Order Code IB10104
CRS Issue Brief for Congress
Received through the CRS Web
Postal Reform
Updated October 14, 2003
Nye Stevens
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Causes of the Financial Crisis
Recalculation of USPS Retirement Obligation
The Postal Reorganization Act of 1970
The USPS Transformation Plan
Should the Postal Service Compete?
The President’s Commission on the United States Postal Service
Activity in the 107th Congress
Activity in the 108th Congress
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
FOR ADDITIONAL READING
CRS Reports

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Postal Reform
SUMMARY
Although
its
short-term
financial
volume discounts for big mailers.
It also
prospects have unexpectedly brightened by
proposed to redefine its universal service
discovery that retirement obligations are less
obligation by adjusting the number of delivery
burdensome than presumed, the U.S. Postal
days, and to revamp union contract talks by
Service (USPS) faces severe financial straits
involving the President and Congress in avert-
in the long term. Business use of the mails is
ing strikes. Most postal stakeholders think
declining as alternatives such as e-mail, faxes,
that the USPS monopoly lines — first class,
and cell phones substitute for hard copy let-
periodical, and advertising mail — are a
ters. The economic slowdown that began in
declining business, and want USPS to com-
2001 has cut into advertising mail. On top of
pete in other markets that are growing. Com-
this, the anthrax attack of October, 2001 has
petitors in those markets resist because USPS
affected volume and added billions in costs
pays no taxes and is immune from most gov-
for mail sanitization. Despite three rate in-
ernment regulation. They think USPS should
creases in 18 months, USPS lost well over $2
concentrate on its natural monopoly — the
billion in fiscal years 2001 and 2002, and
“last mile” in the delivery process. USPS has
built up a $11.9 billion to the Treasury. It has
had little success to date in developing com-
a negative net worth and mounting obligations
mercially competitive products.
for retiree health benefits. USPS would be
bankrupt but for the fact that it is a govern-
While a reform bill has been under devel-
ment entity, with Treasury borrowing rights.
opment in the House for a half-dozen years, it
has yet to emerge from committee. Senator
USPS, its board of governors, GAO,
Carper has introduced a modified version, S.
mailers’ organizations, and most recently a
1285, in the 108th Congress. Passage of P.L.
presidential blue ribbon commission have said
108-18, the Postal Civil Service Retirement
that the Postal Reorganization Act of 1970 no
System Funding Reform Act of 2003, will
longer provides a viable business model. It is
enable USPS to pay down its debt to the
dependent on rising mail volume to cover the
Treasury by about $3 billion per year, and
ever-increasing cost of arbitrated labor settle-
defer further rate increases to 2006.
ments, legislated benefits, and the addition of
1.7 million new delivery points each year, yet
On July 31, a blue-ribbon commission
volume has begun to fall. The highly regu-
appointed by President Bush issued a report
lated process of setting rates is cumbersome
recommending reforms consistent with reform
and tendentious.
legislation that has been brewing for years and
with the transformation plan. It recommends
At congressional request, USPS devel-
changes in governance, scope of the postal
oped a “Transformation Plan” that briefly
monopoly, rate-setting, physical infrastructure,
considered, and rejected, the alternatives of
and – most controversially – workforce com-
privatization and a return to regular agency
pensation policies. The commission rejected
status with appropriations to cover the costs of
privatization and endorsed continued universal
universal service. Instead, it asked Congress
service within the governmental framework.
for authority to change rates more flexibly,
Congressional hearings on the commission’s
close post offices and processing centers, and
report began in September and are expected to
negotiate tailored service agreements and
continue for several more months.
Congressional Research Service
˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
President Bush’s Commission on the United States Postal Service issued its report, with
35 reform recommendations, on July 31, 2003. The commission rejected the privatization
option that is popular abroad and recommended retaining the Postal Service with a universal
service obligation in the executive branch, but with enhanced independence. Rather than
expand into new business lines, the commission said that USPS must downsize and cut costs,
notably by consolidating and closing unneeded processing facilities through a base-closing
model approach.
