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Mag Industry Weighs in as USPS Bill Clears Another Hurdle

Eliminating 6-day delivery, closing facilities will be more challenging.



By TJ Raphael
04/26/2012

 

A concentrated effort to save the United States Postal Service [USPS] from complete financial collapse advanced in the U.S. Senate Wednesday—the bill, which will now head to the House of Representatives, will make it harder for the USPS to close facilities and eliminate a 6-day delivery cycle.

In addition to making broad service changes more difficult to implement, the legislation (S.1789) would allow the USPS to deliver new products and services, preserve overnight delivery standards and secure a refund of up to $11 billion that the USPS overpaid to the Federal Employees Retirement System [FERS], among other things.
 
While service frequency and availability is one of the most watched aspects of postal reform by the magazine industry, Tom Carpenter, American Business Media’s [ABM] chief legislative lobbyist with the firm Wexler and Walker, says that is not the only aspect the periodicals industry should be watching.
 
“Postal reform is desperately needed—the postal service has been loosing money hand over fist and is really outsized for the kind of mail volume they have,” says Carpenter, who adds that some estimates show the ratio is two-to-one when it comes to the size of labor force and facilities when compared to actual mail volume. The USPS system, he says, is built for about 300 billion pieces of mail annually, with the current number of actual pieces falling around 160 million.
 
Labor costs account for about 80 percent of USPS expenses, according to Carpenter. The S.1789 bill, which is sponsored in this house by Joe Lieberman (I-CT), would allow the USPS to use a portion of the FERS surplus to provide cash buyouts and other incentives for up to 100,000 USPS workers to voluntarily retire or leave the system, saving an estimated $8 billion each year.
 
“To be a viable service, periodicals need service standards that they can count on so the USPS needs to do that in an orderly way, which is our bottom line,” he says. “We’re happy and very excited to get a bill out of the Senate, which is a huge hurdle with regard to what we’re talking about these days. The fact that a bill has been reported out is great news. But the Senate bill is weaker than we would like in terms of reforms. ABM fought hard to make sure if a lot of the reform provisions would be stripped out that they weren’t going to turn to mailers to pay for those. We pushed back very hard when rates were raised and we fought against amendments and ultimately we prevailed and we’re pleased.”
 
Legislative Likelihood?
 

The newly advanced Senate bill does not include rate increases, and does not burst a price cap that ABM helped to fight for almost six years ago. While the industry can let a sigh of relief slip, the likelihood of seeing S.1789 passed by the whole Congress, and then signed by President Obama, is still unclear.
 
“I’ve been telling ABM we’re kind of at halftime in the process right now,” he says. “The House bill is significantly stronger in terms of reforms, but it also can be seen as a bit of a slash-and-burn type of bill. Ultimately, we’d like final legislation to be a bit stronger than what came out of the Senate, but also manageable from the standpoint of mailers—they need to see long-term sustainability and viability from the USPS. We also want predictability. In 2006, the price cap allowed us to know what our increases would be—you couldn’t have drastic variations within a class of mail, allowing for stability.”
 
Periodicals are considered an “underwater product” because the Postal Regulatory Commission says that they only meet approximately 75 percent of their attributable costs (what it costs USPS to deliver them). Carpenter says the industry doesn’t believe these numbers are accurate because periodicals get tagged with a lot of the excess labor and facilities costs within USPS.
 
Given the financial condition of the USPS, a lot of policymakers think that rates for any “underwater products,” Carpenter says, should immediately or quickly be brought up to cost coverage so the USPS can get more revenue. This would mean an immediate 25 percent increase to get periodicals up to 100 percent, but most of the provisions Carpenter has seen would add a 5 percent surcharge annually until an “underwater product” reached 90 percent cost coverage. This would be on top of normal CPI increases, meaning annual increases for periodicals would be around 7-8 percent for 3-4 years in a row.
 
The deal Carpenter helped to strike in both the House and Senate, at this point, is at a delay in the implementation of any underwater surcharges—2 years in the House and 3 years in the Senate from the date of enactment—and then a study at the end of the delay period to examine if the underwater products are indeed forced to carry some of the excess capacity costs. Once that determination is made, the underwater surcharge would be no more than 2 percent annually on top of CPI increases until a product reached 90 percent as determined by the methodology of the study.
 
Carpenter won’t know the shape of the final deal until the bill is conferenced and sent to the President, but he is hopeful. “It’s not likely that you’ll see a Democratically controlled Senate pass a bill that’s really hard on organized labor,” he says. “I think Senate action beefs up the chances to get a real reform bill. In early April, I was fearful that the longer this waited, and the closer we got to the presidential election, you’d see a sort of ‘kick-the-can’ bill. I’m hopeful that the Senate action will push the House to move on their bill in the next month or so and get a bill done by the summer before we get to the crazy election period.”
 
Despite the fact that Carpenter thinks the moment to make substantial change within this system may be on the horizon, Postmaster General Patrick R. Donahoe seems to still believe this effort would actually attribute to a “kick-the-can” effort, as Carpenter mentioned.
 
“Today the Postal Service incurs a daily loss of $25 million and has a debt of more than $13 billion,” Donahoe says in a news release. “Based on our initial analysis of the legislation passed today, losses would continue in both the short and long term. If this bill were to become law, the Postal Service would be back before the Congress within a few years requesting additional legislative reform.”

By TJ Raphael
04/26/2012







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