Postal Reform Update: A DMA Call To Action

February 16, 2006 – Now that postal reform bills have passed in both the US Senate and House of Representatives, the Direct Marketing Association (DMA) is urging quick action by the joint House-Senate Conference Committee to resolve differences between the two bills and quickly finalize legislation that will help secure a successful future for the US Postal Service (USPS).

DMA has fought hard for this legislation for several years, and we are proud to have helped get the legislation this far.

DMA President & CEO John A. Greco, Jr. today said, “We have a big stake in the outcome of this legislation -- and a big story to tell.”

“I want to thank all of you who helped us over the course of the year with letters, calls, and visits to members of Congress and their staffs,” Greco said. “This involvement helped us get where we are today.”

“Now, in the coming weeks,” Greco added, “we may be turning to you -- our members -- once again to help us make the push that will get the legislation through conference and signed by President Bush.”

“With 9 million jobs and more than $900 billion in commerce affected by the success or failure of the Postal Service, it’s time to cross the finish line and give the Postal Service the flexibility it needs to operate competitively in the 21st century,” added Jerry Cerasale, DMA’s senior vice president for government affairs.

Why Postal Reform Is Important to Marketers

For years, the USPS has struggled with declining mail volumes, increasing costs, and an ever-expanding number of delivery points it must service.

Moreover, in an era of increasing competition and ever-changing technology that impacts communications and delivery services, it is a struggle for the USPS to remain economically viable while it is being hindered by an operating structure that dates back to early 1970s.

Postal rates increased last month, with additional increases already being proposed for 2007. These increases add up to millions of extra dollars in costs for commercial mailers and nonprofit organizations. Faced with frequent and costly price increases, many mailers ultimately will be forced to curtail mailing campaigns and seek less expensive ways of communicating with current and potential customers and donors.

And cutting back on mailings not only will affect downstream industries, such as paper and printing, but will also further reduce USPS revenue-bearing mail volume, necessitating additional rate increases or even service cuts in order to keep the USPS afloat.

What DMA Wants in Conference

As passed by the House and Senate, postal reform legislation would give the USPS the flexibility to respond to both changing market conditions and ongoing evolution of communications technology, while maintaining the USPS’s cornerstone mission of providing universal service.

However, it is crucial that the final bill include the following provisions:

· Placing a cap on rate increases. The Senate bill calls for a “hard cap” that would keep postal rate increases at or below the rate of inflation, while simplifying the process for the approval of such increases. The House also places a cap on rate increases, but this softer version could likely be broken by such events as the recent increase in gasoline prices. DMA supports the “hard cap” as passed by the Senate.

· Allowing worksharing provisions. Both the House and Senate bills have worksharing provisions that continue to allow a reduction in rates for mailers, who in effect do part of the USPS’s work and push mail into the system later in the process -- closer to the “last mile” before ultimate delivery.

· Continuing negotiated service agreements (NSAs). Both the House and Senate bills allow the USPS to continue to negotiate service agreements with mailers. NSAs will help prevent mail volume loss by providing rate relief and encouraging mailers, both large and small, to better utilize USPS services by taking costs from the system.

· Eliminating the escrow account. Legislation passed in 2003 requires that excess funds for future postal employee retirement be held in escrow. Under both the Senate and House bills, the escrow account will be eliminated. Those funds -- some $3.2 billion in 2006 and larger amounts in future years -- could then be used to meet current USPS needs and offset the need for future rate increases.

· Reversing the current policy on retirement costs for military service. The USPS is now required to pay the total retiree benefits for employees who have also served in the military. This is different from other government entities, where the US Treasury pays military portions of retiree benefits. Both the Senate and House bills currently incorporate the recommendation of President Bush’s Commission on the Postal Service, which in its 2003 report called for the transfer of military pension responsibility back to the US Treasury. The funds saved by the transfer of military pension costs could mitigate the need for future rate increases.

Current Status and Future Steps

As mentioned, the next step in the legislative process is for a joint conference committee of House and Senate members to reconcile the discrepancies in the House and Senate bills.

The Senate’s appointed conferees are Senators Susan Collins (R-ME) and Tom Carper (D-DE), the Senate bill’s chief sponsors, and Robert Bennett (R-UT), Norm Coleman (R-MN), George Voinovich (R-OH), Ted Stevens (R-AK), Joe Lieberman (D-CT), and Daniel Akaka (D-HI). House conferees likely will be appointed soon.

Stay tuned -- DMA may need you to reach out to these members soon.

Additional Information

DMA will continue to keep members apprised of the campaign for postal reform via:

“3D”--DMA Daily Digest.

DMA’s online newsstand, which is located at www.the-dma.org/newsstand.

Government Affairs section of DMA’s Web site at www.the-dma.org/government.

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