On December 20, 2006, President Bush signed into law H.R. 6407, the Postal Accountability and Enhancement Act, the first major overhaul of our postal system in over 30 years. 

On March 20, 2007, the U.S. Postal Service (USPS) Board of Governors approved a 7.6 percent overall increase in postage rates, including a 2-cent increase for the price of a first-class stamp that would raise it to 41 cents effective May 14, 2007. 


The USPS ended fiscal year 2006 with a $2.1 billion deficit after being required by law to pay over $3 billion into an escrow fund.  A provision of the Civil Service Retirement System Funding Reform Act of 2003 called for the establishment of a $3.1 billion escrow account beginning in 2006.  Use of the money in the escrow account is subject to the direction of Congress.

Record levels of revenue and volume allowed USPS to end with net income of $900 million.  The end result is that the total revenue for the agency was $72.8 billion, and total expenses were $71.9 billion, leaving the agency with a net deficiency of $2.1 billion, after including the $3 billion escrow allocation.

Total mail volume increased in fiscal year 2006 by 1.4 billion pieces, or 0.7 percent.  While the mail volume decline trend continued for first-class mail with a 0.5 percent decrease from the previous fiscal year, growth in standard and priority mail helped increase overall mail volume to 213 billion pieces.

The Postal Service delivers more than 200 billion pieces of mail each year to nearly 140 million addresses, which accounts for more than 40 percent of the world's mail.  Moreover, 1.7 million new delivery points are added each year—roughly the equivalent of adding the number of addresses in Chicago.  More than seven million Americans visit post offices each day.

The Postal Reorganization Act of 1970 was the result of the recommendations of a Presidential Commission.  The Act abolished the old Post Office Department (which was then a cabinet agency) and created the United States Postal Service (USPS), a government agency with a mandate to "break even over time."  Because the Postal Service is required to operate on funds from customers, it is expected to "act like a business."  Nevertheless, it remains a government agency, its prices are regulated, the benefits it gives its workers are established by Congress and wage rates and work rules are the result of a collective bargaining process, which includes binding arbitration.  The Postal Service also enjoys many benefits of a government agency: the monopoly over the mailbox and certain classes of mail, immunity from taxes, and the right to issue regulations.

While the 1970 Act solved many of the problems it was designed to address (postal strikes, the large annual operating subsidy from the federal government, excessive patronage), the 30 year old statutory framework is no longer appropriate for the new century with the increased competition (from other carriers and other forms of communication such as email), wage rates that are now well above private sector rates for similar work, and costs and regulations imposed by the federal government.

Yet, full privatization may not be the solution either.  Universal postal service and pricing has been a bedrock of commerce since the founding of our nation.  A fully privatized entity might not be able to carry out the mission.

Because of a lack of consensus on the best direction for Postal Reform, President Bush named a commission to sort through these issues and make recommendations.


The Commission's report contains 35 recommendations, 18 of which would require some action by Congress.  In many ways, the Commission's approach is in the mainstream of postal reform discussions that have been underway among stakeholders since the mid-1990s.  For example, the Commission endorsed the basic structure of the 1970 Postal Reorganization Act, recommending that the USPS "should continue to operate as an independent establishment within the executive branch with a unique mandate to operate as a self-sustaining commercial enterprise" and rejecting the alternative of privatization that many other developed countries have adopted.  While keeping the basic government corporation model, the Commission expressed in many of its recommendations that the USPS should adopt the "best practices of similarly-sized, private-sector corporations."  These included an independent, corporate-style board of directors that would perpetuate itself, greater financial transparency, expanded outsourcing for services, aggressive real estate asset management, and the use of commercial purchasing practices.

The Commission's recommendations with regard to regulatory controls are similar to recent Congressional proposals.  The Postal Rate Commission would be transformed into a new Postal Regulatory Board that would have authority to refine the scope of the universal service obligation and the postal monopoly, to establish limits and broad parameters within which the USPS could set rates and negotiate service arrangements, and to assure that competitive products are not cross-subsidized by revenues from products protected by the monopoly.

While recommending that Congress eliminate current statutory restrictions on closing post offices for economic reasons, the Commission did not press for an aggressive program of closing local post offices, pointing out that even some "low activity" post offices are needed to meet the universal service obligation.  It placed much more emphasis on consolidating the 380 large processing facilities, recommending the creation of a Postal Network Optimization Commission to identify facilities to be closed with a fast-track congressional approval process similar to what is used for military base closures.

The aspect of the Commission's report that is already being vocally challenged by some of the USPS labor unions are four recommendations relating to workforce compensation, a subject that recent bills in Congress have avoided.  Referring to "persuasive testimony" that a postal compensation premium may exist, the Commission recommended major revisions to the current practice of binding arbitration of wage bargaining disputes, including the value of fringe benefits such as health care and early government retirement in bargaining over compensation, a redefinition of pay comparability made by the Postal Regulatory Board, and the introduction of some form of "pay for performance" into the compensation package.  The American Postal Workers Union news bulletin, denouncing the recommendations as "fundamentally dishonest" and "a disaster," said it would use every tool at its disposal to assure that none of these recommendations becomes law.


