Hey, Postal Service: “What’s the Big Deal?”
Filed under: APWU, postage rates, postal, postal news, press releases, usps
Press Release From Affordable Mail Alliance
Union Challenges Existence of Postal Service Financial Crisis
Washington, DC – Underscoring the recklessness of the massive rate increase proposed by the United States Postal Service on July 6, American Postal Workers Union President William Burrus made clear on Friday that his Union does not believe the Service is currently in an unprecedented financial position. He made it clear that the Union will not back away from its contract demands during the current round of negotiations with the Postal Service, despite its supposed financial crisis. This furthers the case against the Postal Service request for a rate hike 10 times the rate of inflation.
“Mail volume is depressed and revenue is down, but we have faced similar circumstances before,” President Burrus said. “The history of the Postal Service is replete with forecasts of doom and gloom.” Click here to read or view President Burrus’ full statement.
A law passed in 2006 limits postal rate increases to the rate of inflation except when “extraordinary or exceptional” circumstances make a larger increase necessary for the Postal Service to continue operating “despite best practices of honest, efficient and economical management.” The Consumer Price Index has gone up less than 1 percent in the past year, the USPS is proposing rate increases of 10 times that rate. The Postal Service claims that its losses result from the “exigent circumstances” of the long-forecast recession and the long-term loss of mail volume to the Internet.
Also opposing the rate increase proposal is the Affordable Mail Alliance, an unprecedented coalition of more than 1,000 postal customers and trade associations representing the majority of the mail sent in the United States, who have joined together to strike down the rate hike. The Postal Service’s projected shortfalls are not the sole result of the recession or the increased use of the Internet, but the Service’s long-standing failure to control its costs. These chronic problems do not qualify as “exigent” circumstances under the law. Until the Postal Service deals with these long-term problems, any demands for above-inflation rate increases – in effect, a new tax on customers – is unwarranted and unproductive, and will likely drive away customers while exacerbating the Postal Service’s problems.
That is the central case put forward in multiple filings by the Affordable Mail Alliance with the Postal Regulatory Commission, the independent body that will decide early next month whether to allow the proposed rate hikes to take effect.
“President Burrus’ statements confirm that the Postal Service’s current condition is not the product of a sudden crisis,” said Jerry Cerasale, Affordable Mail Alliance spokesperson and Senior Vice President, Government Affairs of the Direct Marketing Association. “This is yet more evidence that a rate hike 10 times the rate of inflation is unnecessary and unproductive – for postal customers and the Postal Service itself. Such a rate increase would delay the cost controls and other reforms that are long overdue.”
He added that the Postal Service needs to do what most American businesses have been forced to do in the past few years: to make better and tougher decisions, offer services customers need, address workforce problems, and cut back on needlessly high spending.
More on the Affordable Mail Alliance
The Affordable Mail Alliance is an unprecedented coalition of postal customers who have come together to say “enough is enough” – no more postal rate hikes. The coalition includes charities, consumer groups, small business, national retailers, utilities, banks, insurance companies, Fortune 500 companies, and the customers who use the Post Office every day. The members represent many of the Postal Service’s biggest customers—and many of its smallest—and use every major class of mail. It is this cross-section of America that will suffer if USPS raises rates. For further information, please visit www.affordablemailalliance.org or contact Jessica McCreight at jmccreight@SKDKnick.com or 202 464 6900.
Affordable Mail Alliance: Don’t Allow the USPS to Continue Costly Business Practices
Filed under: postal, postal news, PRC, press releases, rate increase, usps
Businesses and Non-profits cannot afford to Pay for the Postal Service’s Excessive Costs
Washington, DC – The Affordable Mail Alliance – a growing coalition of non-profits, Fortune 500 companies, small businesses, major trade associations, consumer groups, and citizens representing the vast majority of the mail sent in the United States – filed comments urging the Postal Regulatory Commission to help rein in the USPS’s excessive costs by denying the proposed rate hike.
“The Post Office needs to reevaluate their approach,” said Jerry Cerasale, Affordable Mail Alliance Spokesperson and Senior Vice President of the Direct Marketing Association. “Instead of trying to keep things afloat with a giant tax on consumers, the USPS should focus on improving management and controlling costs to get out of this mess. To do otherwise is just bad business.”
This is the Alliance’s final legal step before the PRC announces their decision on October 4.
The comments also highlight the Postal Service’s flip-flop on the cause for their request. The USPS previously claimed that such a severe rate increase was needed to alleviate an immediate and unforeseen cash crisis. But at the public hearing held on August 10, a top official admitted that the “crisis” would not prevent them from operating in their current fashion for at least the next year. The Postal Service now claims that the rate increase is needed to prevent a longer-term profit slowdown over the next decade.
“Our comments make the same case that businesses and working families are making all over the country,” said Cerasale. “The Postal Service’s proposed rate hike is unreasonable, unhelpful, and unlawful, and the more than one thousand members of the Alliance are not going to let the Postal Service take advantage of its customers.”
The comments reiterate what the Alliance has argued all along – that the Postal Service has failed to show that it would suffer from its projected losses if it followed “best practices of honest, efficient and economical management,” and has failed to meet the “extraordinary or exceptional” circumstance test of the 2006 Postal Accountability and Enhancement Act. The increase thus should be rejected, especially at this time of economic uncertainty for America.
