A POSTMORTEM ON POSTAL REFORM, OR "WHO REALLY SHOT JOHN?"

The following is a special contribution to the PostCom Bulletin by veteran postal affairs correspondent Bill McAllister (formerly of the Washington Post and the Denver Post).

Postal legislation that was more than a dozen years in the making died at 9 p.m. September 29. It was the victim of a fragile coalition that could not remain united despite repeated assertions that the legislation was crucial to rescuing the U.S. Postal Service from a “death spiral” of higher prices and falling mail volume. 

On one level there is no mystery about how the bill died. National Association of Letter Carriers President Bill Young has taken credit for the death, saying his union could no longer support the measure because it would penalize postal workers who seek workers compensation benefits. With the defection of the city letter carriers, represented by the NALC, the bill was proclaimed moribund by its chief Senate sponsor. 

The letter carriers union had been in the fore of support for postal reform legislation and its sudden opposition stunned many mailing industry officials. It also shocked the bill’s supporters in the Senate who said the NALC’s complaint had never been cited as a barrier to passage of the measure during more than three years of negotiations.  

The NALC opposition was even more surprising because the postal measure had quickly gained momentum in the final week of the session. Backers had won key financial concessions from the Bush White House in mid-week. Then the proponents had steamrolled United Parcel Service (UPS) into dropping a parcel provision that some feared would kill the legislation. UPS, an influential force on Capitol Hill, retreated, not wanting the blame for killing what would have been the most important postal measure in 30 years.

House Government Reform Chairman Tom Davis, R-Va., who led the fight for the legislation in the House, has claimed that the bill still can win quick approval in the upcoming lame-duck session of Congress. “We’re going to get it done,” he said in an Oct. 2 speech. “We are conceptually 99.9 percent of the way there.” 

Senate Governmental Affairs Chair Susan Collins, R-Maine, who led the fight in that chamber, has voiced skepticism, saying that the same issues that killed the bill in the just-concluded regular session remain unresolved. Several key mail industry lobbyists interviewed for this paper agreed with her assessment.

If the bill remains moribund, as the lobbyists expect, then one of the mailing industry’s leading advocates, lobbyist Ben Cooper, predicts it may be 2010 before Congress returns to the issue.  Cooper says that the stalemate will result from a Bush administration that won’t be willing to touch the issue without some of the labor changes that the unions have resisted. The unions, which also have considerable support in Congress, are not likely to change, Cooper says.

The November elections will be critical to the bill’s fate in the lame-duck session. If the Democrats take control of the House that will put Rep. Henry Waxman, D-Calif., in charge of House Government Reform Committee. His priorities for what a bill should contain are not the same as Davis, the lobbyists say.

Waxman does not, for example, like the bill’s price cap. That was to be a major pricing concession to USPS. It would replace the current 10-month long review of postal rate increases by the independent Postal Rate Commission and would allow the service to automatically increase postal rates at basically the same rate of increase as the Consumer Price Index. Waxman, however views installing the price cap as tying the hands of postal regulators and a way of effectively allowing “Congress to set prices.”

UPS Washington representative David Bolger sees the prospect of the annual rate increases now promised by the Postal Service as a potential driver for reform before 2010. Large mailers will become increasingly frustrated over those increases, Bolger predicts. That concern, he says, will drive the broad coalition that had supported postal reform back together quicker than many now believe.

At the moment, there is no question that the postal coalition remains fractured, split by the sudden collapse of legislation that would have changed the way stamp prices are set for the first time since the Postal Service became an independent federal agency on July 1, 1971.

Many mailers and congressional staffers are furious at the NALC. Senator Collins believes she was “stabbed in the back” by a friend, says one colleague. The defeat has left “a tremendous amount of distrust” among the mailing community in the opinion of one congressional staffer. And the internal fight over the UPS parcel provision that it withdrew reluctantly has left bad blood between it and the big Direct Marketing Association.

Even the U.S. Postal Service, which initiated the call for reform in the early 1990s, gets dinged by many for its hot and cold attitudes toward the legislation. “They were all over the place,” says one lobbyist. Several other lobbyists sneer at the service, hinting that postal officials may have been behind the NALC veto. 

Drew von Bergen, the union’s spokesman, denies that Young, who had talked with Postmaster General John E. (Jack) Potter shortly before he moved against the bill, was doing the bidding of a third party. “There was no backroom deal with the postmaster general or anyone else regarding this legislation,” says von Bergen. Young acted only for the good of his union, the spokesman said.

Postal officials declined to be interviewed for this paper. When pressed for comment spokesman Gerald J. McKiernan said: 

“The Postal Service's commitment to Postal reform in principle has not wavered since HR 22 was first introduced. As for the current bill, it has been the subject of numerous discussions and revisions during recent weeks. Hill staff would confirm that we have been a part of these discussions and I don't think there's anyone in the Postal community who would doubt our commitment to the process. I don't think there's any organization that has issued a statement of support of the bill in its present form and that's as it should be as we all sort out where we are. And quite conceivably there'll be more discussions and revisions right up to Nov. 13. Let's see where we are then.”

But if nothing happens in the lame-duck session, as the lobbyists suggest, financial dynamics set in motion by the bill’s failure may drive the mailing coalition back together. 

