Transcript

On today’s podcast, I discuss the details of H.R. 3076, the postal reform legislation that has recently passed in the House of Representatives and what this legislation would mean for the United States Postal Service and the mailing industry.

Welcome to the podcast everyone!

Perhaps it is because I’m from Minnesota, but I’ve always enjoyed the Peanuts comic strip created by Charles Schulz who was also a Minnesotan, don’t ya know. I guess in many ways, I saw a bit of myself in characters such as Linus, Schroeder, and of course Charlie Brown. I’m sure you’ve seen the classic scene where Lucy holds the football for Charlie Brown to kick only to have it abruptly yanked away at the last minute with him falling flat on his back. Despite doing this numerous times, he still dusts himself off and thinks maybe, just maybe, he will actually be able to kick that ball and watch it sore.

Alas, that is how postal reform legislation has seemed to have been these past ten plus years. And each time postal reform legislation would be brought up in Congress, I always thought of Charlie Brown and that darn football hoping that this would be the one that finally gets kicked into motion. Granted, it doesn’t have to be an actual field goal to win the game, just a chance for Charlie Brown’s foot to finally make contact with the ball would be wonderful!

Well folks, after more than ten years, it looks like we may have a real chance to see postal reform legislation pass through Congress and get signed into law. On February 8, the House of Representatives passed H.R. 3076 with 342 yeas, and 92 nays. Every Democrat representative voted in favor of it and 56% of the Republican representatives also voted for it, so it was truly a bipartisan effort.

Like many in the mailing industry, BlueCrest also sent a letter to Chairwoman Maloney and Ranking Member Comer in January thanking them for their efforts on this important legislation and urging them to continue to move forward. We support the key points of the legislation and urged every member of the House to vote in favor of H.R. 3076. I would like to think our letter along with the many others submitted by individual companies and industry associations helped to get this bill finally passed in the House.

So, what exactly is in H.R. 3076 and how does it help the USPS and perhaps help the mailing industry? Well, first, and foremost, H.R. 3076 removes the requirement to prefund retiree healthcare – a key provision in the Postal Accountability Enhancement Act that was questionable at the time it was included in 2006 and certainly makes no sense today. If you recall, back in 2006 we had over 213 billion pieces of mail and the USPS had plenty of cash. So, perhaps it made sense to ask them to put aside some of those funds for future retiree healthcare. However, when the great recession hit, and mail volume dropped precipitously it put the USPS in a financial crisis situation where they were unable to continue paying into the escrow. In fact, they haven’t paid into the escrow for over ten years, so rescinding this part of PAEA makes sense.

The second part of the legislation is for USPS retirees to use Medicare as their primary healthcare provider rather than continue to use the USPS as their primary healthcare provider. This too makes sense when you consider the more than $34 billion dollars in Medicare taxes the USPS has been paying since 1983 that is not being fully utilized. There is broad support for this provision, and it is certainly not a “bailout” as some have called it. This is simply leveraging Medicare tax investments the same way as any other company. If approved along with rescinding the prefunded liability, this legislation would generate more than $40 billion in cost savings over the next 10 years and is foundational for the Delivering for America plan.

The third provision in this legislation is to permit the USPS to provide non-postal services. When I initially read this, I was a bit concerned as the primary mission of the USPS should be its universal service obligation for timely delivery of mail and parcels. However, as I looked closer at this provision I realized that it is only for state and local government and not meant to be in direct competition with the mailing industry. Moreover, the attributable costs have to be fully covered by the revenue generated so this should not have any financial burden on postage payers. It will be interesting to see what types of non-postal services emerge and hopefully they help local communities and strengthen the USPS brand.

Those three provisions are all part of the financial reforms for the USPS. The rest of the bill focuses on USPS operational reforms and includes a number of provisions, the first of which is performance targets and transparency. The USPS is already permitted to set its own performance targets for service measurement, but this language requires a greater level of granularity and broader transparency. It requires the USPS to establish a public performance dashboard via a website with an interactive web-tool showing performance information for market dominant products that is updated on a weekly basis. The website will enable the general public to search for performance information by street address, ZIP Code, or post office box and it must display the information in plain language. If this bill becomes law, then it is my understanding that we may see this new website by spring of 2023.