Senator Susan Collins (R-ME), a key author of the 2006 law, has supported the Alliance’s position. In her statement following the Postal Regulatory Commission hearings, Senator Collins said that the law being cited by the Post Office was intended for use in circumstances such as natural disasters and terrorist attacks. The Post Office’s “failure to sufficiently update its business model,” she said, was not sufficient for special consideration.
Formed in response to the US Postal Service’s July 6th announcement that it would seek to raise rates far beyond those currently allowed by law, the Affordable Mail Alliance grew from a small group of concerned USPS customers to a membership of over a thousand in less than two months. The Alliance has been gaining momentum in the wake of recent Postal Regulatory Commission Hearings, and this most recent action provides a strong argument to the PRC in advance of its coming decision on the issue.
Related link: Affordable Mail Alliance Document Submitted to PRC
Postmasters: PRC Denial Of Rate Increase Could Compel USPS To Cut Services Provided To American Public
Filed under: NAPUS, postal, postal news, Postmasters, PRC, rate increase, usps
National Association of Postmasters of the United States (NAPUS) submits the following comments in support of the Postal Service’s July 6 request of the Postal Regulatory Commission to approve a rate adjustment due to “extraordinary or exceptional circumstances:
It would be shameful if those who argue for furloughs would have the unintended consequence of advocating against our veterans.
Since enactment of PL 109-435, global and domestic economic conditions have deteriorated sharply. In fact, 2005 was the last year in which the United States Gross
Domestic Product (GDP) exceeded 3%. While the normal business cycle experiences economic waxing and waning, the ongoing financial turmoil is quite different. As of yet,
our country is still languishing in a unrelenting recession. In fact, over the past three years, the Congress and two successive Administrations felt the necessity to take drastic
steps, attempting to stabilize the economy. As illustrated by falling mail volume and revenue decline, the Postal Service is not immunized from these dire economic
circumstances. Furthermore, the statute does not state that the circumstances must be unique to the Postal Service to prompt an exigent rate case.
A number of intervenors have commented that the private-sector institutions were able to ride out the recession through retrenchment, radical structural and pruning labor costs.
For the most part, these private-sector profit-maximizing strategies are unavailable or improper in a governmental public service agency. The Postal mission is to maximize
service to the American public. Moreover, the Postal Service must comply with a series of statutes and regulations (e.g., veterans’ preference, pre-funding retiree health benefits,
fully funding retirement benefits, and the universal service obligation); those who urge the Postal Service to freeze, furlough and fire are exempt from these requirements.
A number of intervenors and commenters have suggested that the Commission should reject the Postal Service’s request, since the federal agency has not exercised such cost-cutting strategies as freeze, furlough and fire. Those who have associated with these views have a total disregard for the impact on the service provided to the American
public, the affect on the postal workforce, and the long-term implications for the future of the Postal Service’s universal service obligation.
The intervenors seem to overlook the huge decline in postal employment over the past decade. The agency has shed more than 164,000 positions and this represents an almost
21% decline since fiscal year 2000. The Commission should recognize that “Reductions-in-Force”, within the federal government, are subject to various statutes, which among
other safeguards, protecting former members of the U.S. Armed Forces. It would be shameful if those who argue for furloughs would have the unintended consequence of
advocating against our veterans.
Unlike private sector companies that have undergone recession-necessitated retrenchments and initiated sizeable layoffs, the Postal Service provides a vital and
constitutionally mandated public service. Moreover, profit-driven entities, by their very nature, may be dismissive of the public-service aspect of their mission, if they have one at all. For the Postal Service, however, public service is its raison d’être; and, any action that undermines its core mission needs to be considered unfavorably.
NAPUS is concerned that the recently announced hiring freeze is undermining the capability of front-line postal managers and their employees to deliver quality services to
the mailing public. This compounds a major problem that is being experienced throughout the country, a concerted strategy to close statutorily protected Post Offices
through the abuse of the Post Office suspension process. (Last year, the Commission initiated an investigation of this abuse – PI2010-1.) In response to POIR-4, in the present
docket, the Postal Service disclosed that, beginning in fiscal year 2010, the agency estimates that 3,248 Post Offices will be without a Postmaster; the number of Postmaster
vacancies almost doubled over the past year. Additionally, in fiscal year 2010, 12% of all Post Offices would be without a Postmaster and foreshadows Postal efforts to suspend
(aka to close) those Post Offices.
Commission denial of the requested rate adjustment, in NAPUS’ view, would compel the Postal Service to wield its cost-cutting axe against service provided to American citizens,
small businesses and rural America. These are the prime constituency for which the universal service obligation was established.
NAPUS suggests that the Commission consider degradation of postal service standards (e.g., delivery standards, postal window hours, customer service, etc.) in its assessment of
the exigent rate request. To do otherwise, would force the Postal Service into noncompliance, which would only come to light when the Commission issues its ACR for
2011.
NAPUS urges the Commission to approve the Postal Service rate increase, which is necessitated by “extraordinary and exceptional circumstances.” We believe that the
current economic conditions are of such magnitude that the request is justified and that the Postal Service has striven to reduce costs, including cuts that Postmasters continue to
believe are harmful to customer service. Rejection of the Postal Service request will result in a cascade of service reductions that will utterly destroy our Postal Service.
read full document submitted to Postal Regulatory Commission
NC Postmaster: USPS Must Re-Evaluate Its Management Culture to Face Challenges Ahead
The following are excerpts of comments by North Carolina Postmaster Mark Jamison submitted to the Postal Regulatory Commission regarding exigent rate case :
The truth is that until the PRC, the Board of Governors or Congress are willing to
truly look at how those measurements are constructed, reported and managed
they will never know the true state of the Postal Service. In the Five Day case
you were given customer survey data that reflected a certain resignation on the
part of the public to a set of equally poor choices. In that case some of the
surveys asked which, given a choice of rate increases or reduction in delivery or
perhaps closure of a local facility, a customer might find preferable. The results
that were publicized clearly showed a preference for reduction in delivery days.
