Reform proposals aim to help Postal Service turn a profit

Should the Postal Services be split into two entities-one that maintains a statutory monopoly over First Class mail and one that offers such competitive products as express and priority mail? Should the entire Postal Service be privatized? How about making it easier for the agency to change postage rates? And what exactly is "universal service?" These questions are at the center of two draft postal reform documents circulating among Postal Service officials, lawmakers and stakeholders. Rep. John McHugh, R- N.Y., drafted the first reform proposal, a new version of postal reform legislation, which would give the agency greater flexibility to set rates. The bill would also prohibit activity deemed to be outside the Postal Service's core mission, including electronic commerce. During the past six years, McHugh was unsuccessful in trying to get Congress to pay attention to, let alone pass, postal reform legislation. "The last time, our supporters outnumbered opponents, at least on paper," said Robert Taub, McHugh's chief of staff. "But there was not a grassroots effort. We don't want to be back at that again." If there isn't significant grassroots support, McHugh is unlikely to formally introduce the legislation. As McHugh gauges interest for his reform bill, Postal Service officials are working on a transformation plan of their own. Requested by the Senate Government Affairs Committee and the General Accounting Office, the plan is the agency's first comprehensive statement about the short- and long-term reforms needed to stem the agency's tide of declining revenue. The agency made public Sept. 30 an outline of its transformation plan. The document explains the problems facing the Postal Service and lists a series of possible solutions. Stakeholders are invited to comment on the draft. A final transformation plan is due to Congress and GAO by year's end. Among some of the short-term suggestions, the agency said it will continue to look for ways to form a partnership with the mailing industry in an attempt to improve efficiencies and reduce costs. McHugh's legislation and the transformation plan share some long-term concepts, such as eliminating the agency's break-even mandate, thus encouraging it to turn a profit and reinvest the money in operations, reduce debt or use it for employee bonuses. Both also explore the notion of dividing the agency into two parts-one responsible for universal service the other for competitive products. And both raise the possibility of altering the definition of universal service, which currently says that mail must be delivered to every mailbox in the United States six days a week. "It's encouraging to see this kind of attention being placed on the Postal Service's finances," said Robert McLean, executive director of the Mailers Council, an Arlington, Va., trade association. "Without action we could see postal rates continue to escalate. Our worst fear is that we see postal rates coming faster and with bigger increases." It's not clear yet how much attention postal reform will get on Capitol Hill, given the focus on the war on terrorism. However, as the economy continues to slump, the Postal Service is bound to suffer. Many large mailers-including catalogue companies-are curtailing plans for the holiday season, typically the agency's biggest moneymaking time. Before the Sept. 11 attacks, the agency was predicting $1.35 billion in losses on $68 billion in revenue for 2002. Those projections were based on 1 percent growth in mail volume, a 3.2 percent rise in expenses, a 3.7 percent rise in revenue and a slight upturn in the economy.