The one labor representative on the commission dissented from
recommendations to end binding arbitration in wage disputes, to include leave, health, and
retirement benefits in collective bargaining, and to add pay for performance to the
compensation package. In an initial hearing on the commission’s report, on September 17,
2003, Senate Governmental Affairs Committee members were generally complimentary of
the commission’s work.
On April 23, 2003, President Bush signed into law the Postal Civil Service Retirement
System Funding Reform Act of 2003, P.L. 108-18. The Act authorized USPS to reduce its
annual payments to the Civil Service Retirement Fund by $3.5 billion in fiscal year (FY)
2003, and $2.6 billion in FY2004. The savings, a June 2002 rate increase, and elimination
of 47,000 jobs since mid-2001 allowed USPS to finish FY2003 in the black, and to reduce
its $11.9 billion debt to the Treasury. While the civil service law granted financial breathing
room, Postmaster General John Potter said that it does “not in any way obviate the
fundamental flaws in the Postal Service business model” and urged undiminished attention
to postal reform. The President’s Commission also warned that while the retirement
contribution relief had staved off an immediate crisis, structural changes in the business
model are essential if USPS is not to become a huge burden on future taxpayers.
At the end of September, USPS and the Administration issued conflicting reports to
Congress on whether USPS should be responsible for paying the retirement costs of its
employees based on prior military service, a $27 billion obligation.
BACKGROUND AND ANALYSIS
The U.S. Postal Service has been operating in a mode of financial crisis since February
2001. Despite three rate increases in 2 years, it is mired in operating losses. Its deficit rose
from $199 million in FY2000 to $1.68 billion in FY2001. An accelerated and negotiated rate
increase in June, 2002, combined with radical cost cutting measures and a freeze on facilities
spending, cut the eventual FY2002 loss to $676 million. Stagnant mail volumes continued
to cut revenues below plan throughout FY2003. USPS was able to end the year with a
surplus, however, largely because Congress relieved it of $3.5 billion in obligations to the
Civil Service Retirement Fund.
Both the House and the Senate held hearings early in 2001 on the deteriorating financial
condition of the Postal Service. The General Accounting Office (GAO) has issued a number
of reports that portrayed a steadily growing sense of urgency. Among the indicators of the
crisis were the following:
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! Despite desperate cost-cutting measures, a freeze on facilities, and severe
limits on productivity investments, revenues are falling faster than expenses.
! Mailers warn of an “economic death spiral,” as falling mail volume forces
price increases to cover fixed costs, and the price increases lead to further
drops in volume as businesses seek more cost-effective alternatives.
! The USPS debt to the Treasury rose to $11.9 billion, not far from its
statutory $15 billion limit.
! Before discovery of the Civil Service Retirement Fund potential
overpayment, GAO estimated major liabilities and obligations at close to
$100 billion for such items as Treasury debt, pension and retiree health
obligations, and workers’ compensation future benefits, all of which will
need to be borne by future ratepayers, or taxpayers, in a shrinking and
increasingly competitive market.
! Liabilities continue to exceed and grow faster than assets, a condition that
GAO said would mean bankruptcy if USPS were not a government entity.
Causes of the Financial Crisis
While there are differences among the stakeholders in emphasis, the following factors
have been identified as being in part responsible for the financial crisis of 2001-2002:
! The economic slowdown that began in early 2001 cut into USPS revenues
from the dominant business segment, and reduced advertising mail, which
accounts for 25% of revenues. Costs continue to rise, however, since 1.7
million delivery points are added each year, built-in wage and cost-of-living
increases add $2 billion per year, and USPS is particularly vulnerable to
energy price spikes.
! The rate determination process is cumbersome and rigid, preventing USPS
from aligning its offerings with the variable needs of its customers.