But was that really the choice? You have before you this exigent rate case in
addition to the reduction case. The strategic plan currently publicized by
headquarters includes several parts that are portrayed as essential in total.
Those parts include reduction in delivery, rate increases and rationalization of the
network
In recent years the Voice of the Employee surveys have been used to portray the
mind and sentiment of the work force. Yet when those surveys are administered
managers are told to instruct employees to provide either positive or negative
responses and to avoid neutral responses. Survey behavior and administration is
a well studied field. Encouraging or discouraging particular choices by an
authority figure administering a survey has certainly been shown to influence and
perhaps limit the effectiveness of the results.
The EXFC measurement system is designed to measure the effectiveness of the
delivery network. All over the country postmasters, supervisors and management
personnel have been detailed to make second trips and extra trips to deliver
missent or misdirected mail. I have personally, at the direction of my manager,
driven less than a foot of mail to an office thirty miles away at a cost of over $100
to avoid the possibility of an EXFC failure. I have gone on missions of even
greater futility, once driving an empty mail tub on a ninety mile round trip in the
middle of the night to satisfy a nonsensical protocol. These are not isolated
experiences, they occur every day all over the country. Under these
circumstances EXFC may become less a measurement of network efficiency
than a demonstration that we can develop extraordinary and wasteful protocols in
search of satisfactory numbers.
What these examples show is that the old aphorism that one measures to
manage can easily become a culture of managing to the measure. I do not cite
these examples to claim corruption or even incompetence. I do think they
demonstrate a management culture that has become a prisoner of a deleterious
institutional groupthink.
If the Postal Service is to successfully face the challenges ahead then it must be
willing to re-evaluate its culture.
Even if the Postal Service is able to resolve the issues surrounding its payments
to Treasury, even if the Postal Service is able to repair and reinvigorate its
management culture and if even if the Postal Service is able to capitalize on
some of its more promising revenue opportunities like providing last mile delivery,
it will still be saddled with a business model that is essentially unsustainable.
Following the current direction will not solve the challenges that confront the
Postal Service. The current recipes for recovery or sustainability still rely on a
bad fit between the promise of the Universal Service Mandate and a business
model that relies on downsizing. It has been argued that perhaps the Postal
Service could enter into some other businesses, that it could find additional or
alternative revenue streams.
In today’s polarized political environment there is virtually no business solution
that will offer the Postal Service sufficient additional revenues to meet future
challenges. Some countries, like Japan, assign basic savings bank capabilities to
the post office. At one time we did too but that isn’t feasible today. Neither would
it be realistic to think we could offer the Postal Service some opportunity to
compete with the private sector in some areas. We already have a rate and
regulatory structure that is far too cumbersome. The reality is that the Postal
Service has done best when it complements rather than competes with the
private sector as the example of recent successes with providing last mile
delivery for UPS and Fed Ex.
It is unlikely that we can downsize the Postal Service and still meet our goals of
universal service without ultimately being placed in a situation of requiring
increasing subsidies or rates. Mail is still an important part of the American
economy, especially for those at the lower end of the economic spectrum and
those in rural areas. Mail will continue to be important but volumes both of first
class and advertising mail will continue to decrease. Bill presentment and
payment will increasingly move to electronic alternatives and direct mailers and
marketers are in the business of selling. Their loyalty is to what works at the
cheapest prices. As data mining allows them to be more selective and mail less
for better response and as electronic and alternate media forms develop, their
businesses strategies and models will shift – one should also not discount the
possibility of do not mail initiatives returning if advertising volumes actually did
increase substantially.
Mail will continue to be important for at least another generation or two but any
model based on volume is bound to fail and if we raise rates and cut service as is
proposed we may accelerate the decline of the Postal Service without providing
for those who will need its services for years to come.
Mailers:Postal Employees Over Compensation Costs USPS And Public Needless $Billions Annually
Filed under: Benefits, mailers, postal, postal news, PRC, usps
“The Affordable Mail Alliance – a growing coalition of nearly 1,000 non-profits, Fortune 500 companies, small businesses, major trade associations, consumer groups, and citizens representing the vast majority of the mail sent in the United States – submitted further comments to the Postal Regulatory Commission yesterday. The comments focused on last week’s hearings at the Commission, where the Postal Service admitted that it is not facing an immediate cash crisis – the original rationale for demanding a rate increase ten times the rate of inflation.”
Excerpts:
The Postal Service’s August 2 Response and testimony on August 10-12 also confirm the Postal Service’s failure to show that it would face a cash crisis—or suffer any losses at all—if it adhered to “best practices of honest, efficient, and economical management.” 39 U.S.C. § 3622(d)(1)(E). The Alliance’s July 26 motion summarizes decades of official reports, from the 1968 Kappel Commission to the present, documenting the Postal Service’s inefficiencies and the uneconomic costs that result from them. Specifically:
• The Postal Service maintains an inefficiently large network of undersized and obsolete mail processing facilities. Motion at 21-25.
