Wednesday, October 19, 2011

Publishers face rate increase and a iffy partner in the USPS; industry objects to current postal reform proposals

Yesterday's announcement that the USPS would be raising its rates by 2.133 percent was hardly unexpected by publishers. Everyone knows that the post office is losing billions each year, after all.

But a rate increase won't help the USPS anymore than another meeting between French President Sarkozy and German Chancellor Merkel won't solve the Eurozone crisis – real action is what is needed.

Right now Republicans and Democrats continue to fight over USPS reform: one side wants to raise the premiums for USPS employees and allow the USPS to significantly raise its prises, while threatening to restructure labor agreements (austerity), while the other side wants to allow the USPS to get into other services and correct its over payments to employee retirement accounts (growth and austerity). You can guess which parties support which positions – but that is really not very important since nothing is getting done anyway.

As it stands now, the Republicans in the House have gotten a Postal Reform bill through the Oversight Committee, but strictly on a party line vote. That means the bill should eventually pass the full House, but then we have the Senate (where Senator John McCain (R-AZ) has introduced a companion bill).

Today The Association of Magazine Media (MPA) reacted to the report issued last week that looked at Periodical costs. The MPA "strongly" disagreed with the study's findings and expresses concern about the possible elimination of the Periodicals Class. Most importantly, the MPA is obviously concerned that the USPS might significantly raise the rates paid by publishers, so called "captive rate payers", in order to subsidize rates in area were the USPS competes for its business, such as express mail.
A systemwide rate cap would leave captive rate payers completely at the mercy of USPS monopoly power. The Postal Service could increase prices on disfavored classes (particularly those, such as Periodicals, that represent only a small percentage of total mail volume) as much as it wished, as long the USPS offset this by increasing prices on favored classes by less than inflation (or reduced those prices outright). USPS could gouge captive mailers, all the while retaining its monopoly powers, including its legal monopoly over the mailbox.
If you are not familiar with the Republican proposal that cleared committee the summary can be found after the jump.
Summary of the H.R. 2309, the Postal Reform Act, as Amended

Prevents Taxpayer Bailouts: plan delivers an efficient, effective Postal Service without the thinly-veiled taxpayer bailout proposed by other bills and thoroughly denounced by the Government Accountability Office.

Modernizes Delivery Standards: the Postal Reform Act saves an estimated $3 billion a year by giving the Postal Service the option of eliminating Saturday delivery six months after the enactment of the legislation. According to polling by Quinnipiac University, 79% of the American people favor moving to 5 day delivery in order to restore the Postal Service to solvency.

Normalizes Rates: phases out many special rates for certain customers that force the Postal Service to actually charge certain customers less than the true cost of delivery, while preserving the ability for non-profits to fundraise and communicate with a mass audience in an economical manner.

Ends Special Treatment for Political Parties: the legislation eliminates the ability of the national and state political committees to use the non-profit mail rate.

Shares Sacrifice in Post Office Consolidations: Empanels a BRAC-style two-year task force, directed to recommend a plan to consolidate redundant post offices - saving at least $1 billion a year, excess mail processing faciliites - saving at least $2 billion per year - and the 30% of management facilities. The legislation ensures that small post offices that do not cost much to operate but serve isolated areas are maintained in order to preserve universal service. Under current closure rules, rural post offices are unfairly targeted by strict formulas on foot traffic that fail to account for community impact. The legislation also preserves appeal rights for citizens affected by post office consolidation.

Normalizes Pay & Benefits: mandates that postal workers pay at least the same health and life insurance premiums federal workers do, and clarifies that compensation parity with the private sector is maintained.

Establishes a Restructuring Authority to Turnaround Postal Defaults: when the Postal Service fails to pay its bills for more than 30 days, a receivership-style authority takes over for USPS management with an explicit mandate to cut costs while maintaining universal service. Management is replaced if they cannot successfully restructure Postal Service finances. Restructuring will be financed with an up to $10 billion line of credit that must be fully collateralized by postal facilities. The restrucutring authority will have the ability to make policy changes to cut costs as well- for instance- by moving from expensive door delivery to curb or clusterboxes in neighborhoods, the Postal Service will save $3.5 billion annually, while maintaining to the greatest extent possible door service in poor, densely populated, and historic neighborhoods. The solvency authority will also have the ability to remove postal workers from the expensive federal workers compensation system to be placed in their own.

Enables Postal Service to Pursue New Revenue: even though the Postal Service is supposed to act like a private business, it can't make money from selling advertisements. The Issa-Ross Postal Reform Act allows USPS to sell advertising space on vehicles and facilities, as long as the ads respect the Postal Service's integrity.

Offers an Affordable Payment Plan for Retiree Health Care Benefits: Allows the Postal Service to make the retiree health care funding payment they can make this year, roughly $1 billion, and pay the balance in equal installments in Fiscal Year 2015 and Fiscal Year 2016.

Surpluses in Pension Accounts to Facilitate Workforce Rightsizing: Provides for consideration of using a net surplus in all Postal Service pension accounts to fund the cost of reducing the size of the postal workforce. This provision protects taxpayers by ensuring that surplus funds are only accessible if there is an actual net surplus in all accounts.

No-More No-Layoff Clauses: No-layoff clauses are prospectively barred in Postal Service collective bargaining agreements. For employees who might lose their job, they will receive a hiring preference at Postal Service contractors. Postal employees would be subject to the same Reduction-in-Force authority as the rest of the federal workforce.