FROM THE OFFICE OF PUBLIC AFFAIRS
March 22, 2004
js-1276
Speech on Postal Reform
The Honorable Brian C. Roseboro
Acting Under Secretary for Domestic Finance
Department of the Treasury
To the National Leadership Conference of the
National Association of Postmasters of the United States
March 22, 2004
The Crystal Gateway Marriott, Arlington, Virginia
Good morning ladies and gentlemen. It is indeed a privilege to be invited to address the National Leadership Conference of the National Association of Postmasters of the United States (NAPUS). I wish to thank National President, Wally Olihovik, for this opportunity to share my views on postal reform. I had the pleasure of first meeting Wally and Bob Levi in my office in October, 2002, when we talked about the need for reform.
With 42,000 members, NAPUS is an important organization shaping the future of the United States Postal Service. I don’t need to tell each of you how important your role as postmaster is in the life of your community. As postmaster, each of you directs and coordinates operational, administrative, management, and supportive services of a post office, and coordinates activities of employees engaged in postal work. As such, I can imagine that you wear many hats every day. In many ways, you are also the “face of the federal government” for many of our citizens. I say this to assure you that I appreciate this audience and that I have great respect for your mission and the challenges that come with it.
I am delighted to observe that NAPUS has consistently articulated support for comprehensive postal reform, beginning with your long-time advocacy for the establishment of a President’s Commission on the Postal Service. I also note that NAPUS has positively evaluated the Commission’s report. Recently, Wally testified in both Senate and House hearings on postal reform, contributing to the high level dialogue surrounding optimal strategies for moving forward. I am pleased that NAPUS has seen fit to fully endorse the five principles that the Administration postulated to frame postal reform legislation. These are: implement best practices; enhance transparency; provide for greater operating flexibility; foster greater accountability; and ensure self-financing. Tomorrow, Secretary Snow will again emphasize these five principles in his testimony before a joint hearing of the Senate Governmental Affairs Committee and House Government Reform Committee.
The Postal Service plays a vital role in the commercial and social life of our nation. However, the current business model is not sustainable going into the 21st century. It is widely known that electronic diversion of mail volumes has caused a substantial and likely irreplaceable decline in first class mail. This trend is expected to continue. The Postal Service ended the latest fiscal year with large on and off balance sheet liabilities, totaling more than $88 billion. We need to act now to effect changes that can ensure a more sound and high quality Postal Service for the decades to come.
Recognizing this increasing financial vulnerability, President Bush took decisive action by establishing a bipartisan, non-stakeholder Commission to complete a comprehensive review of key postal issues. The process of receiving input from stakeholders, such as NAPUS and many others, through public meetings and written correspondence was given high marks for being fair and transparent.
The Commission’s report is the most important document on postal reform in the last 30 years. With its 35 recommendations, the report takes us a great distance toward reaching a common goal: to implement changes that best prepare the Postal Service to be a sound and efficient provider of services, a quality employer, and a fair competitor long into the 21st century. While the Administration may not agree with every aspect of the 35 recommendations, we encourage the postal management, NAPUS, and Congressional leaders to carefully consider how the full range of recommendations for legislative consideration might be incorporated in meaningful, comprehensive postal reform.
According to the Commission, 16 of the 35 recommendations do not require any legislative action. The Commission concluded that the Postal Service could implement each of these without any undue delay connected with legislative changes. I take this opportunity to underscore the Administration’s strong support for the Postal Service’s efforts to implement reforms as expeditiously as possible. As Postmaster General Potter has frequently stated, the Transformation Plan of April 2002 and the Commission’s recommendations are not incongruous; in fact, they are remarkably similar. I also encourage you, as postmasters, to play your part in implementing positive change.
In my view, we will likely have only one bite at this apple that we call “postal reform,” and we need to act quickly and decisively to address the many core issues necessary to include in comprehensive postal reform. To that end, the Administration set forth the following five guiding principles to help frame a long-term solution for the challenges that loom on the short and long-term horizon.
First, implement best practices. The Administration supports comprehensive reform that ensures that the Postal Service’s governing body is equipped to meet the responsibilities and objectives of a business of this size and scope. It is time to reflect on whether improvements in corporate governance adopted in the private sector can be successfully applied and add value for ratepayers, taxpayers, and the Postal Service’s workforce and management. We agree with the President’s Commission Report: “The Postal Service should meet the highest standard of corporate leadership…applying the best business practices of the private sector to delivering the nation’s mail.”
Second, enhance transparency. Consistent with our desire to implement best practices, we seek postal reform that takes steps to ensure that important factual information on the Postal Service’s operations and performance is accurately measured and made available to the public. The Postal Service should provide more detailed financial information, including audited product-line financial statements and expanded financial reporting, e.g., voluntary SEC reporting. We also believe that transparency requires that the aggregate unfunded post-retirement health liabilities and the annual current cost of such liabilities be recognized, either directly on the balance sheet or, at least, in notes to the financial statements. I believe that efforts to facilitate greater access to information can contribute to better decision-making, further enhance trust among stakeholders, and improve oversight.