• The Postal Service has an oversized work force, inflexible work rules, and low productivity. Id. at 25-30.
• The total compensation of Postal Service employees—more than $80,000 per employee on average—is well above the amounts paid in the private sector for comparable work. According to the Postal Service’s own experts, this compensation premium is probably more than 30 percent. This inefficiency costs the Postal Service and the public $10 to 14 billion or more in needless costs annually. Id. at 30-34, 55-56.
The loss of mail volume to the Internet was not an unforeseeable surprise. The Postal Service had notice of this threat years before significant volume losses occurred. Id. at 35-39.
• The Postal Service’s failure to cope effectively with the 2008-2009 recession is further evidence of structural inefficiency. The average firm in the private sector saw its revenues collapse by nearly as much as the Postal Service; and many large firms saw their revenues collapse by 20 percent or more. Well-run private firms, including the Postal Service’s competitors, responded to the downturn with immediate headcount reductions and other aggressive and painful austerity measures that resulted in a return to profit relatively quickly, even while sales volume and revenue remained depressed. The Postal Service, by contrast, contented itself with a business-as-usual incremental approach to cost cutting that allowed productivity to plummet and unit costs to get further out of control. Id. at 39-55.5
• The Postal Service’s financial loss projections in this case assume no major improvements in cost control in the future. Id. at 55-57
The Postal Service has many cost-saving opportunities available to it that remain to be pursued seriously. Given the magnitude of the Postal Service’s inefficiencies, even a modest improvement could result in billions of dollars of additional savings annually. For example:
(1) The Postal Service makes much of the supposed legal obstacles to closing retail post offices. But the Postal Service cites no legal obstacles (including restrictive language in appropriations bills) to the closure of most Processing & Distribution Centers and other central mail processing facilities. Since 2005, however, the Postal Service has closed only 2 of its 270 P&DCs. “U.S. Postal Service: Strategies and Options to Facilitate Progress toward Financial Viability,” Report No. GAO-10-455 (April 2010) at 13-14, 31. Instead, the Postal Service boasts because it saved $68 million—only about 1/10 of one percent of total USPS revenues—from area mail processing consolidations (“AMPs”) in the past year. Tr. 1/60-61 (Corbett).
(2) A number of enterprises in the United States have asked their employees to reopen existing collective bargaining agreements in light of the recession. See Motion to Dismiss (Aug. 2, 2010) at 15, 45-46. Given the supposedly parlous state of the Postal Service’s finances, reopening of existing collection bargaining agreements with postal labor would be a logical step. During the August 10 hearing, however, USPS witness Corbett admitted that he was completely unaware of whether such relief would be sought. Tr. 1/100.
(3) Two of the Postal Service’s national collective bargaining agreements expire in November 2010 (with the American Postal Workers Union and the National Rural Letter Carriers’ Association), and two more in November 2011 (with the National Association of Letter Carriers and National Postal Mail Handler Union). The expiration of these agreements presents a timely opportunity to negotiate reductions in head counts, greater freedom to employ layoffs and furloughs, and improved flexibility in work rules and employee utliization. Successful negotiations could narrow, or even eliminate entirely, the forecast 10-year shortfall.
(4) The expiration of the same collective bargaining agreements also presents a timely opportunity to deal with the more than $10 billion in above-market compensation that the Postal Service concedes it pays. The Postal Service, however, already appears to have taken the renegotiation of these compensation premiums off the table. Tr. 1/120-121 (Corbett). Instead, the Postal Service appears content simply to try to reduce its share of the total cost of the health benefit packages—from the current 81% down to 72%, the percentage paid by other federal agencies. Id. Even a full nine-point reduction would save the Postal Service only about $750 million per year. This is a small fraction of the $10 to $14 billion or more in excess costs that the Postal Service incurs each year because of the existing compensation premiums. Moreover, even these limited savings would occur with halting slowness: the Postal Service does not seek to increase the employee contribution by more than one percentage point per year. Tr. 1/121 (Corbett).
At that pace, even the $750 million savings target will not be reached until 2020.
(5) The Postal Service suggests that seeking relief in arbitration from inflexible hiring and work rules and above-market compensation premiums is useless because arbitrators tend simply to rubber-stamp the status quo. USPS Response at 31-33. But the Postal Service has not invoked its right under 39 U.S.C. § 1207 to arbitrate its major collective bargaining agreements in years, and certainly not since the beginning of the recent recession. It is premature to assume without exhausting the arbitration remedy that arbitrators today would ignore the supposedly “extraordinary” and “exceptional” economic developments since the last arbitration decisions, and the desperate financial straits the Postal Service says it now faces as a
result. This is particularly so given the number of economic concessions made by unionized employees of state and municipal government employees downturn. Motion to Dismiss (July 26, 2010) at 45-46; Brophy (Consumers Union) Impact Statement. At a minimum, best practices of “honest, efficient and economical management” certainly require that the Postal Service at least exhaust its administrative remedies under 39 U.S.C. § 1207 rather than throwing up its hands and shifting $3 billion in costs annually to mailers as the stakeholders of first resort.
