WASHINGTON – Today, Sen. Tom Carper (D-Del.), Chairman of the Senate subcommittee with jurisdiction over the U.S. Postal Service, released the following statement in response to the Postal Regulatory Commission’s (PRC) decision to reject the latest postal rate hike:

“I’d like to thank the members of the Postal Regulatory Commission and their staff for their work.  I know this was a hard-fought and complicated case so I appreciate the thought and the long hours that went into producing this important decision.

“The Postal Service is clearly in a financial crisis.  It lost $4 billion last year and will likely lose as much as $7 billion this year once it closes its books for the fiscal year later today.  Postmaster General Potter announced this past spring that, if nothing were done, the Postal Service could accumulate as much as $230 billion or more in losses by 2020.  This is clearly an unsustainable path.  In fact – if these trends continue and no major changes occur – I understand that the Postal Service will actually run out of cash by the end of fiscal year 2011, just a year from today.

“The rate increase that was denied today would not have fixed the Postal Service’s problems.  A number of observers argued that it could actually have made them worse.  Regardless, I hope that today’s events will focus the Postal Service, its employees, its customers, and my colleagues in Congress on the need to take dramatic action to arrest the slide the Postal Service is on.  Even when our economy has fully recovered from this recession, the Postal Service will still need to deal with the fact that more and more people are turning to electronic communication to keep in touch with friends and family and to conduct their daily business.  Postal management has done a tremendous job in recent years cutting costs, becoming more efficient, and reducing its workforce.  But despite these efforts, more needs to be done to reduce costs and increase revenue, especially during the labor negotiations currently underway.  Perhaps more importantly, Congress needs to clear the way for further progress by passing legislation to free the Postal Service to execute its reform plans.

“If we do nothing, we face a future without the valuable services the Postal Service provides. However, if we act quickly, we can turn things around by passing my recently introduced bill, the Postal Operations Sustainment and Transformation (POST) Act of 2010. This necessary legislation would give the Postal Service the room it needs to manage itself and avoid becoming the latest victim of Congressional gridlock. More specifically, my bill addresses the current budget issues plaguing the Postal Service by proposing a series of provisions including: easing postal employee pension and retiree health costs; addressing postal employee wages and benefits; allowing partnerships with state and local governments; and giving the Postal Service leeway to close post offices, market certain non-postal items, and eliminate Saturday delivery.

“The Postal Service has put forth a plan that shows a commitment to further cost cutting and efforts to make their business relevant during these changing times. Achieving these goals will require a shared sacrifice on the parts of the Postal Service, postal employees, and major postal customers.”

Background: The proposal was a 5.6 percent increase that would have gone into effect in January.  The price of a first-class stamp would have increased by two cents from 44 to 46.  The Postal Service was anticipating that it would generate $2.3 billion in revenue.  It was filed under a process laid out in the 2006 Postal Accountability and Enhancement Act allowing the Postal Service to increase prices above the CPI rate cap during “extraordinary or exceptional” circumstances.  The PRC is denying the request.

A summary of the bill follows:

The POST Act (S. 3831)

There are seven provisions in the bill.  All of them are based on the legislative proposals the Postal Service made this past spring.

1. Financial Relief – The heart of the bill attempts to permanently address the pension and retiree health issues that have been a drain on postal finances over the years.  The Postal Service currently pays into the old Civil Service Retirement System using a formula that the Postal Service Inspector General, the Postal Regulatory Commission, and at least two outside consulting firms have found unfairly allocates costs related to the former Post Office Department to the Postal Service.  If true, this has resulted in the Postal Service overpaying its CSRS obligations over the few decades by between $50 billion and $75 billion.  In addition, the Postal Service since FY2007 has been required to pay between $5.5 billion and $5.9 billion a year in an effort to prefund its future retiree health obligations. The bill would give the Postal Service more than $5 billion in breathing room each year by making two changes to current law:

– First, it requires OPM to recalculate the Postal Service’s CSRS obligation in a way that makes the Treasury responsible for pension costs related to pay increases Post Office Department employees working for the Postal Service would have gotten had they stayed on the federal payroll.  This was the approach recommended by the IG, the PRC, and the consultants who looked at this issue.  The recalculation will result in a finding that the Postal Service has paid about $50 billion more into CSRS that it owed.

– Second, it allows the Postal Service to use its $50 billion in overpayments to make the remaining seven retiree health prefunding payments it owes between now and 2016.

2. Saturday Delivery – The bill would remove the Appropriations rider that currently prevents the Postal Service from moving forward with its proposal to eliminate Saturday delivery. Under the 2006 postal reform legislation, the Postal Service was given the authority to reduce delivery frequency when it felt like it was necessary after taking the proposal to the PRC and receiving an advisory opinion.  The Appropriators, however, put language in their bill every year negating this authority.  Eliminating that rider would allow the Postal Service to achieve the $3 billion or more a year in savings that the Postal Service believes it could achieve if they eliminated Saturday delivery.

3. Post Office Closings – The bill would eliminate several provisions in law that the Postal Service believes forces it to maintain post offices that are no longer necessary.  If the Postal Service is able to close some of these facilities, postal management believes they could began the process of rolling out cheaper, more convenient retail options such as automated kiosks or postal stations located in grocery stores or other places where people go every day.

4. Arbitration – Under current law, the Postal Service is required to pay its employees wages and benefits that are comparable to those paid in the private sector.  Arbitrators in labor disputes have made it clear in the past that they think this is a legally binding requirement that should be taken into consideration when they render a decision.  At times, arbitrators have awarded postal employees what they believe are comparable pay and benefits without taking the Postal Service’s financial condition into account.  Recognizing that this situation cannot continue in a world where the Postal Service operates under a rate cap and faces stiffer competition from electronic communication, Senator Coburn proposed language in the past that would require arbitrators to take the Postal Service’s financial condition into account.  The contains a similar provision requiring arbitrators to take the Postal Service’s financial condition into account along with other factors such as the comparability requirement and the details of the rate system.

5. Non-Postal Products – Under current law, the Postal Service is prohibited with a few exceptions from offering “non-postal” products and services, meaning products or services not related to the mail.  The bill would revise this prohibition so that the Postal Service can begin offering non-postal products that are in the public interest and make use of the existing postal network.

6. State and Local Governments – Under current law, the Postal Service may partner with federal agencies to offer government services in postal facilities.  The bill would allow them to enter into similar partnerships with state and local governments.

7. Wine and Beer – Under current law, the Postal Service is prohibited from mailing alcoholic beverages.  UPS and FedEx can, however.  The bill includes language putting the Postal Service on equal footing with UPS and FedEx with respect to shipping beer and wine.