounts it has paid into its OPM account for its share of Federal Employee Retirement System costs. OPM has determined this surplus is approximately $6.9 billion, which would be paid back to USPS over 30 years, including an estimated $550 million in 2011. Secondly, the Budget proposes to restructure USPS retiree health benefits payments that were specified by the 2006 Postal Act. This change would still prudently pre-fund retiree liabilities, but on an accruing cost basis rather than the arbitrary amounts fixed in current law, which do not allow for the dramatic shifts in demand or workforce size that USPS has experienced in recent years. This restructuring and near-term deferral would provide USPS with $4 billion in temporary financial relief in 2011.
Over the 2011 to 2021 budget period this proposal has an estimated deficit effect of $5 billion. See the Office of Personnel Management section of this Appendix for more information on this proposal.
"These steps to provide USPS with the breathing room necessary to continue restructuring its operations without severe disruptions must be coupled with meaningful reforms to its business model to make USPS viable for the medium- and long-term. Postal volumes have dropped precipitously in the last few years due to the economic crisis and longer-run shifts in communication technologies and use shifts that have created new challenges even as they propel innovation and revolutionize our economy. The Postal Service needs the flexibility to adapt to these changes and higher public expectations for customer service. To that end, the Administration's discussions with the Congress and others will be guided by the goals of allowing the Postal Service to: 1) Realign its infrastructure, facilities, processing and delivery systems to continuously improve efficiency; 2) Promote an adaptive, 21st Century workforce; and 3) Accelerate value creation and enhance service to the public while respecting fair competition in the marketplace."
In addition to proposing the reduction of the Postal Service's retiree health benefit payment due on September 30 by $4 billion, the budget also proposes the elimination of the annual $29 million payment to the Postal Service that resulted from the Revenue Forgone Reform Act of 1993. The budget language reads: "The Budget proposes terminating the $29 million annual appropriation to reimburse the Postal Service for prior years' lost revenue from legislatively mandated reduced postage rate for non-profit mailers. This appropriation was authorized to compensate USPS for lost revenues that occurred in the early 1990s and ended in 1998, and is not related to any current USPS activities. While the funds serve to very marginally increase postal revenues, the Budget proposes far greater, though temporary financial relief to USPS to provide it an opportunity to evaluate and adjust its overall business framework."
We see no correlation between the debt owed the Postal Service from the Revenue Forgone Reform Act and the retiree health benefit payments. The Revenue Forgone Reform Act requires that the Postal Service be paid $29 million annually over 42 years for legitimate debt resulting from preferred rate mail. If that debt can be written off for no good reason, why can't the Postal Service's retiree health benefit obligation also be written off?
Senator Tom Carper (D-DE), chairman of the Postal Service oversight subcommittee, reacted to the inclusion of provisions on the Postal Service in the President's budget with the following statement on February 14.
"I welcome the Administration's engagement in the effort to stabilize the Postal Service's precarious financial situation. The President's proposal to reduce the Postal Service's retiree health care payment due this year and to refund, over a period of time, nearly 7 billion dollars in over payments to the Federal Employees Retirement System, is an important first step. However, more clearly needs to be done in order to address the Postal Service's long term fiscal problems. We need to address the Postal Service's massive overpayments to the older Civil Service Retirement System. We also need to make sure that the Postal Service has the resources it needs to meet its future retiree health care obligations. Putting the Postal Service back on stronger financial footing is something I've been trying to do for a long time now, and I plan to reintroduce comprehensive postal reform to enact these necessary changes. I hope my colleagues and the Administration will join me in pushing for this much needed reform so we can prevent the Postal Service from going broke by the end of the year."
Senator Collins Introduces Postal Reform Legislation
Senator Susan Collins (R-ME), ranking member of the Postal Service oversight committee, introduced the "U.S. Postal Service Improvements Act of 2011" on February 15. Senator Collins released the following statement when she introduced the bill.
Washington, DC - Senator Susan Collins, Ranking Member of the Senate Homeland Security and Governmental Affairs Committee, today introduced legislation to help the U.S. Postal Service (USPS) regain its financial footing as it adapts to the era of increasingly digital communications. The "U.S. Postal Service Improvements Act of 2011" would help the USPS achieve financial stability and future cost savings without undermining customer service.
"The Postal Service is at a crossroads," said Senator Collins. "It must embrace fundamental change. The Postal Service must take actions to reduce overhead costs, curb no-bid purchasing, bring workforce benefit structure into line, and better serve customers to expand volume. My legislation would help spark new life into the Postal Service as it evolves and maintains its vital role in our nation's economy. I am grateful for the support of so many stakeholders for my bill, and I look forward to working with them and my colleagues as the legislation progresses."