(6) Finally, the Postal Service’s analysis of the legal implications of the “honest, efficient and economical” standard is as inaccurate and one-sided as the Postal Service’s discussion of the facts. The notion that the standard of “honest, efficient and economical management” requires the regulator to ignore inefficiencies that result from past decisions by the regulated company (USPS response at 23-25) is contrary to precedent and would have perverse consequences. It is well-established, for example, that the standard of
honest, efficient and economical management supports the disallowance of capital investment in long-lived assets as imprudent when made, even though the investment was the result of past decisions, and is now sunk and irrevocable. Missouri ex rel. Southwestern Bell Tel. Co. v. PSC, 262 U.S. 276 (1923); Verizon Communications Inc. v. FCC, 535 U.S. 467, 485-486 (2002). Indeed, the regulator may deny a regulated company a return on a sunk longlived investment that was prudent when made but “rendered useless by
unforeseen events.” Verizon, 535 U.S. at 484 n. 6 (citing Duquesne Light Co. v. Barasch, 488 U. S. 299, 311-312 (1989)).
In any event, a very large share of the Postal Service’s excess costs is neither fixed nor sunk. Inefficient Processing and Distribution Centers, for example, can be closed or consolidated in a relatively short period. Likewise, as previously discussed, the Postal Service’s major collective bargaining agreements are up for renegotiation when they expire this year or next, even if the Postal Service is unwilling to seek to reopen them during their term.8 as well as private sector employees—including the unionized employees of the Postal Service’s customers—since the beginning of the current economic downturn. Motion to Dismiss (July 26, 2010) at 45-46; Brophy (Consumers Union) Impact Statement. At a minimum, best practices of “honest, efficient and economical management” certainly require that the Postal Service at least exhaust its administrative remedies under 39 U.S.C. § 1207 rather than throwing up its hands and shifting $3 billion in costs annually to mailers as the stakeholders of first resort.
see full pdf file submitted to PRC
Envelope Manufacturers To PRC: Rate Increase Would Do Long-Term Harm To USPS
The following is a letter submitted to the Postal Regulatory Commission by the Envelope Manufacturers Association opposing the proposed rate increase:
Re: Docket No. R2010-4, Rate Adjustment Request Due to Extraordinary or Exceptional Circumstances
August 12, 2010
The purpose of this letter is to offer our comments on the above-mentioned request that is now before the Postal Regulatory Commission. The Envelope Manufacturers Association rarely comments on rate or regulatory matters, however, we in this case, that we should provide our point of view.
Background
The Envelope Manufacturers Association was established in 1933 from two associations that were established in 1909. Since 1915, we have worked closely with the United States Postal Service. We believe that for the most part, what has been good for the United States Postal Service was also good for our industry. EMA and its sister organization, Global Envelope Alliance (GEA), have envelope companies in 38 nations and we count 11 posts in our current global membership. We regularly provide global postal assessments and a number of Commissioners have spoken at our conferences worldwide. We have great respect for the work of the Postal Regulatory Commission and know that the decision you now have before you represents more than a normal rate increase; it represents an important precedent for the future.
We were very engaged in much of the work that went into the Postal Accountability and Enforcement Act of 2006. Starting in 2002, we provided a host of studies to Congress and the Postal Service on various aspects of the need to reform the Postal Service. While we chose not to engage ourselves in rate and regulatory reform as we strongly supported the work of the mailing industry that pushed for price cap regulation, the same caps we must live under today.
Basis of Our Concerns
When Congress, with input from many of us, created a rate-ceiling mechanism that would allow prices for non-competitive products to be adjusted upward within the strict limit of the Consumer Price Index (CPI), we believed this to be a critical aspect of establishing a rate-making system that was more predictable and regular. Our understanding of the inflation-based cap was not only to restrict the United States Postal Service to these increases to provide a valuable incentive for it to improve its business model and its effectiveness, but also to give it an opportunity to generate and bank gains for future periods as well to avoid extraordinary cost increases. The Postal Service, as we understand it, has the authority under the law to raise rates every year, not to exceed the CPI cap. It chose not to do so in 2010 but it had the authority to do so and made a management decision not to do so for the same reasons we argue against this rate case today. The economy has not recovered and increasing rates at this time will have a detrimental impact on the entire postal value chain.
Besides the impact on our business activities, we think there is an important precedent here that should not be violated. That precedent is that the Postal Service must operate under the parameters that were set up in PAEA for an important reason; to incentivize the USPS to operate in a businesslike manner. If we want to have our Postal Service here in the future, it must operate its business under these parameters. We cannot return to the previous system of ratemaking.
We know that electronic diversion has been occurring for quite some time. If you go back to 2001 in the First-Class mail data, you can see the impact of this diversion, even when the economy was doing well following the recession of 2001 and 2002. We all know that economies are cyclical and while this recession was deeper than normal recessions, we adjusted our operations accordingly. We cut staff, we cut purchases and we cut benefits.
If we allow the United States Postal Service to breach the intent that was put in place in 2006, we believe we do long-term harm to ever operating the Postal Service as a business. We believe that a recession is not an exceptional circumstance under the law as we understand it, and we should not set a precedent for future generations to have to deal with by breaching an important protection for postal customers that was designed to ensure the Postal Service would be here in the future.
Summary
The Envelope Manufacturers Association opposes the Postal Service Request for a price increase based on the exigency provisions of the law. To allow this increase might offer short-term benefit, however, would do long-term harm to the need to reshape the Postal Service into a more modern, effectively functioning enterprise. We all are well aware that there are other avenues to lower Postal Service costs, primarily the overfunding of benefits, which need to be pursued before cutting services and increasing rates.
We sincerely hope you will uphold the important protections that PAEA has created and continue to do the diligent work you do to help create a postal system that will serve future generations.
