A POSTAL WIN

Three years after repeated previous failures to reform the $70 billion U.S. Postal Service, Sen. Susan Collins can claim victory on major legislation almost no one has heard of but that will affect nearly everyone. Her bill steers the Postal Service toward a more competitive, more stable future.

A study by the Government Accountability Office 18 months ago summarized the Postal Service’s challenges: “The service’s core business of First Class Mail continues to decline,” its report said, “squeezing revenues available to pay universal service costs. Meanwhile, compensation and benefit costs continue to rise despite decreases in the number of postal employees.”

The goal of the reform was to support universal service as private carriers and e-mail threatened the service’s customer base. The GAO noted that the Postal Service had begun some reforms and that it had been helped temporarily by pension reform passed by Congress several years ago, but that it still faced growing competition and a huge unfunded retiree health benefit.

The Collins reform addresses these issues by giving the service more flexibility to set rates for different dominant classes of mail, as long as the new rate level remains under an inflation cap. Though the senator had intended this new system to be permanent, a compromise with the House limits it to 10 years. The results of the new model, however, will be apparent well before that, and Congress should be willing to revisit this issue as its performance becomes clear.

Along with this new flexibility come limits on how market-dominant products could be priced. Of particular concern was whether the Postal Service was using these products – First Class Mail, for instance – to subsidize products that were competing against those of private firms. That would be forbidden under the new law. The organization keeping an eye on this will be the new Postal Regulatory Authority, which replaces the Postal Rate Commission and will have more authority to oversee rates, ensure fair limits on retained earnings, and review complaints against the Postal Service.

The bill repeals the requirement that the Postal Service pay the military pensions for postal employees, turning that responsibility over to the Treasury Department. It also freed up $78 billion in a retirement escrow account, money that now can be used to finance health benefits.

By clarifying the service’s mission, adding transparency and accountability through the regulatory authority and providing for more flexible rates, the congressional reform package prepares the Postal Service to compete in an increasingly tough environment. This matters directly to its employees and to the countless businesses that depend on affordable and reliable delivery. And that means it matters indirectly to hundreds of millions of customers.

The public may not see much difference at the local post office as a result of the reforms, but if the simple mailing of a letter – or all those Christmas cards or, if you are a catalog-dependent company, those millions of mailings – is to be affordable, the changes were crucial. Sen. Collins deserves credit for sticking with this issue and assuring its passage.