Preparations for a rate case begin many months before a filing with the
Postal Rate Commission (PRC) and USPS must estimate costs and demand
nearly two years into the future. The adversarial process of contesting
proposed rates and classes goes on for 10 months, with exchanges of tons
of paperwork and hundreds of hours of testimony. USPS competitors are
very active participants. The emphasis is on allocating stated costs among
mail classes rather than reducing costs or encouraging demand. USPS
complains that the process gives it no opportunity to respond to competition,
to vary rates with the season or periods of low usage, to negotiate rates with
big mailers, or to price products in accordance with demand, rather than
costs of service.
! Three rate increases in an 18-month period have driven some mailers to
curtail volume in order to stay within set budgets, and made the comparative
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cost of alternatives — such as newspapers, television, and e-mail for
advertising — more attractive.
! Competition from other providers and other media is marginalizing some of
the services that USPS provides. E-mail, fax transmission, and cell phones
without
distance
charges
have
become
substitutes
for
written
correspondence. The Internet is becoming increasingly popular as an
alternative for financial billing and payment, which sustained USPS volume
and revenue growth through the 1990s. USPS is already a secondary player
in the overnight express and package delivery markets, except for the most
difficult routes to service in Alaska and Hawaii.
! Labor costs of its 843,000 employees account for over three-fourths of
USPS expenses, not much less than was the case decades ago. In contrast,
labor costs are 56% of United Parcel Service’s expenses, and 42% of costs
at FedEx, where only the pilots are unionized. Lagging productivity growth
(11% in 30 years), a backlog of 146,000 pending or appealed labor
grievances that are pursued “on the clock,” and binding arbitration of
disputes keep labor costs high. Costly government annual and sick leave,
early retirement, and health benefits are set in law and not negotiable.
! Facilities are not optimally located for efficient distribution, since USPS has
been unable to close existing facilities and consolidate operations in new
locations.
USPS maintains that over half its 38,000 facilities do not
generate enough revenues to cover their costs, and complains that political
considerations prevent it from modernizing its retail and distribution system.
The American Postal Workers Union (APWU) has been a vocal proponent of another
ascribed cause for the postal financial predicament. The APWU told Congress in May 2002
that the “Postal Service’s financial crisis is directly attributable to the $12 billion in postage
discounts it gives annually to major mailers and direct mail firms for pre-sorting their mail.
The discounts equal significantly more than the costs the Postal Service avoids when it
receives pre-sorted mail, and they amount to huge subsidies for the major mailers and direct
mail firms.” APWU believes that at least some of this revenue could be recovered if the
work were brought back in-house. GAO recently issued an informational report on the issue.
Recalculation of USPS Retirement Obligation
On April 23, 2003, President Bush signed into law the Postal Civil Service Retirement
System Funding Reform Act of 2003, P.L. 108-18. The law was quickly passed without
dissent in either chamber in response to a surprise finding by the Office of Personnel
Management that future payments under current legislation would overfund USPS liability
to the Civil Service Retirement Fund by $71 billion. A principal reason is that interest
earnings on past contributions have been credited at a statutory rate of 5%, when in fact the
average rate of return on the bonds held by the trust fund has been substantially higher.
The Act authorized USPS to reduce its annual payments by $3.5 billion in FY2003 and
$2.7 billion in FY2004. The savings will allow USPS to reduce its $11.9 billion debt to the
Treasury and keep postage rates stable to 2006. While this development grants financial
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breathing room, Postmaster General John Potter said that it does “not in any way obviate the
fundamental flaws in the Postal Service business model” and urged undiminished attention
to postal reform.
P.L. 108-18 also required USPS and the Administration to report back to Congress on
the use of future savings from the retirement funding reduction, and on the effects of another
provision of the Act which had transferred from the Treasury to USPS the obligation to cover
military retirement costs of postal employees. In its report on use of the savings, USPS
proposed using them to fund future retiree health benefits, currently a major unfunded
liability. Its report on military pay asked Congress to reverse the provision of P.L. 108-18
requiring USPS to pay $27 billion in military retirement costs for its employees, again
proposing to use the funds for retiree health benefits. The Treasury/OPM report on behalf
of the Administration defended the requirement that USPS, rather than the Treasury, pay
these costs. Postal ratepayers are preparing a major lobbying initiative to focus congressional
attention on both of these issues, since they will have a very significant effect on postage
rates.
