PRC Commands Center Stage While Congress In Recess
During this past week, the Postal Regulatory Commission (PRC) claimed the center of the Postal universe by conducting three days of hearings on the Postal Service’s request to raise postage rates greater than inflation. The Postal Reform Act of 2006 permits the USPS to request such an increase if conditions are such that the agency would be unable “to maintain and continue the development of postal services of the kind and quality” to meet the needs of our nation without the increase. Specifically, the circumstances under which the increase is requested must be “either extraordinary or exceptional”.
The battle lines are clearly drawn between the USPS and mailers. The USPS argues that without an adjustment of about 5.6%, the agency will be incapable of providing the level of service that it is obligated to provide. The agency points to the cataclysmic effect that the recession has had on mail volume and postal revenue. (The Postal Service highlighted the historic volume declines of FY 2008 and FY 2009.) On the other side of the postal divide are the major mailers. They have orchestrated an expensive and expansive media and lobbying campaign, attempting to derail the proposed postage increase. The mailers suggest that the increase is unnecessary and premature, since the Postal Service has not done enough to cuts costs (i.e., labor and infrastructure) and the economic turmoil and mail decline should have been anticipated.
In its pre-hearing and supplemental filings, the USPS laid out a persuasive case that it had been dealt a losing hand. The deeper-than-expected recession and the legal requirement to aggressively pre-fund its retiree health care costs have handcuffed its efforts to maintain fiscal viability. The Postal witnesses pointed out that the retiree prefunding obligation is required of no other entity, and that the PRC’s very own study concluded that the Postal Service has been required to overfund its retirement account by at least $50-55 billion. Moreover, Postal officials argued that they have indeed taken aggressive steps to reduce its costs, leaving it no option but to seek an “exigent” rate adjustment to remain solvent. The only testimony presented to the PRC was by the Postal Service; “interveners”, which included NAPUS, submitted wriiten comments and/or suggested questions.
Two major points of contention dominated the proceedings: the meaning of “extraordinary or exceptional circumstances” (i.e., the exigency clause) and whether the USPS exercised “best management practices” in running its operations. The mailers contend that the current conditions are not what Congress envisioned in drafting the exigency clause. Moreover, if the USPS used “best practices” the rate increase would be unnecessary. It is noteworthy that all “Postal Reform era” Congressional statements on the exigency clause refer to a much tighter exigency provision, one not in the law – “unexpected and extraordinary circumstances”. Although this phrase was in the version of the Postal Reform Act that passed the Senate in February 2006, the more restrictive language is NOT included enacted Postal Reform bill. The more permissive variant, “extraordinary or exceptional circumstances”, is the legal standard. The enacted version was the result of negotiations and compromise, involving Congressmen Henry Waxman, Tom Davis and John McHugh, Senators Susan Collins and Tom Carper, the Bush White House, the mailers, employee groups, and the Postal Service.
The mailers suggest that the Postal Service should have done more to reduce costs, by slashing earned benefits, furloughing employees, and closing processing facilities. Regarding labor costs, the mailers seem to ignore the existence of legal contracts, consultative agreements and civil service law. They also fail to distinguish between the Postal Service as a public agency, and private for-profit corporation. Regrettably, mailer eagerness in attacking employees exposes a breach in a postal coalition that has up until now worked together on such issues as fighting “Do Not Mail” initiatives.
A number of questions posed by the PRC at the hearings relate to Postmasters and Post Offices. For example, Vice Chairman Tony Hammond asked the USPS to provide data on how the USPS decides whether a Post Office is a money- loser. The PRC elicited from the USPS that it uses different criteria for different Post Offices. Commissioner Nanci Langley requested the data by Post Office level. Chairman Ruth Goldway critiqued a USPS comment regarding moving counters to non-postal venues; this would not make sense in rural locations where there is no core population area. This line of inquiry was part of an exchange about the complex way in which the USPS allocates revenue and expenses among retail facilities; the USPS conceded that you cannot simply subtract stamp sales from salaries and capital costs to assess profitability. Goldway also requested data on the number of Post Offices that are being managed by someone other than a qualified Postmaster. In addition, the PRC asked about projected savings from the new hiring freeze. The Postal Service responded that it would “not have a massive effect.” Ironically, as part of a submission to the PRC, the employee headcount for period 16 reflected a loss of 44,000 employees since last year, but an increase of 157 at Postal HQ.
The PRC will close its proceedings on September 2, and will issue a decision by October 4. The PRC may accept, reject or modify the USPS postage request. Prior to the Postal Reform Act of 2006, the USPS Board of Governors could have overruled the Postal Rate Commission by a unanimous vote.
FEGLI Should Be Fixed
Postal employees participate in the Federal Employees Group Life Insurance (FEGLI) program, which provides death and dismemberment payments to eligible beneficiaries. Last Sunday, Bloomberg News reported that once a FEGLI death benefit is claimed, Metropolitan Life Insurance Company (the FEGLI provider), opens up a “retained-asset account” for the beneficiary. MetLife sends the beneficiary a check book, and checks can be drawn from the death benefit. However, Bloomberg reported that the account is not federally- insured, there is no interest and, the funds are comingled with the insurance company’s corporate assets. The Office of Personnel Management believes that the death benefits are separate from corporate funds. NAPUS believes that FEGLI payouts should be in segregated, interest-bearing, federally insured accounts. We urge OPM and Congress to ensure that this happens.