Sincerely yours,
Maynard H. Benjamin, CAE
President & CEO
click here for the PDF of the letter
Newspapers Group To PRC: Reject Rate Increase But Approve Standard Mail Incentive Program
The Newspaper Association of America (“NAA”)1 hereby submits these comments on the Postal Service’s unprecedented request under the Postal Accountability and Enhancement Act of 2006 (“PAEA”) for permission to impose rate increases that substantially exceed inflation. For the reasons stated herein,NAA:
• Opposes the Postal Service’s proposed exigent rate increases because the statutory requirement of “extraordinary or exceptional circumstances” is not met; and
• Supports the Postal Service’s proposal to extend the “volume incentive” proposal in Standard commercial flats to include High-Density flats as well as Saturation flats.
The Postal Service’s request in this case rests, at bottom, on the decline in mail volume that it has experienced during the recent economic recession,coupled with financial obligations created for it by Congress in the form of overpayments towards its Civil Service Retirement System obligations and
requirements to prefund its retiree health benefits. NAA is working with other 1 NAA represents the interests of nearly 2,000 newspapers in the United States and Canada. Its members account for nearly 90 percent of the daily newspaper circulation in the United States and a wide range of non-daily U.S. newspapers. NAA members use all classes of mail, including First Class Mail, Periodicals mail, and Standard mail.
**mailers to urge Congress to rectify the statutory funding obligations, which alone could save the Postal Service more than $5 billion annually, and which would make this case entirely superfluous.
Insofar as the Postal Service’s filing stems from the loss of mail volumes over the past two years, however, NAA submits that it should not be looking to mailers to ante up even more money. First, since R2005-1, mailers have already paid some $3.1 billion annually, first into an escrow for CSRS obligations and
subsequently towards the retiree health benefit fund.
Second, the reason that the Postal Service has had less volume in the past two years is simple – mailers have mailed less due to economic conditions. In the case of newspapers, the entire industry saw substantial declines in advertising revenue, which meant less advertising both in the newspaper and in
mailed “Total Market Coverage” (“TMC”) programs reaching non-subscribers. Today, newspapers continue to focus intensely on efforts to increase revenue and cut costs. Unfortunately for the Postal Service, the higher postage rates in recent years caused many newspapers to cut costs by shifting newspaper
products and efforts away from the mailstream into other delivery options, including private delivery.2
NAA has devoted significant resources in recent years to encouraging
newspapers to make more use of the mail, and to educating the Postal Service
on how newspapers can be valuable business partners. Over the past decade,
2 The 2009 postage increase posed particular problems for newspapers, because (as
noted in more detail in Section II below) the new Standard Mail rates conferred a significant rate
advantage on Saturation mailers that compete with newspapers in the market for the delivery of
local advertising.
3 newspapers greatly expanded their use of Standard Mail, especially the High-Density and Saturation flats categories, for delivery of their TMC advertising products to households that do not subscribe to the newspaper. Raising postal rates at this time, however, could undo much of these gains. The Postal Service
could hardly think of a more counter-productive strategy than the current case, in
which it proposes to raise rates by an average of 5.6 percent (approximately five
times the rate of inflation), including increases of 8 percent for both the Within-
County and Outside County Periodicals rates paid by newspapers and aboveinflation
increases for the Standard Enhanced Carrier Route flats product.
At a time when all mailers are facing continuing economic storms, raising
postal rates by fivefold times the rate of inflation will do little but increase the
pressure on publishers to move mail away to alternate delivery. NAA has little
faith that the Postal Service’s volume forecasting methodologies, which rely on
trends over six years, have correctly adjusted to the new economic environment
spawned by the recession. NAA believes that the Postal Service’s volume
forecasts are overly optimistic, and that if the proposed rate hikes for Standard
Enhanced Carrier Route flats and Periodicals are implemented, the volumes of
those products would fall by more than the Postal Service expects.
The statutory predicate for the extraordinary relief of exceeding the rate
cap – “extraordinary or exceptional circumstances” – does not exist. A loss of
business due to an economic recession may be painful and difficult, but it is not
“extraordinary or exceptional.” Accordingly, the Commission cannot approve the
rate increases. However, the Commission can and should approve the proposed
modification to the Standard Mail volume incentive program, which would have
the effect of both retaining existing newspaper mailings and encouraging new
mailing initiatives.
I. AN “EXIGENT” RATE INCREASE IS NOT THE SOLUTION TO THE
POSTAL SERVICE’S FINANCIAL PROBLEMS
The purpose of rate cap regulation is to provide the regulated entity with
an incentive to operate efficiently. When Congress in the PAEA directed the
Commission to replaced cost-of-service regulation with a more modern rate cap
regime, it did so against a long history of the Postal Service’s chronic inability to
operate in a cost-efficient manner. Over the course of many years, the Postal
Service developed a network that has too many facilities to handle the
foreseeable volumes in an efficient manner, and has a staff that, while
appropriately and commendably reduced from its peak, still accounts for far too
large a share of the Service’s operating costs.
At the same time, Congress recognized, as is customary in price cap
regulatory regimes, that in rare and drastic circumstances it may be necessary to
raise rates by amounts larger than the CPI cap. For this reason, it crafted an
exception, allowing (but not requiring) the Postal Service to seek to raise rates by
amounts in excess of the rate cap “in extraordinary or exceptional circumstances”
where the resulting rates are “reasonable and equitable and necessary to enable
the Postal Service, under best practices of honest, efficient, and economical
management” to maintain and develop the postal services needed by the nation.
