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THE DMA APPLAUDS FINANCIAL FINDING THAT COULD HOLD RATE INCREASES DOWN UNTIL 2006 Work Remains To Be Done To Enact New Law Fixing Legislative Glitch
NEW YORK, November 5, 2002 – The Direct Marketing Association (The DMA) today applauded the announcement from the United States Postal Service (USPS) that it may be able to delay future postage rate increases until at least calendar year 2006. This action, however, depends on a change to the current legislative formula that controls how the USPS funds its employees' retirement. The change to the law is required to ensure that the American mailing public does not overpay for postage.
Absent these necessary changes in current law, the USPS likely will file a new rate case with the Postal Rate Commission (PRC) in the spring of 2003 that could lead to new and higher postage rates in 2004.
This new and positive development comes after a review of the USPS's pension liabilities by the U.S. Office of Personnel Management (OPM). The OPM's findings have been validated by the President's Office of Management and Budget (OMB). The review found that the current formula contained overly conservative interest assumptions under which the USPS contributes for its employees' retirement, creating an overpayment of pension liabilities.
Changes in the payment schedule will require a modification of the current law by Congress. This necessary change in the law would mean a reduction of postal costs of $2.9 billion in fiscal year 2003 and another $2.6 billion in fiscal year 2004. Changes proposed by the USPS and supported by the Administration would have the USPS fully fund all of its future pension liabilities and correct its payment schedule for past liabilities. Congress would, in effect, be helping to keep a lid on otherwise rising postal costs.
"We are pleased about the possible delay in any future rate increase and call on Congress to enact the necessary legislative change to fix this broken system quickly," said H. Robert Wientzen, president & CEO, The DMA. "We will work with the Postal Service and others to effect necessary changes which will ensure that the American mailing public receives the lowest possible mailing rates."
"This fiscal windfall should not, however, be misconstrued as a long-term salvation of the Postal Service," added Wientzen. "As noted today by the Postmaster General, the fact remains that Congress and the Administration need to look at fundamental reform of the 32-year-old law that governs all Postal Service functions. Without this type of fundamental reform, the Postal Service will not be able to compete in the 21st century electronic and private delivery marketplace as a provider of communications services," said Wientzen.
"I look forward to working with Congress, the Administration, the Postal Service, postal employee groups and all mailing groups to make certain that the Postal Service's retirement formula is changed very quickly," said Jerry Cerasale, senior vice president, government affairs, The DMA. "We will need this kind of cooperative effort to ensure that Congress enacts the change before the end of fiscal year 2003 so that the Postal Service and the mailing public can realize this potential benefit."
"The Postal Service and all of its stakeholders must, however, continue to be committed to its 'Transformation Plan' and to postal reform legislation if it is to ensure its survival in the 21st century," said Cerasale.
The DMA is the leading trade association for businesses interested in interactive and database marketing, with nearly 4,700 member companies from the United States and 53 other nations. Founded in 1917, its members include direct marketers from every business segment as well as the nonprofit and electronic marketing sectors. Included are catalogers, Internet retailers and service providers, financial services providers, book and magazine publishers, book and music clubs, retail stores, industrial manufacturers and a host of other vertical segments, including the service industries that support them. According to a DMA-commissioned study, direct and interactive marketing sales in the United States is projected to surpass $2 trillion in 2002, including $125 billion in catalog sales and $33 billion in sales generated by the Internet. The DMA's Web site iswww.the-dma.org, and its consumer Web site is www.shopthenet.org.