PRC rejects exigent rate increase,
punts financial crisis to Congress
Commission backs NALC on definition of exigent circumstances,
faults USPS case
Noting that the U.S. Postal Service and its employees had successfully adapted to the adverse effects of the Great Recession—cutting costs enough to more than offset the loss in mail revenue due to the recession—the Postal Regulatory Commission on Sept. 30 rejected the Service’s request for a 5.6 percent “exigent” rate increase.
The PRC did not dispute that the severity of the recession constituted “extraordinary or exceptional” circumstances, but it concluded that the Postal Service had failed to demonstrate that its recent financial losses were “due to” the Great Recession. Rather, the Commission argued —ss the NALC has for the past two years—that recent large financial losses are the direct result of the congressional mandate to massively pre-fund retiree health benefits.
The USPS filed for the emergency increase in July.
“Congress and the Obama administration should sit up and listen to what the PRC is saying,” National Association of Letter Carriers President Fredric V. Rolando said. “The time for delay is over. We must adopt Congressman Stephen Lynch’s bill [H.R. 5746] and repeal the pre-funding provisions of the law as soon as possible.”
The Lynch bill would allow the USPS to pre-fund its future retiree health benefit costs with the massive postal surplus in the Civil Service Retirement System, calculated by independent experts for both the PRC and the USPS Office of Inspector General.
The NALC called on Congress to adopt Rep. Lynch’s legislation during the so-called “lame duck” session of Congress after the mid-term elections, which would lay the groundwork for repeal of the annual pre-funding payments now currently in the law in the early days of the next Congress.
“Contrary to the irresponsible rhetoric of hyper-partisan leaders in the Republican party, the Lynch bill does not involve any taxpayer money and cannot honestly be called a ‘taxpayer bailout,’” Rolando added. “We want to use our own money—excess pension funds amassed over decades as a result of employee and employer contributions to the CSRS—to pre-fund our future retiree health benefits.”
Ruling a victory for NALC
“The Commission finds that the Postal Service has shown the recent recession to be an exigent circumstance but it has failed both to quantify the impact of the recession on its finances and to show how its rate request relates to the resulting loss of mail volume,” said PRC Chair Ruth Goldway. “Therefore, we unanimously deny its exigent rate request.”
Although NALC did not take a formal position for or against the exigent rate case, it did intervene to ensure the proper implementation of the exigent rate case provision of the law. In so doing, we argued that the events of recent years clearly complied with the definition of “extraordinary or exceptional” circumstances set out in the law.
The union also fought a motion by the Affordable Mail Alliance (AMA), a coalition of mailers, to limit the definition of exigent circumstances to those involving terrorist attacks and similar disasters.
“We are gratified that the whole Commission endorsed our view and rejected that of the self-selected group of mailers that formed the AMA,” President Rolando said.
In July, the Postal Service had asked for the PRC’s permission, under the terms of the 2006 Postal Accountability and Enhancement Act, to raise postage and parcel rates to offset revenue shortfalls that it said were brought on by the “extraordinary or exceptional” mail volume declines resulting from the Great Recession. The Service had argued that without such an increase, it would be unable to make its scheduled pre-funding payments into the Postal Service Retiree Health Benefit Fund as mandated by the PAEA.
For the next three months, the Commission heard testimony on the subject from a variety of sources and reviewed hundreds of comments from the public. Ultimately, the PRC concluded in its findings “that the recent recession and its impact on postal volumes” indeed qualified as “an ‘extraordinary or exceptional’ circumstance” as defined by the PAEA.
“The recent recession [was] unique in kind and severity in post-war America,” the Commission said. “The credit crisis disproportionately damaged the very economic sectors on which demand for postal services depends most—real estate, banking, mortgage lending, credit card lending, insurance and advertising.”
However, the Commission determined that the Service would have had serious money problems even if the recession had never happened, thanks to what it called the “overly ambitious requirement for the Postal Service to pre-fund its future retiree health benefit premiums” mandated by the PAEA.
“The Commission’s ruling confirms what we have been saying for more than a year now,” President Rolando said, “that the key to the Postal Service’s financial future lies in relieving the onerous requirement to fully fund its retiree health benefit fund within a 10-year time frame by paying $5.5 billion a year—a requirement foisted upon no other corporation or government agency in America.” The account already contains more than $37 billion—enough to handle the needs of current and future retirees for decades, he added.
The Postal Service “has been unable to fund this obligation from operations, and has instead used up all of its retained earnings and drawn down from its $15 billion borrowing authority,” the Commission’s report noted. “Even with the requested increase, the Postal Service would be unable to meet this annual obligation either in 2011, or in succeeding years.”
The report wasn’t all gloom and doom, however. Indeed, the Commission recognized that the USPS had slashed expenses by $6 billion last year, and that Postal Service cost-cutting has stayed ahead of mail volume declines over the last 12 months.
“The Postal Service is making up lost ground, reducing hours far in excess of the declines,” the report said. “This offers a positive outlook for the future.” The Commission also sounded another upbeat note—that as the effects of the recession are fading, mail volume appears to be rebounding.
“We continue to press Congress to pass H.R. 5746, which calls for refunding the decades of Postal Service overpayment into the Civil Service Retirement System—worth between $50 billion and $75 billion—and transfer the resulting surplus into the Postal Service Retiree Health Benefit Fund to offset the PAEA’s pre-funding requirement,” President Rolando said. “We remain hopeful that our friends in both the House and Senate will draw upon the PRC’s findings and use them to get this law passed in Congress’ ‘lame duck’ session before the end of the year.”