The President’s Commission on the United States Postal Service (see below)
recommended that costs of military service of postal employees be returned to the Treasury.
The Postal Reorganization Act of 1970
Postal Service management, its board of governors, GAO, most stakeholders, and most
lately a presidential commission have asserted that the Postal Reorganization Act of 1970
no longer provides a viable business model for a successful postal enterprise at the turn of
the century. That Act had taken postal affairs out of the direct control of either Congress or
the President. It made USPS an independent establishment of the executive branch, directed
by a postmaster general selected by, and serving at the pleasure of, a part-time board of
governors appointed by the President with the consent of the Senate. USPS was permitted
to operate using business principles, and charged with generating enough revenues to support
the costs of the service it provides by allocating those costs among the many users of the
postal system. That allocation has been accomplished through periodic rate cases before the
Postal Rate Commission, a five-member regulatory commission that considers cost data and
the conflicting views of competitors, unions, and users of the many classes of mail in a 10-
month adjudicative process leading to new rates and classification requirements.
The legal and regulatory framework established by the Act served reasonably well for
nearly three decades. Delivery service and customer satisfaction improved, USPS survived
without general appropriations since 1983, rising mail volumes covered the costs of adding
new routes and delivery points each year, and prices rose generally in line with inflation.
Postal issues came to be perceived as minor enough that postal service committees and
eventually even subcommittees disappeared from the congressional organization chart.
However, few who are familiar with postal affairs believe that Congress can ignore the
current state of the enterprise. USPS admits that its business model no longer works in the
21st century, and Comptroller General David Walker testified bluntly on May 13, 2002 before
a Senate Governmental Affairs subcommittee that the institution’s current course is
“unsustainable.”
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The USPS Transformation Plan
When GAO placed the long-term outlook for USPS on its High Risk List in the spring
of 2001, the Senate Committee on Governmental Affairs asked USPS to prepare a
comprehensive plan to address its financial, operational, and workforce challenges, along
with a time frame and key milestones for achieving positive results. USPS eventually came
to welcome the opportunity to lay before Congress a comprehensive statement of what it
needed to make its business successful.
USPS released its Transformation Plan in April, 2002 with a substantial public relations
effort. The plan contains 400 pages of historical and analytical information about changes
in the postal business in the United States and throughout the world, and presents three
alternative futures for USPS. It rejected the option of returning to government agency status,
and depending on Congress to provide appropriations to maintain universal service as the gap
between costs and revenues continues to widen.
It also dismisses the prospect of
privatization as likely to result in substantial layoffs, and inevitably leading to cuts in
services and geographic coverage that do not pay for themselves. The option USPS favored
is called the “Commercial Government Enterprise,” preserving government ownership but
allowing USPS to operate under more businesslike conditions than what the 1970 Postal
Reorganization Act provides.
While it lacked (as GAO pointed out) a detailed action plan, milestones, and concrete
legislative recommendations, the transformation plan did propose a number of significant
departures from the status quo.
The following are among those likely to require
congressional approval:
! An aggressive effort to “optimize the retail network” and “redesign the
postal logistics network,” which would entail lifting the moratorium on
closing post offices, streamlining the process for more closures, and
reducing the number of processing centers.
! Negotiating service agreements and volume discount prices with the biggest
mailers, exploring seasonal discounts and premiums, and phasing in new
rates on a more predictable basis.
! Revamping contract talks with the unions to escape binding arbitration,
moving eventually to a mediation process like that in the Railway Labor Act,
which involves the President and Congress in averting strikes and
encouraging reasonable settlements with the public’s interest paramount.
! Redefining universal service by adjusting service levels and the number of
delivery days to a more affordable level.
! Changes in the incentive structure to permit USPS to retain any excess
earnings, and remove the limit on executive pay tied to the federal executive
schedule.
! Expanded freedom to use its assets for entering related markets and
developing new products without skeptical scrutiny from the PRC.