39 U.S.C. §3622(d)(1)(E).
A recession, even one as painful as the recent U.S. recession, is not what
Congress meant by “extraordinary” nor “exceptional.” It is simply a fact of
business life with which all commercial entities, whether newspapers or the
Postal Service, must deal. Nor can the financial problems associated with the
obligation to prefund the retiree health benefits be considered extraordinary or
exceptional – indeed, they were mandated by Congress in the PAEA itself and
mailers have been paying $3.1 billion annually towards those costs since Docket
No. R2005-1. The legislative history demonstrates that Congress contemplated
a drastic event and abnormal event, such as the anthrax attacks or a September
11-type event. This was recently summarized by Sen. Susan Collins (R-Maine)
in her letter to the Commission in this proceeding. Letter from Sen. Susan M.
Collins to Ms. Shoshana Grove, Docket No. R2010-4 (August 9, 2010).
Obviously nothing of that nature has occurred.
Instead of raising rates, NAA believes that the Postal Service’s financial
difficulties require a legislative solution. To this end, NAA is working with other
mailers for appropriate legislative reforms. NAA supports the elimination of the
retiree health benefits prefunding requirement, relief from the CSRS
overpayment, and better aligning of facilities with needs.
II. NAA SUPPORTS EXTENDING THE VOLUME INCENTIVE IN STANDARD MAIL TO HIGH-DENSITY MAIL
NAA supports the Postal Service’s proposal to extend the Standard Mail volume incentive program to High-Density flats mail.
A. Extending The Standard Mail Volume Incentive To High-Density Flats Is In The Public Interest
As the Commission has long understood, newspaper Total Market
Coverage programs compete directly with saturation mailers in the delivery of
advertising to homes. Newspapers deliver ads through a combination of in-paper
delivery to subscribers and by mail delivery to nonsubscribers. TMC mailings to
nonsubscribers pay either High-Density or Saturation rates, depending upon the
density on a particular route. The rate paid for a particular route can vary from
week to week as subscription levels change or as the Postal Service alters
routes.
The Saturation mail volume incentive program introduced by the Postal
Service in May 2009 conferred saturation mailers with an unwarranted
competitive rate advantage over newspaper TMC programs. Newspaper TMC
programs that primarily used High-Density rates, and had few Saturation-rated
mailings, were effectively ineligible. As a consequence, they saw the Saturation
mailers with which they competed enjoy a substantial price advantage, up to 39
percent in some circumstances.3 Newspapers believed that this rate advantage
hurt the Postal Service by encouraging third-party advertising inserts to shift from
newspaper TMC mailings (at High-Density rates) to Saturation mailers (at lower
postal rates). That would result in less revenue for the Postal Service and
transferred mail, not organic growth.
3 Under the 2009 incentive, “new” flats weighing less than 3.3 ounces entered at a DDU
paid 10.2 cents after the “credit,” 6.6 cents less than a High Density flat of the same weight.
The Postal Service now proposes to extend the volume incentive currently
in effect for Saturation flats mailers to High-Density flats. That expansion will
substantially improve the rate incentive program by making it available to
newspaper TMC programs as well as for Saturation mailers. Most importantly, it
provides a potentially valuable incentive to retain newspaper TMC programs in
the mailstream, both by establishing a rate incentive for TMC programs to
increase their use of the mail and by also narrowing the discriminatory rate
advantage that Saturation-rated mail has enjoyed over High-Density mail.
In addition, newspaper TMC programs will also enjoy the flexibility offered
by the revised program to qualify either their High-Density and Saturation rate
mailings, or both, for the incentive program. This flexibility has the potential to
make the program attractive to a larger number of newspapers, which can only
benefit the Postal Service.
Accordingly, NAA urges the Commission to approve the Postal Service’s
proposed changes to the Standard Mail volume incentive program. And, as
noted above, the Commission may do so regardless of how it disposes of the
request for an exigent rate increase.
B. The New Standard Mail Rate Incentive Should Be Approved
Regardless Of How The Commission Decides The Exigency
Request
The Postal Service’s proposal to extend the Standard Mail volume
incentive program to High-Density flats is a mail classification proposal that
legally can stand independently of the exigent rate request. The improved
incentive program can and should take effect regardless of the Commission’s
disposition of the exigent rates request.
Although the improvements to the Standard Mail volume incentive
program are included in the request for approval of exigent rate increases, the
exigent rates are not necessary for the volume incentive improvements to take
effect. Changes to the mail classification schedule for market-dominant products
may be filed at any time, and are subject to section 3020.30 of the Commission’s
rules. 39 C.F.R. §3020.30. That provides specifies the information that the
Postal Service must provide in support of its proposed change.
In its Request and the supporting statement of Mr. Kiefer, the Postal
Service has provided the required information. See Exigent Request at
Attachment A & Statement of James M. Kiefer. In particular, the Postal Service
has identified the product as required by section 3020.31 of the rules and
provided supporting justification required by section 3020.32. The Commission
has provided the appropriate public notice and solicited public comment. 39
C.F.R. §3020.33. Accordingly, NAA submits that the Postal Service had made a
sufficient showing for the proposed modification, and that it should be approved
regardless of whether the Commission approves the proposed exigent rate
increases.
IV. CONCLUSION
For the foregoing reasons, the Newspaper Association of America
respectfully asks the Commission not to approve the proposed “exigent” rate
changes, but to approve the proposed modification to the Standard Mail volume
incentive extending eligibility to High-Density flats.
