Congress needs to let the Postal Service reduce its costs

Saturday, June 19, 2010

FOR ONCE, the U.S. Postal Service deserves to be commended. After years of plummeting revenue under a business model that assumed mail volume would rebound when the recession ended, the Postal Service has finally acknowledged the changing communications landscape. Its 10-year plan, released in March, anticipates continued attrition in the face of new technology and proposes many sensible cuts. But the Postal Service's hybrid status as a semi-governmental, semi-private institution already threatens to cripple these reforms.

The Postal Service is funded by ratepayers, not taxpayers. But because of its mailbox monopoly, its pricing decisions for both market-dominant and competitive products must be reviewed by the Postal Regulatory Commission. Any rate increases must be linked to inflation, and federal law prohibits the closure of failing post offices. This cumbersome structure of oversight creates significant obstacles to change.

The Postal Reform Act of 2006 requires the Postal Service to prepay into an employee retirement fund each year to ensure that its increasing financial woes will not leave taxpayers shouldering costs. The Postal Service hopes Congress will release it from this obligation. That it already cannot afford such payments only reinforces the wisdom of the requirement: If Congress ends pre-funding, taxpayers will pay the price. But it might make sense to reevaluate the assumptions about workforce size and composition that serve as the basis for the requirement, which could lead to a decrease in these payments by billions a year. If Congress agrees -- as it did last year -- to let the USPS delay payments, it must make sure the Postal Service can undertake the reforms it so badly needs.

One proposed reform would limit mail delivery to five days a week. The shift clashes with the Postal Service's Universal Service Obligation, which mandates that service remain at 1983 levels. In a world where bills can be paid, taxes filed and communications carried out at the push of a button, coverage standards that date from an era when the mail functioned as the nation's nervous system look increasingly absurd. Congress must redefine the Universal Service Obligation in a way that makes sense for a new century.

As collective bargaining begins this fall for major portions of the USPS's 500,000-strong career workforce, Congress and the Postal Regulatory Commission must also require that arbitrators take the Postal Service's finances into account, allowing room for reasonable cuts in hiring and benefits rather than assuming that employee costs can simply be passed along to taxpayers. With an institution as large and entrenched as the Postal Service, reform moves slowly. By redefining universal service, encouraging reasonable bargaining and beginning to reshape the USPS's monopoly to free it from crippling regulatory structures, Congress can ensure that the Postal Service moves in the right direction.

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