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Many of the initiatives proposed in the transformation plan could be undertaken under
USPS’s existing authorities, and it suggested that others could be negotiated with a PRC that
had become more cooperative in the wake of the terrorist attacks. However, Congress would
need to act in both the short and the long term to achieve the most significant changes. One
change urged immediately was the removal of annual appropriations language that restricts
post office closings and mandates no reduction from the service levels that prevailed in 1983.
At the May 13, 2002 subcommittee hearing of the Senate Governmental Affairs
Committee called to discuss the plan, reaction was somewhat subdued. The postmaster
general said that gaining more flexibility in pricing its services was the “number one priority”
in the transformation plan. Members generally complimented USPS on a good-faith effort
to set forth its needs, but raised questions about several key facets of the plan: whether it was
“fair to competitors;” whether opening new businesses would divert attention from its core
mission; whether closing post offices was politically realistic; and whether now is the right
time for long-term decisions, since the world of communications continues on such a rapid
pace of change.
Should the Postal Service Compete?
USPS itself, its unions, and many mailers’ organizations believe that the survival of the
Postal Service depends on the institution’s ability to compete in active or developing
markets, because the services it provides under its statutory monopoly are a declining
business. Another school of thought, however, rejects the notion that USPS should compete
with private sector companies who are able to provide services within the market economy.
There are several thrusts to the argument. One relates to fairness. USPS has many
advantages stemming from its governmental status. It pays no federal, state, or local taxes
on its income, sales, purchases, or property. Unlike private sector companies, It is immune
from most forms of regulation, such as zoning, land use restrictions, motor vehicle
registration, parking tickets, and antitrust. It is also able to borrow money at the lowest
possible rate because it does so through the U. S. Treasury. Understandably, companies
facing competition from USPS feel that they are at a great disadvantage.
A second argument is based on concepts of economic efficiency. Because of its indirect
subsidies such as freedom from taxation and regulation, and because its goal is to break even
rather than earn a competitive rate of return, USPS has less incentive than private sector
entities to use capital and labor resources efficiently. Subsidies make government products
and service seem artificially cheap, resulting in an over-allocation of resources that could be
used to produce greater benefits elsewhere in the economy. Economic theory maintains that
such a mis-allocation reduces national economic welfare below that achieved by a
competitive market. When private sector companies produce and sell a product or service,
there is some benefit to society from the taxes that result, a benefit not gained when the
government produces the same product or service.
Finally, there is substantial evidence that USPS is not a very adept competitor. GAO
has issued several reports of failed commercial ventures by USPS. In 1997, for example,
USPS had discontinued or was losing money on 15 of 19 new products, resulting in a net loss
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of $85 million. UPS and FedEx have both established profitable delivery networks in
markets where USPS tries to compete but is now a relatively minor player.
One policy prescription leading from this diagnosis is that USPS should stick to its
monopoly business and not seek to grow at the expense of private sector competitors.
Indeed, some would like to see the postal monopoly reduced to “the last mile” of delivery,
opening up collection, sorting, and transportation to market competition.
The President’s Commission on the United States Postal Service
A number of postal observers have believed for some time that political power is so
thoroughly dispersed among stakeholders that only an independent blue-ribbon commission,
rather than the legislative process, can devise a contemporary solution to today’s postal crisis.
There is a notable precedent. In 1967, President Johnson appointed Frederick R. Kappel (the
chief executive of AT&T) to chair a Commission on Postal Organization that eventually
devised the framework for the Postal Reorganization Act of 1970. The USPS Board of
Governors, the Association for Postal Commerce, the Mailers Council, GAO, the United
Parcel Service (UPS), and some Members of Congress are among those who called on the
President to create a new commission to study and make recommendations on the future
organization and function of the Postal Service. The president of the American Postal
Workers Union, however, opposed the creation of a commission, believing that it would be
a front for privatization initiatives.