Then we come to the integrated delivery network portion of HR 3076 in section 202. This states that “The Postal Service shall maintain an integrated network for the delivery of market-dominant and competitive products. Delivery shall occur at least six days a week, except during weeks that include a Federal holiday, in emergency situations, such as natural disasters, or in geographic areas where the Postal Service has established a policy of delivering mail fewer than six days a week as of the date of enactment of the Postal Service Reform Act of 2022.” Thus, if enacted into law, this will finally codify a six-day delivery of mail and clarifies that the USPS must maintain an integrated delivery network.

In section 203 of the bill, there is appropriate coverage for attributable costs to market competitive and market dominant products, and if not then the Postal Regulatory Commission “…shall make modifications or adopt alternative methodologies as necessary.” While I appreciate the concern for appropriate cost coverage with this language, let us not forget that it is wording like “adopt alternative methodologies” that wound up with these new pricing adders that are resulting in double-digit postage increases far exceeding CPI-U over the past 18 months.

Section 204 has the least language of the bill, yet the biggest potential positive relief for Periodical mail in a long time. This language, if adopted, would change Title 39 section 3626(h) to permit Periodicals to mail up to 50% of the entire publication to non-subscribers. Currently, no more than 10% of the publication being mailed can be to non-subscribers. This could help Periodical grow their subscription base, particularly for new Periodicals.

The rest of H.R. 3076 covers reporting requirements, requires a flats operations study and reform which is arguably long overdue, provides funding provisions for the Postal Regulatory Commission, and finally ends with a somewhat odd change. Section 209 of the bill would change a 1978 law by expanding oversight of the USPS Inspector General to include the Postal Regulatory Commission. As many of you know, Tammy Whitcomb is the current USPS Inspector General having been appointed by the USPS Board of Governors on November 29, 2018. So, with this change, we now have the USPS Inspector General overseeing both the regulator, the PRC, and the regulated, the USPS, which is appointed by the regulated Board of Governors. Feels like a bit of circular reference in my mind, but given the extremely high level of integrity at the OIG I am confident this too is a positive change.

So, a lot of changes with this legislation, but I see more positive than negative which is why we publicly supported its passing in the House. It fixes the financial problems created by Congress in PAEA, corrects the Medicare and healthcare issue, expands transparency, helps newspapers, codifies six-day delivery of mail. All of this will help the US Postal Service, and it will also help the industry. That is because with the prefunded retiree healthcare rescinded, that effectively removes one of the pricing adders for the USPS to raise postage beyond CPI.

Right now, the USPS is targeting July 9 for the next price increase, which they have already signaled will be 6.4% to possibly as high as 8% depending on mail class cost coverage. The pricing adder related to prefunded retiree healthcare is about 1% of that, so we may see that pricing range drop down to slightly more than 5% depending on CPI-U and inflation, which I just heard is at a 40-year high. Yikes! And I know, a 5% price increase is little comfort to postage payers who have seen double-digit increases over the last 18 months. But hey, every little bit helps.

Now that the House has passed HR 3076, it’s time to focus on the Senate and thankfully there may be a way to expedite things. It turns out that the Senate has something called Rule 14, which permits a House-passed bill to bypass the normal committee process and proceed directly to the floor of the Senate for consideration. It is my understanding that right now, Senator Schumer is working quickly to make that happen. If successful, that could mean a vote in the Senate on H.R. 3067 that if passed would send the bill to President Biden to sign into law. Folks, we could possibly see postal reform legislation actually happen by the end of February!

Now I know, you’re probably thinking this is Charlie Brown all over again and maybe you’re right. Maybe the bill won’t pass the Senate and we’ll have to start all over again, which would be like Lucy holding that football waiting to yank it back as Charlie Brown falls flat on his back. But I’m an optimistic guy and maybe, just maybe, a guy named Charles Schumer which sounds similar to a guy named Charles Schultz, will make sure that Charlie Brown finally gets to kick that darn ball over the goalpost.

Folks, I want to thank you for listening to today’s podcast, and if you’d like to learn more about mail tracking, or how to better automate your mailing workflows, please visit us at BCC Software.com or give us a call. As always, we’d like to know “How can we help?” Thank you for listening to the podcast, and have a great day!