U.S. Postal Service

Although its short-term financial performance has improved, the United States Postal Service (USPS) faces severe financial straits in the long term. As additional delivery points are added each year, the cost of operation continues to increase, but the increased use of online services and faxes had resulted in a decreased demand for services. USPS, its board of governors, the General Accountability Office (GAO), mailers' organizations, and a Presidential blue ribbon commission have all found that the Postal Reorganization Act of 1970 no longer provides a viable business model. Since 2003, Congress has been working to pass a postal reform bill. In May 2007, a postage rate increase of 2 cents (up to 41 cents) went into effect.

Postal Reform

On July 25th, 2005, with Rep. Petri's support, the Postal Accountability and Enhancement Act, H.R. 6407, passed the House by voice vote. Following Senate passage in early December, President Bush signed the Postal Accountability and Enhancement Act into law on December 20, 2006. This is the first comprehensive overhaul of the U.S. Postal Service in 35 years. Public Law 109-435 brings extensive reform to the nation's postal delivery sector, an $871 billion industry that employs nine million workers nationwide and represents more than 8 percent of the GDP.

Public Law 109-435 maintains universal coverage, creates a more flexible and predictable rate setting process, defines postal services, and allows for extending the amount of work sharing between the USPS and private mailers.

The most expensive provision of the legislation, and some say the most necessary to keep the USPS afloat, entails the transfer of military pension costs from the Postal Service to the Treasury Department. The USPS is currently the only government agency that is responsible for military pension payments while the employee was not a part of the USPS. Public Law 109-435 eliminates this unique obligation. The Act also calls for a repeal of an escrow provision that was established by Congress in 2003. At the same time, it requires the Postal Service to fund its enormous liability for retiree health benefits.

Major Provisions of Public Law 109-435

Modern Rate Regulation - replaces the present adversarial postage ratemaking process, which typically takes 10 to 14 months, with a rate- cap system that would permit USPS to raise postage rates on market- dominant products at the rate of inflation. The Board of Governors of USPS would establish rates and classes for competitive products.

Limitations on Postal Monopoly and Nonpostal Products - defines the categories of postal services and products as "competitive" or "market- dominant" and prohibits the Postal Service from subsidizing competitive products with revenues from market-dominant products.

Military Costs of Postal Retirees' Pensions - a provision in the "Postal Civil Service Retirement System Funding Act of 2003" (P.L.108-18) transferred the responsibility, from the Treasury to the Postal Service, of paying the retirement benefits earned by postal employees when they were members of the Armed Forces - a $27 billion obligation. Public Law 109-435 returns this responsibility back to the Treasury Department, making the USPS like other federal agencies. The Act also repeals the escrow provision of P.L. 108-18 and requires the Postal Service to fund its enormous liability for retiree health benefits.

Strengthening of the Commission - gives the Postal Rate Commission (PRC) "teeth" by granting subpoena power and broader scope for regulation and oversight. The PRC is renamed the Postal Regulatory Commission.