USPS opposes bill to restructure mail service

The threat of a presidential veto could determine the content of a bill to restructure U.S. Postal Service operations for the first time in more than 30 years, according to USPS executives, who are now fighting the legislation.

Senior USPS officials had hoped to influence a more favorable Senate bill (S. 662) during eleventh-hour negotiations in late January. But they dropped their support when it appeared likely that President Bush would veto any final bill that failed to require the agency to prepay at least $3 billion a year for retirees’ health benefits.

Bush administration officials have insisted on the $3 billion prepayment provision to ensure that new legislation does not increase the administration’s budget deficit projections, said Richard Strasser, USPS executive vice president and chief financial officer, in a recent teleconference with reporters.

USPS wants to continue funding its retirees’ health benefits on a yearly basis. Prepaying $3 billion or more each year could force USPS to raise stamp prices as much as 20 percent in the near future, Strasser said. The President’s Commission on the U.S. Postal Service recommended in 2003 that USPS begin to prepay retiree health benefits as its finances permitted.

In withdrawing support for the bill, USPS and its governing board publicly denounced provisions that they said would make it impossible for the self-financed agency to maintain universal mail service and break even financially. Members of the U.S. Postal Service Board of Governors sent a letter to each senator asserting that the bill “would make it extremely difficult for the Postal Service to function in a modern, competitive environment.”

The size and complexity of the pending legislation — the result of years of debate and compromise — make it difficult for anyone to forecast all of its potential consequences. But USPS executives and some union leaders say the legislation lacks certain protections and retain too many provisions they oppose. The bills’ critics say no legislation is better than bad legislation.

With their various restrictions on generating new sources of revenue, including money from Internet-based services, the bills fail to give USPS the flexibility it will need to operate without massive future borrowing or sharp increases in postal rates, said Tom Day, USPS senior vice president for government relations.

The Senate bill grants a new Postal Regulatory Commission authority to override operational decisions that USPS makes about deploying automated processing equipment or awarding contracts, Day said.

Information technology is essential to USPS operations as a cost-cutting tool and as the basis for new fee-based services that officials hope will offset decreased mail revenue, USPS officials said. In fiscal 2000, USPS earned $1.50 on an average bundle of mail delivered to households and businesses. Last year, revenue from the average mail bundle dropped to $1.40, Strasser said.

The co-authors of the Senate bill, Susan Collins (R-Maine) and Thomas Carper (D-Del.), said they were troubled by USPS’ late defection. In a statement condemning opposition to the bill, Collins and Carper said their legislation would prevent steep increases in postage rates. “Nothing in the bill would lead to rate increases,” they wrote. The pending legislation includes a cap to keep USPS from raising rates each year by more than the Consumer Price Index.