More Hypocrisy as Big Mailers Decry Rate Hike
In Run-Up to Postal Reform, They Championed Annual Increases
Burrus Update 11-2010, July 13, 2010
The APWU often criticizes the cozy relationship between large mailers and postal management, but we understand that without the major mailers there would be insufficient mail volume to maintain the Postal Service’s national network and to employ 600,000 workers. “Non-household mail” enables us to fulfill our obligation to serve the American people.
Unfortunately, commercial mailers have been permitted to influence postal management beyond the scope of their contribution. While direct mail accounts for an ever-increasing share of mail volume, its contribution to USPS revenue is a pitiful 20 percent. But the voice of the average citizen, who pays 44 cents postage per letter, is drowned out by those who have access to USPS decision-makers.
The APWU has frequently found fault with the major mailers and some unions for championing “postal reform,” which resulted in the Postal Accountability and Enhancement Act of 2006 (PAEA). History will reflect that this legislation — with its onerous requirement that the USPS must pre-fund more than $5 billion of future retiree healthcare liabilities annually for 10 years — has caused immeasurable damage to the Postal Service. The result has been the degradation of service to the public through facility consolidations, station-and-branch closings, reduced service, and mail delays caused by the need to reduce expenses to satisfy this requirement.
One of the most disturbing aspects of the unhealthy relationship between the USPS and major mailers is the mailers’ reaction to the Postal Service’s recent request for a rate increase under the “exigency provisions” of the PAEA. These provisions allow the USPS to increase postage above the rate of inflation.
The influential mailers have formed an organization, the Affordable Mail Alliance, for the sole purpose of denying the Postal Service the opportunity to increase revenue in response to the pre-funding obligation that the mailers imposed. Included in their near-hysterical reaction to the increase is the refrain that the Postal Service is raising rates “again.”
Despite differences in the legal interpretation of an “exigency,” if the mailers were honest, they would accept responsibility for the legislation that resulted in annual rate increases. Prior to the enactment of the 2006 law, the Postal Service’s mandate was to “break even over time.” The mandate was applied to three-year rate cycles, with the intent that the USPS would generate a surplus in year one; break even in year two, and lose money in year three, thus breaking even over time.
The large mailers insisted to Congress that their business model was best served by annual incremental rate increases rather than larger, less frequent rate hikes. Individual citizens and small businesses voiced no opinion about whether postage should increase by 3 cents every three years or by one cent each year for three years.
It was the large mailers who demanded annual increases tied to the Consumer Price Index; now, however, they have joined the chorus criticizing the Postal Service for raising rates “again.” Despite the differences between the large mailers and the unions, we should at least be honest with the American people: The mailers may disagree with the use of the exigency option, but annual rate increases are of their own doing, and they should take responsibility for them.
William Burrus
President
Direct Marketing Association Strongly Opposes USPS Request for Rate Increase
Press Release from the Direct Marketing Association Inc.:
Washington, DC, July 6, 2010 — The Direct Marketing Association (DMA) strongly opposes the United States Postal Service’s (USPS) request for a rate increase. In its presentation today to business mail customers, USPS said that mail volume declined by 36 billion pieces (or 17 percent) between 2007 and 2009. DMA strongly believes that a postal rate increase at this time will cause mail volumes to decrease even further, and irreparably harm the financial viability of the Postal Service going forward.
“We question the need for a rate increase at this time, and strongly believe that it will further damage the economic viability of the Postal Service,” said Linda Woolley, DMA’s executive vice president for government affairs. “The increase is not in the public interest, and ultimately, would have a devastating effect on any economic recovery since marketers rely heavily on mail to deliver offers, as well as products, to customers.”
The Postal Service’s rate increase request proposes to raise rates an average of 5.6 percent, but in order to reach that average, the increase on some mailers will be dramatically higher. The proposed increase for small parcels, for example, is 23.3 percent, something that would be devastating to many companies. A rate increase would force business mailers to look for alternative methods of communications.
These increases will hasten efforts by mailers to shift to other channels of communications.
DMA strongly questions the assumptions underlying the Postal Service’s request for a rate increase, namely that it will generate some $2.3 billion in new revenue over a 9 month period. In the period following the last rate increase in May 11, 2009, in the next year, mail volume decreased by an additional 5 percent (above the previous 13 percent) and DMA strongly believes that this new increase would have the same, if not a more dramatic, effect, and drive away even more business mail, which accounts for some 85 percent of the Postal Service’s revenue.
DMA strongly supports a vibrant and fiscally sound Postal Service, and believes that there are many ways for the Postal Service to get its financial-house in order without an increase in postal rates. On many occasions, the Postmaster General has said that there is excess capacity in the system, and that there may be opportunities to downsize the system and the labor force. In addition, there are new product lines and business opportunities that the Postal Service can and should pursue, most of which were outlined in the Postal Service’s 21st Century presentation on March 2, 2010.
The Postal Regulatory Commission (PRC) has 90 days to review the USPS rate increase request. DMA will strongly oppose the request at the PRC, and make its views known before Congress.
History of Postage Rates for Domestic Letters 1863-2010
* Beginning September 14, 1975, additional ounces were charged a lower rate. Since July 15, 1979, a surcharge has been added for non-standard envelope sizes.
HISTORIAN
UNITED STATES POSTAL SERVICE
MAY 2009