Anyone reading the postal press may encounter references to “postal reform” and whether it will ever happen. People not in our industry may wonder just exactly what “postal reform” is and why its future is such an issue. Answering all this briefly may not be easy, but here goes.
The Postal Reorganization Act of 1970 replaced the cabinet-level Post Office Department with the Postal Service, which was to be a self-supporting service operated in a business-like manner. The act also established a cost-of-service pricing model under which the agency would file for higher prices to cover growing costs, and the independent Postal Rate Commission (PRC) would conduct a lengthy proceeding to review the request and issue a determination.
Toward the end of the 20th century, changes in the Postal Service’s business environment were inspiring calls for changes to the law — “reform” of the agency’s charter. After several unsuccessful efforts, postal reform legislation (the Postal Accountability and Enhancement Act, or PAEA) was passed in 2006. Among other things, that law split USPS “products” into market-dominant (First-Class, Periodicals, Standard Mail) and competitive categories, the latter consisting primarily of package and expedited services. For the market-dominant classes, the 2006 law replaced the cost-of-service pricing model with a new regime that, generally speaking, limits rate increases to an amount tied to the cost of living index (CPI), in turn forcing the USPS to control costs and seek operational efficiencies. The nine months of litigation under the 1970 law were replaced by a shorter review process under which the re-chartered PRC would ensure that USPS price changes complied with the CPI “cap.” Even greater pricing latitude was afforded the Postal Service for its competitive products.
However, the 2006 law also included a provision requiring the USPS to fully prefund about 75 years of future retiree costs, and to do so over the following 10 years; this translated into annual payments of $5.5 to $5.8 billion per year. Any chance the Postal Service had of making such payments quickly evaporated; the “mail happens” era was ending, diversion to electronic media was beginning, and the recession severely depressed spending on mailed advertisement, magazine subscriptions, and transactional mail. By the time the scheduled payments ended, the USPS had exhausted its borrowing authority ($15 billion), defaulted on most of the payments, and was struggling to align its sprawling retail, delivery, and processing infrastructure with mail volume (and revenue) that had fallen more than 25% over the past decade.
Even aside from the effects of the recession, USPS finances became mired in red ink as the sharp decline of hard-copy mail constricted a vital revenue source while its prefunding obligations remained. Meanwhile, the growth of e-commerce revitalized the USPS package business, but that revenue was partly offset by higher handling and delivery costs. These changes in the agency’s business environment led many observers to conclude that the 2006 law needed to be revised, but getting consensus from the major stakeholders (the USPS, the postal labor unions, and the mailing community) was a major challenge — and Congress wouldn’t act without it. At this point, only a few reform provisions have broad support — primarily ending the prefunding requirement — while other substantive proposals, such as five-day delivery, removing the CPI-cap, or reforming health care funding, have met resistance from one or another interested party.
Postal reform bills have been filed in both chambers of Congress, but neither has made significant progress. A House bill was filed early in 2017 and quickly reported out of committee, but has gone nowhere since; a Senate bill, filed last spring, has yet to be reviewed by the committee of jurisdiction — and neither has a champion. Given that any bill would need to be passed in identical terms by both chambers, then signed by the president, before it would become law, the odds of any current proposal being enacted are slim, especially since the Congressional calendar offers little opportunity for action — the elections (and preceding campaigning) are just around the corner. Moreover, any legislation still pending when the current Congress ends will be dead, so any reform proposals would need to start afresh once the new (116th) Congress is seated next year.
Of course, in the world of politics, the future is always unpredictable, and a provision thought to be dead suddenly can be attached to another piece of legislation and enacted. Barring such a miracle, though, the future of postal reform — at least for now — isn’t all that bright.
Leo Raymond is the owner and managing director of Mailers Hub, which is dedicated to providing information, resources, training, and expert advice to support mailing service providers and help them succeed. He can be contacted at email@example.com.