That’s because the one immediate impact of the impasse over postal reform will be significantly higher postal rates in the coming years. Until Congress acts, two big financial burdens will remain on the backs of postal ratepayers. Under current law, the Postal Service must continue to place billions of dollars in a congressionally mandated escrow account each year. It also must continue to pay the retirement costs attributed to the time that postal workers spent in the military.

Those are big-ticket items. Postmaster General John E. (Jack) Potter has estimated that the cost of covering the military pensions alone that will add $27 billion to the cost of postage. He also has said that the escrow account requirement alone is enough to drive the current rate increase request. Without that requirement, the service could have avoided the current rate case and would be showing a profit, he has stated.

No other federal agency is currently required to pay for the time its workers have spent in the military. That cost is born by all taxpayers.

Under the Bush administration’s proposals, those costs would have been shifted back to the Treasury Department and all taxpayers. The White House also proposed that all the escrow money be set aside for the unfunded costs of postal retirees health care.

The problem with the escrow account is that it is growing at a rate of $3 billion a year. Lobbyists fear that a cash-hungry Congress is likely to eye it and raid it to pay for other government projects. 

UPS’s Bolger argues that as mailers see that escrow account grow – and their own postal rates soar – they will begin to demand Congress return to postal reform sooner rather than later.

For the moment, however, the mailing community remains abuzz with rumors and suspicions. “Everyone should be astounded,” says Cooper. “They essentially allowed one guy [Young] to lock that money up.” 

What has stirred concerns about the Postal Service’s position toward reform legislation has been its many, often-conflicting positions on the issue and its silence on the defeat of the measure. In the final days, it suddenly would make demands for new language in the bill – one to codify the status of the Negotiated Service Agreements it was reaching with big mailers and another to give it leeway to move two percent above the proposed rate cap under special circumstances. Some mailers considered the requests unnecessary and question whether they were attempts to sabotage the legislation.

Former postmaster general Marvin T. Runyon started the reform movement in the early 1990s, but it faltered when Runyon declined to take a firm position on the legislation introduced to answer his concerns. Since then, the service’s position has wavered although Potter has voiced support for some reforms measures, especially the financial ones. But the presidentially appointed Postal Service Board of Governors has vehemently and publicly opposed the present legislation. Their opposition was largely based on what they saw as an erosion of their oversight powers to a stronger Postal Regulatory Agency.

This time, when the Bush White House entered the discussions in the final week of the session, it directed the Service to take a low profile, one lobbyist said. That may account for the Service’s “no comment” posture. Even so, postal officials have made no effort to thank either the bill’s supporters in the mailing industry or those on the Hill for their actions to save the legislation. “What we have heard is why didn’t you include this or that provision,” said one Senate aide. “We never got a ‘thank you.’”

What brought H.R. 22 – the postal bill – to its demise was the major issue that has bedeviled the Postal Service since its inception: labor costs. Those costs amount to roughly 80 per cent of the agency’s budget – a figure that has remained level for the past three decades despite the billions of dollars that the service has poured into automation.

Both Collins and the White House were insistent that all parties to the legislation make some sacrifice. Senator Collins had made a number of concessions to make the measure friendly to the unions before Young withdrew his support for the measure. Some critics of the legislation have long maintained that its biggest failure was not addressing the Service’s labor costs. Thanks to the required arbitration of postal labor contracts most labor costs are literally out of the control of the agency’s top managers.

The issue that caused Young to pulled the plug on the legislation is, by most estimates, a relatively minor one. It would have required a three-day waiting period for workers’ compensation benefits to begin flowing to postal workers. Since most workers have vacation or leave time to cover that, it was widely believed to be a minor issue with little practical impact on the postal workforce. Young believed it would single out postal workers for treatment unlike any other federal worker.

Some mail industry lobbyists and congressional staffers say privately that Young was trumpeting his role for internal union politics. They also say he may have wanted to show that he – not American Postal Workers Union President Bill Burrus – was the big union influence in Washington.  Others think Young may have decided he could get a better deal from a Democratic Congress.

In a Sept. 30 message to his union members, Young said he sought to block the bill because it was an effort by the Bush administration “to pick on those who are less fortunate than others. The nation’s injured letter carriers and other postal employees were an easy mark.”

Young also predicted that, even if the union had not acted, the legislation would probably fail in the House.  On that point, Cooper agrees. But the lobbyist argues that passage by the Senate would have put the issue in a much greater chance of final passage either in the lame-duck session or the next Congress.

Cooper, who once worked for the Postal Service’s government relations office, thinks his old employer has not realistically assessed its prospects in an age of declining mail volume or embraced the idea that it has to make dramatic changes in its operations. “At the heart of it, they believe they’re doing a good job,” says Cooper.

The service has overcome serious problems in the past and mail volume has always bounced back, despite repeated price increases and dire predictions of its future. That’s the past, Cooper says. Today the Internet and other competitors pose a more serious risk to the service, he argues. “The future is not good,” he says. “Mail volume is going to decline.”

As for the mailing coalition that Cooper led, he thinks it did succeeded on some levels. In an Oct. 2 e-mail after the defeat of the bill, Cooper wrote: “In the final analysis, the work of the coalition was successful in the sense that our core principles were part of the reform. Having established these principles early on, we devoted our devoted our energies to helping resolve other problems. I think we can be proud of these efforts and, unlike others in this fight, kept our word on our negotiations throughout.”