The Postal Service is the linchpin of a $1 trillion mailing industry that employs approximately 7.5 million Americans in fields as diverse as direct mail, printing, catalog production, paper manufacturing, and financial services.
The financial state of the Postal Service is a concern due to a number of factors - some out of the control of the USPS and others a result of its own management. The recession, high operating costs, and the increased use of digital communications have challenged the Postal Service's ability to remain financially viable. The Postal Service lost $8.5 billion during the past fiscal year. In addition, many of the recent proposals of the USPS to save money could have the effect of further driving away its customer base, the opposite of what the USPS should be doing to attract and maintain customers
Senator Collins' bill would fix the overpayment by the Postal Service to the Civil Service Retirement System, estimated to be more than $50 billion, as well as the approximately $3 billion it has overpaid into the Federal Employees Retirement System. This legislation would direct the Office of Personnel Management to correct the methodology for calculating Postal Service obligations to these pension funds and would greatly improve USPS's financial condition.
"The bill would set in motion a process that would definitively and equitably correct the actuarial errors, and overcome the administrative roadblocks, that have burdened the Postal Service and its customers with unfairly high pension-related costs," said James R. Cregan of the Affordable Mail Alliance. "These provisions, if enacted, would go far toward ensuring the future viability and affordability of the national postal system upon which we all depend."
The legislation also would improve the Postal Service's contracting practices, and help prevent the kind of problems recently uncovered by the Postal Service Inspector General, which include contract mismanagement, ethical lapses, and financial waste.
"I am also concerned that the federal and postal workers' compensation program has morphed into a higher-paying alternative to federal and postal retirement," said Senator Collins. "From July 1, 2009 to June 30, 2010, the Department of Labor paid approximately $2.78 billion to employees on workers' compensation, including about $1.1 billion to U.S. Postal Service employees. This program must be reformed."
Senator Collins is proposing several provisions that would enhance efficiency and reduce costs including one to lessen workforce-related costs by converting employees on long-term workers' compensation to retirement when they reach retirement age. This is a common-sense change that would significantly reduce expenses that the Postal Service cannot afford to sustain.
"I want the Postal Service to survive and thrive," concluded Senator Collins. "This valuable and viable American institution with roots in our Constitution must be put back on steady course."
A list of supporting organizations follows:
Alliance of Nonprofit Mailers
American Catalog Mailers Association
Coalition for a 21st Century Postal Service
Greeting Card Association
Magazine Publishers Association (MPA)
National League of Postmasters
National Newspaper Association
National Postal Policy Council
PostCom (Association for Postal Commerce)
Postal Service 5-Year Loss Projection Improves
In March 2010 the Postal Service projected its total projected ten-year loss to be $238 billion if it conducted business as usual and received no legislative relief. The projected five-year loss under the same scenario was $86 billion. Fortunately business as usual has not been the order of the day since that time.
The Postal Service lowered that projection to a $43 billion loss over five years with initiatives planned in March 2010. And now the Postal Service has further lowered the five-year loss projection to $28 billion with further management initiatives that include:
Network reductions affecting plants and post offices.
Administrative reorganization.
New labor contracts.
Transportation improvements.
Despite these improved projections the Postal Service remains in financial crisis. It projects losses of $6.4 billion in FY2011 (ends on September 30, 2011) and $7.5 billion for FY2012. Unless legislative or administrative (President directs OPM to fix CSRS overpayment) is provided, the Postal Service will be unable to meet its financial obligations at the end of this fiscal year.
Alixe Johnson To Retire From Postal Service
In a decision that surprised her many friends in the postal community, Alixe Johnson has decided to retire from the Postal Service at the end of this month. It will be hard to imagine National Postal Forums and MTAC meetings with Alixe behind the scenes.
Ms. Johnson joined the Postal Service in the late 1970s at headquarters in Washington and subsequently moved to Chicago with her husband. She left the Postal Service for a period to begin raising a family, but later returned to work for the Service in Chicago.
Recognized as extremely bright and able, Alixe was recruited to return to Postal Service headquarters in Washington.
Ms. Johnson was pleased to see the Postal Service establish a scholarship program in the name of her mother, Rita Lloyd Moroney, who served as the Postal Service Historian from 1973 to 1991. The Rita Lloyd Moroney Awards provide two annual prizes for scholarship on the history of the American postal system.
Alixe Johnson's 30-year career in the Postal Service was marked by extraordinary performance, grace, and wit. She and her husband plan to move back to Chicago