On December 11, 2002, President Bush issued Executive Order 13278 creating a
Commission on the Postal Service, forestalling congressional initiatives to create such a
commission by statute. The co-chairmen of the commission were James Johnson, former
CEO of Fannie Mae, and Harry Pearce, board chairman of Hughes Electronics. The other
seven members included no one with close ties to postal stakeholders. Most were business
executives, with one local labor leader, the president of Yale University, and Robert Walker,
a former Member of Congress. The Commission’s Web site has hundreds of statements by
interested parties on reform proposals before the commission. Public hearings concluded
on May 29, and the commission issued its final 181-page report to the President, on
schedule, on July 31, 2003.
The commission’s report contains 35 recommendations, 18 of which would require
some action by Congress. In many ways, the commission’s approach is in the mainstream
of postal reform discussions that have been underway among stakeholders since the mid-
1990s. For example, the commission endorsed the basic structure of the 1970 Postal
Reorganization Act, recommending that USPS “should continue to operate as an independent
establishment within the executive branch with a unique mandate to operate as a self-
sustaining commercial enterprise” and rejecting the alternative of privatization that many
other developed countries have adopted. While keeping the basic government corporation
model, the commission pressed in many of its recommendations that USPS should adopt the
“best practices of similarly-sized private-sector corporations.” These included an independent
corporate-style board of directors that would perpetuate itself, greater financial transparency,
expanded outsourcing for services, aggressive real estate asset management, and use of
commercial purchasing practices. The commission said that USPS should not enter new
businesses, but adjust to a reduced demand for its products by becoming smaller.
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The commission’s recommendations with regard to regulatory controls are similar to
recent congressional proposals. The Postal Rate Commission would be transformed into a
new Postal Regulatory Board that would have authority to refine the scope of the universal
service obligation and the postal monopoly, to establish limits and broad parameters within
which USPS could set rates and negotiate service arrangements, to redefine pay
comparability, and to assure that competitive products are not cross-subsidized by revenues
from products protected by the monopoly.
While recommending that Congress eliminate current statutory restrictions on closing
post offices for economic reasons, the commission did not press for an aggressive program
of closing local post offices, pointing out that even some “low activity” post offices are
needed to meet the universal service obligation.
It placed much more emphasis on
consolidating the 446 large processing facilities, recommending a Postal Network
Optimization Commission to identify facilities to be closed with a fast-track congressional
approval process comparable to the defense base closing process. A similar proposal was
contained in a bill introduced in the 108th Congress by Senator Carper (S. 1285; see below).
The aspect of the commission’s report that will almost certainly be the most
controversial are four recommendations relating to workforce compensation, a subject that
recent bills in Congress have conspicuously avoided. Referring to “persuasive testimony”
that a postal compensation premium may exist, the commission (with the one member from
the labor movement dissenting) recommended major revisions to the current practice of
binding arbitration of wage bargaining disputes, including the value of fringe benefits such
as health care and early government retirement in bargaining over compensation, a
redefinition of pay comparability to be made by the Postal Regulatory Board, and introducing
some form of pay for performance into the compensation package. The American Postal
Workers Union news bulletin denouncing the recommendations as “fundamentally
dishonest” and “a disaster,” said the APWU would use every tool at its disposal to assure that
none of them becomes law.
Activity in the 107th Congress
Although Congress became increasingly concerned about deterioration in USPS’s
finances, little legislative activity occurred until late in the 107th Congress. The House Postal
Service Subcommittee was not reconstituted in the 107th Congress. Representative John
McHugh, who had chaired the Postal Subcommittee through six years of hearings largely
devoted to postal reform, was term-limited as chairman. Formal congressional oversight was
devoted largely to the anthrax crisis. In a House Government Reform Committee hearing
on April 4, 2001, Chairman Dan Burton and ranking minority member Henry Waxman
invited postal stakeholders to participate in a broad range of discussions aimed at the
development of a bipartisan consensus bill, and these discussions proceeded for more than
a year.
H.R. 4970 (McHugh, Burton)
Postal Accountability and Reform Act, introduced June 20, 2002.
