By Stephen Barr
Thursday, December 21, 2006

For almost 12 years, Rep. John M. McHugh (R-N.Y.) has championed legislation to overhaul the U.S. Postal Service. It has been a long and sometimes lonely journey.

McHugh has worked to balance the competing interests of postal management, postal competitors, unions and companies, including Hallmark Cards, L.L. Bean and American Express, that rely on the post office.

Yesterday, he was among a small group from Capitol Hill that saw President Bush sign the Postal Accountability and Enhancement Act, the first change to the Postal Service since President Richard M. Nixon agreed to replace the old Post Office Department with a self-sustaining government corporation.

Thirty-six years ago, of course, the communications landscape was different. The Internet was an infant at the Defense Department, FedEx had not started operations and the United Parcel Service had a smaller market share than it does today.

Concerned that the post office might not be able to continue universal service at reasonable postage rates, McHugh in 1995 began his effort to update the Postal Service's business operations and create a less cumbersome system for setting postal rates. In June 1996, he introduced his first bill to revamp postal laws.

McHugh called the new law "a major achievement," and said it will provide the Postal Service with "the tools to both act and compete as a modern business."

The public, for the most part, will see no change in its dealings with the post office. But stamp prices will probably go up once or twice in the next year. The Postal Service has a request pending to raise first-class postage by 3 cents, to 42 cents, probably in May. Under the new law, the Postal Service can seek one more increase, no later than Dec. 20 next year, before new rules take effect.

The law offers some hope that subsequent increases in postage will be more predictable, especially for letters, magazines and advertising mail. For 10 years, the Postal Service will operate under a price cap that keeps it from raising postage prices above inflation. After that trial run, postal officials and regulators will review the effectiveness of the price cap to see if it should be modified.

The law imposes no price cap on "competitive products," such as Express Mail and Priority Mail. Those rates will be set by the postal board of governors, which will be guided by new regulations developed at the Postal Regulatory Commission (a new name for the Postal Rate Commission). The commission has 18 months to develop the regulations.

In an interview, Postmaster General John E. Potter said some parts of the law will take as long as three years to implement and that changes to postal service standards could take longer.

William Burrus, president of the American Postal Workers Union and a steady critic of the new law, has told his union members that the price cap will make it more difficult to bargain for higher salaries. "This limit on rate increases -- without regard to the actual costs the Postal Service incurs -- will result in an artificial cap on postal workers' wages," he said.

But Potter said the Postal Service plans to continue offering "wages that are comparable to the private sector. The goal here is not to harm postal employees."

The new law shifts responsibility for military pensions earned by postal workers to the Treasury Department, as is the practice for federal agencies. The law also redirects money set aside for postal retirement costs to a new trust fund that will finance retiree health benefits. Potter estimated that about $90 billion will be placed in the trust fund.

Although McHugh pushed the longest and hardest for postal overhaul, others in Congress played key roles in pulling together a compromise acceptable to the White House. Sens. Susan Collins (R-Maine) and Thomas R. Carper (D-Del.) and Reps. Henry A. Waxman (D-Calif.) and Thomas M. Davis III (R-Va.) brokered the final bill, which passed in the hours before Congress adjourned for the year.

On the House floor, McHugh told colleagues, "If there is any truth in the old adage that anything worth having is worth waiting for, this is a very, very good night."

Federal employees and retirees will be able to take advantage of a tax law signed by the president yesterday and increase the amount of money they contribute to health savings accounts, the Office of Personnel Management announced.

Employees who had a 2006 flexible spending account also will have an opportunity to enroll in a high-deductible health plan with a savings account for 2007, the OPM said. They may roll over any used money in their FSA to their new health spending account.

Belated enrollments in a high-deductible plan and the transfer of FSA funds must be completed by midnight Dec. 31, the OPM said. In 2007, the maximum health savings contribution is $2,850 for an individual and $5,650 for a family, the OPM said. Previously, health savings contributions were limited to the amount of a person's deductible.

Stephen Barr's e-mail address is barrs@washpost.com.