On January, 4, 2005, Representative John McHugh (R-NY) introduced H.R. 22, the Postal Accountability and Enhancement Act.  Essentially the same legislation introduced in the House of Representatives the past several Congresses, this bill was designed to allow the USPS to operate more like a business.  The bill aims to preserve universal service at a “reasonable” cost and free the agency of its break-even mandate. 

On the Senate side, Senator Susan Collins (R-ME) introduced S. 662, the Postal Accountability and Enhancement Act on March 17, 2005.  While similar in several aspects to the House version, the Senate’s bill was also designed to address concerns of the Administration.  The bill sought to impose more stringent financial transparency requirements on the USPS, including the filing of SEC-like reports on a quarterly schedule, and require the USPS to get Treasury approval for the investment of its profits.

On July 26, 2005, the House of Representatives passed H.R. 22 by a wide vote of 410-20.  After making the amendments necessary to reflect S. 662, the Senate passed H.R. 22 by unanimous consent on February 9, 2006.  The bill then headed to conference between the two chambers to iron out the differences. 

The bill was salvaged at the end of the 109th Congress when conferees finally reached a compromise.  On December 7, 2006, Congressman Tom Davis (R-VA) introduced the agreed-upon version, H.R. 6407.  The bill was subsequently unanimously passed by both the House and Senate and signed by President Bush.

The bill makes several significant changes, including: 

It preserves universal service, meaning the USPS will continue delivering to every address in the country. It also gives the USPS board of governors the authority to set rates for competitive products, such as Express Mail and Parcel Post, as long as these prices do not result in cross-subsidy from the market-dominant products.

It simplifies the pricing process for Postal Service products and services and replace the current rate-setting process with a rate-cap based structure to allow the Postal Service to react more quickly to changes in the mailing industry. The system of rate caps applies to the market-dominant products only, such as first class mail, periodicals, and bound printed matter.

It provides the Postal Regulatory Commission, formerly known as the Postal Rate Commission, the power to institute emergency price increases due to "unexpected and extraordinary circumstances." An example of the kind of contingency that would trigger action is the anthrax attacks.

It guarantees a higher degree of transparency to ensure fair treatment of customers of the Postal Service's market-dominant products and companies competing with the Postal Service's competitive products. USPS will be subject to Securities and Exchange Commission-like regulations.

It authorizes the USPS to enter into negotiated service agreements with mailers, whereby mailers perform some of the work.

It gives USPS the authority to transition individuals receiving workers' compensation to a retirement annuity when the affected individual reaches the age of 65. It also puts into place a three-day waiting period before an employee is eligible to receive workers' compensation pay.

It requires that all future governors of the Postal Service be selected based on their demonstrated ability in managing organizations or corporations of substantial size.

It requires USPS to report to Congress and the General Accounting Office with a strategy for how it intends to restructure its infrastructure to reduce excess processing capacity and space. The Postal Service also is required to identify anticipated cost savings associated with infrastructure rationalization.


On March 20, 2007, the U.S. Postal Service (USPS) Board of Governors approved a 7.6 percent overall increase in postage rates, including a 2-cent increase for the price of a first-class stamp that would raise it to 41 cents effective May 14, 2007.  The increase in the cost of a first-class stamp will be the fifth since Jan. 10, 1999, when the rate moved up to 33 cents. Postage rates last increased in January 2006.

The rate package, approved with a 9 to 0 vote, includes a "forever stamp" that would be good as stand-alone postage no matter what rates rise to in the future.  The rate increase for first-class stamps is 1 cent less than proposed by the Postal Service, which also asked for an overall 8.1 percent postage rate increase.

The new rates also include a 2-cent increase for postcards, rising from 24 to 26 cents. USPS had requested a 3-cent increase.  On the other hand, the new rates decreased the price of 2-ounce letters, bank statements, targeted appeal letters by nonprofits, and electronic certified mail return receipt.

The board also approved new shape-based pricing.  The new prices reflect differences in the costs of handling letters, large envelopes (flats), and packages, the board said, and mailers are encouraged to consider options available to reduce postage costs.

The following are additional rate changes:

Priority Mail, 1 pound, $4.60, up from $4.05;

Express Mail, 8 ounces, $16.25, up from $14.40;

Parcel post, 5 pounds, $5.67, up from $4.36;.

Certified Mail, $2.65, up from $2.40;

Money orders up to $500, $1.05, up from 95 cents;

Bank statement, 3 ounces, 58.4 cents, down from 73.9 cents;

Department store bill, presorted, 37.3 cents, up from 37.1 cents;

Advertising, 2 ounces, presorted, 23.3 cents, up from 21.4 cents;

Advertising, 9 ounces, last envelope, presorted, 62.9 cents, up from 57.0 cents;

Nonprofit mail, 1 ounce, 16.4 cents, down from 17.0 cents, and

Library mail, 2 pounds, presorted, $1.88, up from $1.78.End of article graphic


Postal reform and the new rates are now a reality. 



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