The bill was
essentially a marriage of the former H.R. 22 (in both the 105th and 106th Congresses) with
elements promoted by Representatives Waxman and Danny Davis, including the formation
of a reform commission, and enhancing the role of the Postal Rate Commission. The PRC
would be renamed the Postal Regulatory Commission, and be given substantial powers to
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monitor, investigate, and control the activities of the Postal Service within broad parameters,
rather than being limited to considering rate requests. The principal changes that would be
made by H.R. 4970 include the following:
! dividing postal operations between “competitive” and “market dominant”
products. Competitive products would include Express Mail, Priority Mail,
packages up to 70 pounds, and international mail.
Market dominant
products are traditional letter mail, advertising mail, periodicals, catalogs,
and rural mail boxes — products on which USPS has a monopoly and can
raise prices above costs without fear of losing market share;
! requiring the new regulatory commission to devise a new rate setting system
for market dominant products that would follow broad principles of
flexibility, predictability, incentives to reduce costs and maintain service
standards, and limits for price increases to no more than the annual rise in
the consumer price index;
! allowing USPS to price competitive products according to market
conditions, including discounts not available to all mailers, and to conduct
tests of new competitive products exempt from most specific pricing
requirements;
! establishing a separate competitive products fund that would have
safeguards against cross-subsidization from the market dominant category,
would borrow from private markets without federal government backing,
and would be subject to imputed federal income taxes;
! giving the Secretary of State authority to lead U.S. delegations to
international postal conventions, charging the secretary with assuring that
international agreements do not give preference to any entity including
USPS, and requiring the Customs Service to treat private carriers on an
equal basis with USPS;
! granting the Postal Regulatory Commission subpoena powers, enforcement
orders through the district courts, and broad authority to investigate and act
on complaints of unfair competition, service deficiencies, subsidization of
competitive products, or offering services that are “non-postal;” and
! specifying that members of the Postal Regulatory Commission be “chosen
solely on the basis of their technical qualifications, professional standing,
and demonstrated expertise in economics, accounting, law, or public
administration.”
In implicit recognition that the bill did not address a number of issues that need
resolution before USPS could be assured a viable future, Title VII would provide for the
appointment of a “National Commission on the Future of the Postal Service,” with 11
members named by the President and congressional leaders. The commission would be
charged with studying and making recommendations on the scope of universal service, labor
relations, safety and security, and postal facilities. The commission would have 30 months
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to issue its recommendations, but there was no provision for fast-track congressional
consideration of them.
H.R. 4970 fell victim to legislative backlogs as the 107th Congress drew to a close. The
USPS board of governors issued a letter of support for the draft, and a number of mailers
groups were active in its support. A markup, repeatedly scheduled and delayed in the House
Committee on Government Reform, finally took place on June 20, 2002. Committee
Democrats, even though several had worked closely on development of the bill, refused to
support reporting the bill from committee without a commitment from the House leadership
that it would be brought to the floor before the end of the session. At the markup, several
supporters criticized the influence of UPS, and of the International Brotherhood of
Teamsters, which represents UPS employees. A roll call vote to report the bill gained only
six votes, all Republicans. Twenty members voted against it, and nine, all Democrats, voted
“present.”
S. 2754 (Collins)
The United States Postal Service Commission Act of 2002, introduced July 18, 2002.
Would create a presidential commission on the Postal Service. The commission would be
charged with studying the USPS mission, monopoly, regulatory and governing structure,
efficiency, and infrastructure. It would be required to report within one year of its initial
meeting, or 15 months after the date of enactment. The bill would forbid the President from
appointing “stakeholders” to the commission, defining “stakeholder” to include any
individual with close ties to USPS, including employees, competitors, or union
representatives.
H.R. 5702 (Crane)
To provide for the privatization of the Postal Service, introduced October 28, 2002. The
bill, co-sponsored by Representative Rohrabacher, was identical to H.R. 2589 in the 106th
Congress. It would transfer USPS to a new private corporation, owned by its employees, and
require the President to appoint a commission to submit a transfer plan to Congress.