Third, provide for greater operating flexibility. In return for increased transparency and accountability, and given its self-financing obligation, the Postal Service’s governing body and management should have greater authority to reduce costs, set rates, and adjust key aspects of its business in order to meet its obligations to customers in a dynamic marketplace. In doing so, we urge caution and care to avoid unintended disruption of market forces.
Fourth, foster greater accountability. Given its existing monopoly, potentially greater flexibility for operations, and its competitive position in some important segments in the delivery marketplace, we urge Congress to enact legislation that ensures that there is appropriate independent oversight to protect consumer welfare and universal mail service.
Fifth, ensure self-financing. The Administration is committed to see a Postal Service that is financially self-sufficient, covering all of its obligations. We believe that ratepayers should be responsible for covering liabilities, including on and off-balance sheet, unfunded liabilities. By so doing, the Postal Service remains motivated to operate in a manner that strengthens the financial and operational health of the Postal Service.
Now, I wish to make a few more focused remarks on the Postal Civil Service Retirement System Funding Reform Act of 2003 (P.L. 108-18) (hereafter Postal CSRS Funding Reform Act), signed into law by the President in April, 2003. To its great credit, the Congress enacted the Postal CSRS Funding Reform Act quickly and crafted it appropriately with respect to attributing pension costs for military service. It said that the Postal Service is responsible to cover some of these costs, amounting to about $27 billion, rather than the Treasury. We agree that the pension costs for military service were fairly and appropriately allocated.
Prompted by recent public comments by some members of Congress, postal employee groups, and others in the mailing community seeking to reverse the current allocation of pension costs for military service in the Postal CSRS Funding Reform Act, I feel compelled to clarify the Administration’s position: The Administration opposes any effort by Congress to put the estimated $27 billion of military pension costs back to the taxpayer. Such a move would contravene the Administration’s principle of self-financing.
.
Please allow me a moment to outline just a few of many reasons that justify why the Administration sees its position on military costs as fair and equitable.
As a starting point, it is important to note that no other federal agency has ever received the benefit of a dynamic analysis of its investment flows, as was the case for the Postal Service. Thanks to the General Accounting Office’s (GAO) request, the analysis by the Office of Personnel Management (OPM) was, indeed, unique and extraordinary. It provided the Postal Service with a properly calculated, enormous gain at the expense of other CSRS participants. Based on OPM’s work, which received GAO concurrence, and endorsed by Congress in the Postal Funding Reform Act, the Postal Service became the beneficiary of a $78 billion financial gain. This gain is evidence that the Postal Service accrued a privileged position vis-à-vis other federal agencies; no other federal agency has ever received such treatment.
This allocation is fair and equitable because the Postal CSRS Funding Reform Act created a funding system akin to the funding system currently utilized for the Federal Employees Retirement System (FERS), which requires that each agency cover the military costs of its retirees (rather than Treasury). In this circumstance, it is reasonable and consistent that allocation of military-related pension costs should match FERS. In our view, the Postal Service should not benefit from the dynamic valuation of its pension fund without assuming responsibilities that come with dynamic funding. To do otherwise would mean that we endorse selectively implementing portions of dynamic funding, thus creating a hybrid that is has both CSRS and FERS-like qualities. We see no reason in taking such a backward step.
This allocation is fair and equitable because the Postal Service, according to the Postal Reform Act, is obliged to manage its finances in a manner that ensures that it covers its costs, unlike virtually all other federal agencies. Even so, it is not uncommon to hear stakeholders complain that the Postal Service is being treated differently from other federal agencies. Statutes connected with the Postal Service, such as the Postal Reform Act, do not support arguments advocating the return of these obligations to the Treasury. One would need to overturn cornerstone aspects of the Postal Reform Act to make a fairness argument, like this, stick. The Administration certainly would not endorse this radical step.
In conclusion, the Administration sees postal reform as an integrated whole. It is crucial to address all major aspects of the Postal Service’s cost and revenue lines, its balance sheet and off-balance sheet components, its corporate governance, its competitors, as well as the taxpayers and ratepayers. Reform should be characterized by the five principles postulated by the Administration that, when implemented, will ask each stakeholder to accept shared sacrifice in order to achieve a better, stronger, more accountable and transparent Postal Service. In my view, the optimal outcome is when everyone at the table feels some pain in the course of reform, rather than any one stakeholder, or just a few groups, left to absorb a disproportionate share of sacrifices.
Issues surrounding postal reform are, indeed, complex. You have dedicated an enormous amount of time to making the Postal Service better. Postmaster General Potter’s sustained dedication to achieve this objective must also be recognized. We are now left with a sprint to get the necessary work accomplished. The issues that are involved with postal reform are complex; and the Administration stands ready to work with you to take this critical issue forward.
Thank you, again, for this invitation to address the NAPUS National Leadership Conference. I wish you continued success in your important work.