The postmaster general has stated that the Postal Service needs a rate increase by the late spring of 1984. In the light of that announcement, the recently released annual report of the Postal Service for fiscal 1982 makes very interesting reading. It reveals a 1982 surplus of $1.2 billion. A later Postal Service report shows that for the first six months of fiscal 1983 there was an additional surplus of over $500 million. These are huge profits--particularly for a government corporation mandated, by law, to operate on a break-even basis.
This surplus flows mostly from sales of billions of 20-cent first-class stamps. In February 1981, the Postal Rate Commission, an independent agency, recommended an 18-cent first-class stamp. The commission's job is to develop fair rates to protect us from the abuses of the Postal Service letter-mail monopoly. The commission calculated that raising the rate from 15 cents to 18 cents, along with some increases in other mail classes, would allow the Postal Service to meet its statutory break-even requirements.
Following a lengthy interagency battle, the Postal Service Governors--a part- time body then receiving no staff advice other than that provided by the Postal Service itself--turned down the commission's recommended rates and went for 20 cents a stamp. This action raised first-class revenues by $1.2 billion per year, lowered second-class (magazines and newspapers) revenues by nearly $50 million, raised third-class (advertising mail) by over $200 million, and lowered revenues from all nonprofit mail by over $100 million compared with commission recommendations.
While ensuing court cases have for the most part upheld the service's right to modify the commission's decisions, the courts have not yet approved the specific rates set by the service. Nonetheless, the consequences of the Postal Service Governors' 1981 modification are striking. For almost one-and-one-half years, first-class mailers--those of us who use the mails for correspondence, greeting cards and paying our bills--have been footing part of the bill for the other classes of mail. An unfair burden has been placed on the first-class mailer.
Furthermore, the service competes unfairly with alternate, private delivery systems. It is also violating the law. The possibility of this happening was envisioned by Congress when it established both the Postal Service and the Postal Rate Commission in 1970. The Senate Report on the Postal Reorganization Act states:
"The temptation to resolve the financial problems of the Post Office by charging the lion's share of all operational costs to first class is strong; that's where the big money is. The necessity for preventing that imposition upon the only class of mail which the general public uses is one of the reasons why the Postal Rate Commission should be independent of operating management."
The Senate's fears have been realized. The Postal Rate Commission's protection is inadequate because the Postal Service Governors can, by unanimous vote, change a Postal Rate Commission decision. Examine the unilateral action of the Postal Service Governors and make what you will of their motives: they raised first-class rates by 33 percent, yet raised second-class by 2 percent, raised third-class by 17 percent and actually lowered nonprofit rates.
In so deciding, the governors explained that they would not be able to break even at the commission's recommended 18-cent rate. They were required, by law, to make this finding in order to modify the commission's recommendation. One year later, the Postal Service had $1.2 billion in profits. Embarrassed by their obviously faulty projection, the governors arbitrarily reduced the profit figure in their 1982 annual report by $400 million. They did this over the objection of their auditors, who proceeded to give the Postal Service only a qualified certification. One of the big eight accounting firms has refused, for good reason, to give a clear and unqualified certification that the Postal Service followed generally acceptable accounting principles when it swept $400 million of its surplus under the rug. It is extraordinarily rare for a major corporation to earn a qualified certification.
What kind of confidence can the public have in our largest government corporation if it does not keep its books according to generally accepted accounting principles? How is the public to know the truth about postal finances? The Congress is so far removed from postal affairs that they have not even held hearings on the subject.
Postal management is not sufficiently accountable. It is not accountable to the Postal Service Governors, which repeatedly rubber- stamps management decisions. It is not accountable to the Postal Rate Commission, because its decisions may be changed by the board whenever it suits them. It is not accountable to its auditors who can only decline to certify its finances. It is not accountable to Congress, which has shown sublime indifference. It is not accountable to the president, who is similarly indifferent and who has no hand in selecting postal management and who would not have the opportunity in a single term to appoint a majority of the Board of Governors. Finally, it is not accountable to the public, which simply has to pay whatever management wants.
There is obviously something wrong when a $25 billion government corporation with a statutory monopoly can be so free-wheeling. It has the freedom to gouge the first-class mailer, bury the ensuing surplus and continue as if nothing has happened. Either change the law to make management accountable, or abolish the monopoly so that first-class mailers can go elsewhere to avoid being overcharged by more than $1 billion per year.