Activity in the 108th Congress
Both the House Government Reform and the Senate Governmental Affairs Committees
have geared up for concentrated attention to postal issues in the 108th Congress. The new
chair of the Senate committee announced that postal affairs will be handled at the full
committee level. The House Government Reform Committee created a Special Panel on
Postal Reform and Oversight for the 108th Congress, chaired by Representative McHugh.
Congress acted swiftly on the USPS request to change the formula for its contributions to the
Civil Service Retirement Fund. By April 23, 2003, the Postal Civil Service Retirement
System Funding Reform Act of 2003 had been enacted as P.L. 108-18. Its proponents said
that the Act would provide some much-needed financial breathing room but warned that it
would be a serious mistake to let that relief forestall consideration of long-range reforms.
S. 1285 (Carper)
Senator Thomas Carper introduced comprehensive postal reform legislation, S. 1285,
on June 18, 2003. The bill is modeled in large part on H.R. 4970 in the 107th Congress, but
there are some key differences. The innovation that has attracted the most attention is the
bill’s provision that a Postal Regulatory Commission devise a set of service standards for
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market dominant products, and that USPS realign its operations to meet the new standards.
USPS’s plan to meet the standards would include the preparation of a list of facilities no
longer needed, and the list would be reviewed by an independent commission along the lines
of the base closing commission used to streamline the Department of Defense infrastructure.
S. 1285 would also explicitly authorize negotiated service agreements with big mailers, and
it contains no provision limiting price increases to rises in the consumer price index.
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
U.S. Congress, House Committee on Government Reform, The U.S. Postal Service’s
Uncertain Financial Outlook, Parts I and II, hearings, 107th Cong., 1st sess., April 4 and
May 16, 2001 (Washington: GPO, 2001).
—— Senate Committee on Appropriations, Financial Security of the U.S. Postal Service,
special hearing, 107th Cong., 1st sess., Nov. 8, 2001 (Washington: GPO, 2002).
—— Senate Committee on Governmental Affairs, Subcommittee on International Security,
Proliferation and Federal Services, The Postal Service in the 21st Century: the USPS
Transformation Plan, hearing, 107th Cong., 2nd sess., May 13, 2002 (Washington: GPO,
2003).
—— Senate Committee on Governmental Affairs, Subcommittee on International Security,
Proliferation and Federal Services, The Annual Report of the Postmaster General and
the Impact of Terrorist Attacks on Postal Operations, hearing, 107th Cong., 1st sess.,
Sept. 20, 2001 (Washington: GPO, 2002).
—— Senate Committee on Governmental Affairs, The Financial Outlook of the U.S. Postal
Service, hearing, 107th Cong., 1st sess., May 15, 2001 (Washington: GPO, 2002).
FOR ADDITIONAL READING
Rick Geddes, Saving the Mail: How to Solve the Problems of the U.S. Postal Service, AEI
Press, Washington, 2003, 152 pp.
Shane Ham and Robert D. Atkinson, Opening the Mail: A Postal System for the New
Economy, Progressive Policy Institute, Washington, Dec. 4, 2001, 29 pp.
Michael Schuyler, “Empire Building at the Postal Service,” Institute for Research on the
Economics of Taxation,Washington, May 19, 2003.
President’s Commission on the United States Postal Service, Embracing the Future: Making
the Tough Choices to Preserve Universal Mail Service, Washington, July 31, 2003.
U.S. General Accounting Office, Major Management Challenges and Program Risks: U.S.
Postal Service, GAO-03-118, Jan. 2002. 38 pp.
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U.S. Postal Service, Transformation Plan, Washington, April 2002. 78 pp. plus appendices.
CRS Reports
CRS Report RL31684. Funding Postal Service Obligations to the Civil Service Retirement
System, by Patrick Purcell and Nye Stevens.
CRS Report RS21640. The Legislative Recommendations of the President’s Commission
on the United States Postal Service: A Brief Overview, by Nye Stevens and Kevin
Kosar.
CRS Report RS21025. The Postal Revenue Forgone Appropriation: Overview and Current
Issues, by Nye Stevens.
CRS Report RL31069. Postal Service Financial Problems and Stakeholder Proposals, by
Nye Stevens.
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