This article originally appeared in the March/April issue of Mailing Systems Technology.
The House Oversight and Government Reform Committee wasted little time to introduce postal reform legislation into the new Congress. On January 31, 2017, H.R. 756 —The Postal Service Reform Act of 2017 — was entered as a new bill.
A push was made at the end of 2016 during the lame duck session of Congress to get a postal reform bill passed (H.R. 5719). However, delayed scoring by the Congressional Budget Office (CBO) left little time to generate the support needed to bring the bill to a vote.
Generally, when a session of Congress completes, any unfinished bills are lost and any effort in the new Congress begins anew. This was not the case for postal reform, as H.R. 756 is very similar to the bill that successfully passed out of subcommittee in the previous session of Congress. The bill, as introduced, seeks to create a balance between cost relief, accountability, and service performance.
The subcommittee quickly held an official hearing on H.R. 756 which occurred on February 7, 2017. The hearing included participation from Postmaster General (PMG) Megan Brennan, Postal Regulatory Commission (PRC) Chair Robert Taub, Government Accountability Office (GAO) Director of Physical Infrastructure Lori Rectanus, National Association of Letter Carriers (NALC) President Fredric Rolando, and Coalition for a 21st Century Postal Service (C21) Manager Art Sackler.
The testimony reflected broad support from the various stakeholders participating in the hearing. Given the excessive amount of USPS unfunded liabilities, few can argue the need for postal reform legislation to ensure the viability of the Postal Service and the larger mailing industry.
H.R. 756 continues to include several core changes:
· Modifications to USPS retirees’ health care benefits, including using Medicare and the use of Postal Service-specific demographics to greatly reduce the USPS current unfunded liabilities.
· While there are still no active board of governors since December 2016, the bill would reduce the number of presidentially appointed governors from nine down to five.
The hearing covered several topics that the mailing industry will need to watch carefully:
· The bill permanently brings back half of the expired temporary exigent surcharge. If the bill is passed as introduced, it will allow the Postal Service to do a one-time increase of 2.15%. It is likely this would be implemented as quickly as the USPS could get the price change officially approved by the PRC. In theory, this could occur as quickly as 90 days after the bill is passed into law.
· PMG Megan Brennan made it clear that the USPS is looking for more than just the proposed postal reform legislation in H.R. 756.
o The PMG noted that ideally, the USPS would like to see the full 4.3% exigent surcharge permanently brought back but did acknowledge a lack of support from the mailing industry.
o The PMG also noted the need for a favorable outcome to the 10-year rate review that the PRC is currently conducting. When asked what would define “favorable,” it was defined as removal of the current Consumer Price Index (CPI) cap on market dominant products.
The one-time 2.15% price increase combined with the removal of the CPI cap on market dominant products sends a pretty clear signal that the Postal Service wants the ability to raise postage prices more than CPI. This is concerning because any increase that exceeds CPI creates unpredictability in postage prices. That could potentially have a significant impact on mail volumes by increasing the push to electronic diversion and further impacting the mailing industry that is still struggling to recover from the volume losses of the last recession.
While the industry has shown the willingness to swallow a one-time 2.15% price increase, the CPI cap has provided the mailing industry stable and predictable postage prices. This value needs to be proactively communicated to the PRC in the 10-year rate review to prevent a cap-based system from being eliminated. Now is the time to leverage the industry association membership(s) you belong to and ensure the USPS objectives are balanced with the needs of the mailing industry to create a win/win environment for everyone.