Postal Reform Legislative Status
Federal legislation directly impacting the printing and mailing industries and their clients came out of Senate committee as this article is being written on a 15-1 vote. Executive Vice President for Public Policy for PIA/GATF Ben Cooper expects the House to take a vote on their version shortly after they've had the chance to study the Senate version. This would be after the July 4 congressional recess.
Both the House and Senate versions of the Postal Reform bill have two vitally important elements for printers and mailers emphasized Mr. Cooper. These are " enhanced work share activity and hard caps on future rate increases tied to the consumer price index."
Adamantly opposed by the postal union, the APWU, work share discounts are offered to mail processors who perform extra processing or logistical tasks. These extra functions either streamline the automated processing of the mail through the USPS high-speed equipment or deliver the presorted mail deeper into the mail system and closer to the ultimate direct delivery unit. The APWU argues that these discounts exceed the actual costs incurred by the post office when members of the APWU perform these functions in house.
Late this spring in the trade press RR Donnelley announced the opening of their huge (over 600,000 square foot) mail processing facility in Illinois. This may be the largest such private sector entity in North America. This plant will have unique economy of scale opportunities to get involved with even more work sharing projects with the postal discounts being shared with their clients. These clients will obviously be publishers but may also be mid-sized printers who want to help their own clients to realize improved logistics while enjoying some postal cost savings.
Future postage rate increases capped off by the consumer price index means that mailers and printers and their clients will know what their worst-case scenario might be. This is no small advantage in budgetary planning! The difference between the Senate "hard" caps and House "soft" caps on rate increases is simply the wording around the exceptions to this element. The "hard" caps are much more restrictive with fewer possible loopholes, such as the Anthrax scare. The bill also allows the unused portion of the CPI index for any given year to be banked as an incentive not to max out a rate request hike when it is not needed for fear of loosing some segment all together. Mr. Cooper expects these differences to be worked out adequately.
Currently the first year subject to the CPI cap would be 2008. This delay might allow a "catch up" year in 2007, which no one wants. An undesirable catch up year might allow another rate hike which in essence could build up the base from which all future CPI hikes would be based.
Additionally the law stipulates more regulatory oversight of the USPS. For example, today under the 1970 postal law there is no methodology for vendors to complain formally about regulatory initiation or enforcement by the USPS. The sentiment is that the USPS should not be able to make regulatory changes without a review process.
Of lesser importance to the printing industry is a stipulation that the USPS financial reporting should follow the Securities and Exchange type of requirement referring to financial transparency.
The one sticking point that still exists in this legislation is between the White House and Congress. Congress wants to restore the military retirement obligation for USPS employees back to the US Treasury where it was until 2003. The White House wants this expense to be covered by postal ratepayers. Mr. Cooper feels that this too will reach a negotiated settlement.
One of my previous articles addressed the USPS' spring '05 requested rate hike of 5.4%, which would go into effect no earlier than January 2006. The overwhelming purpose of this increase is to raise funds to pay this potential retirement obligation. If the law is passed to remove the military retirement obligation from the USPS, there really is no justification for any rate bump.
The last rate hike was 2001. Or stated another way postal rates have remained constant for four years now. The recently released USPS year-to-date (October 1, 2004 through May 31, 2005) financial results of all classifications of mail volume, revenue and profits were up nicely above the USPS budget expectations. The "standard mail" classification led the way with a 6.1% absolute increase over the same period last year. This classification is where all direct mail falls and therefore is most essential to the printing industry. Year to day net income is $1.85 billion or $1.35 billion over planned budget. The complete USPS fiscal report is available from: http://usps.com/financials/_pdf/FY2005_May2005.pdf
It is ironic that the USPS does not seem to understand the basic precept of supply and demand. That is, if you increase price, demand cools off. Hold prices steady and offer standardized processing discounts for incremental volumes and both demand and supply climb.
The industry's wish list of what might have been considered by Congress to improve the postal service even more substantially is now really a mute point. What should not be taken for granted by the printing and mailing industries is the unusually successful effort at pulling together more than a hundred different major concerns and associations who have a vested interest in this Postal Reform legislation. It has been absolutely essential that the elected officials hear "one voice" about these critical issues. This group has been getting together by conference call and e-mail every Monday to stay current on Congressional committee positions and considerations for their follow up either with their own constituencies or Representatives. Ben Cooper has played a significant leadership role at "herding these cats" into a cohesive choir and facilitating this weekly communiqué.
