After a dozen years, we have PAEA
In the darkness before dawn on Saturday, December 9, 2006 the U.S. Senate adopted H.R. 6407, the Postal Accountability and Enhancement Act of 2006 by unanimous consent. The House of Representatives had approved the bill on a voice vote the evening before. On December 20, President Bush signed it into law.
The PAEA amends Title 39 of the U.S. Code, which governs the policies and operations of the U.S. Postal Service. It is the most significant postal reform law since the Postal Reorganization Act of 1970. Though not as revolutionary as the PRA, the new law will profoundly affect the Postal Service’s finances, the way it sets rates, and how it is governed and regulated. It won’t affect the basic structure and mission of the Postal Service—it remains a government-owned enterprise with universal, six-day delivery financed by a monopoly—nor will it change the pay, benefits, working conditions or union rights of America’s letter carriers and other postal employees. (click here for a detailed summary of the law.)
Thanks to NALC and a coalition of other unions (the Rural Letter Carriers and the Mail Handlers), management associations, vendors and mailers, Congress rejected almost all the negative recommendations of President Bush’s blue-ribbon Commission on the Postal Service. Instead it crafted a balanced compromise that emphasized pragmatism over ideology.
Rep. Henry Waxman (D-CA) and Sen. Tom Carper (D-DE) were instrumental in negotiating the final details with Sen. Susan Collins (R-ME), the bill’s chief sponsor in the Senate. In an e-Activist message sent on December 9, NALC President Bill Young thanked Waxman and Carper for advocating NALC’s interests in the legislation. He also thanked Sens. Joe Lieberman (D-CT) and Daniel Akaka (D-HI), and Reps. Tom Davis (R-VA), Danny Davis (D-IL) and John McHugh (R-NY) for their roles over the years.
Modernize, not privatize
As many countries around the world opt for more radical plans to privatize their post offices and to open their postal markets to competition, the United States has chosen to modernize, retaining its existing postal model. With highly affordable postage rates and high-quality service, it clearly is a system that works, thanks to the most productive postal workers in the world.
Nonetheless, President Young called the enactment of postal reform “bittersweet.” The provision of the new law that requires injured postal employees to wait three days before qualifying for Continuation of Pay is “totally unjustifiable,” he said. It does not apply to other federal workers.
Senator Collins maintained that she and the Bush administration absolutely had to have the
provision. In his installation speech, President Young said he agreed not to oppose the bill at the urging of Waxman and Carper, who wrangled several improvements in the overall bill in the final week of Congress.
Despite his reservations, Young noted, the law “preserves our collective bargaining rights, maintains universal, six-day delivery and significantly improves the Service’s long-term financial stability.”
The bill passed when none of the postal unions (including the APWU, which now claims to oppose the bill) and none of the other major stakeholders sought to prevent its adoption under unanimous consent rules in the Senate.
Long road to reform
In 1994, when the “Internet” and the “World Wide Web” were still mysteries to most Americans, NALC already understood that the information technology revolution would dramatically transform the Postal Service in the future, just as it would every other aspect of American life. In January of that year, The Postal Record began a series entitled “The Future of Mail,” which looked ahead to the possible impact of e-mail, the Internet and other technological advances on the demand for mail and the operations of USPS. That series identified the fundamental challenge: USPS’s core first class mail business is stagnating, even shrinking, in the face of electronic diversion, while its universal service costs grow with the relentless creation of new daily delivery points.
Later in 1994, NALC President Vince Sombrotto was invited to Germany by the German Postal Workers Union. At the time, the German union was fighting the privatization of Deutsche Post. Changing technology was animating the debate in Germany and the rest of Europe and driving home the need for traditional postal services to adapt. Upon his return, Sombrotto wrote a President’s Message headlined “Battles abroad can be lesson in struggle for successful future.” In it, he pointed to the challenges of the future and the need to change at home:
“For close to 25 years, the Postal Reorganization Act of 1970 has served this country well. But times change, realities change, needs change.... It’s time to do what has to be done to ensure that despite
the emergence of new and exciting technologies, the Postal Service remains strong well into the 21st century, fulfilling its historical mission of binding together the disparate peoples of this vast country and, in the process, preserving and strengthening American democracy.”
Over the next decade, as traditional mail volume growth began to slow, more and more actors in the postal industry reached the same conclusion. Major mailers, postal vendors and management associations all agreed that the PRA was outdated, but there was little agreement on how to reform it. Over several Congresses, legislation was introduced in the House by Rep. John McHugh (R-NY), but a lack of consensus prevented movement.
A coalition approach
NALC, becoming a major player in the postal reform debate, concluded it would take a broad coalition to protect its members’ interests. Left to its own devices, Congress could easily veer off in the wrong direction. Indeed, conservative ideologues sought to exploit the Postal Service’s structural problems to push for privatization, downsizing, deregulation or the elimination of postal employees’ collective bargaining rights. In order to defeat these ideas, the union had to offer an alternative future for the USPS.
NALC helped organize a broad coalition of unions, mailers, postal industry vendors and interest groups to pursue progressive reform. Though individual partners had their own goals, all had a shared interest in a healthy and viable Postal Service. Early on, NALC secured commitments from the group that reform would not adversely affect postal collective bargaining rights or threaten, in any way, continued six-day delivery and universal service. The very first version of postal reform, H.R. 22, met these basic conditions, as the NALC worked with Rep. Ben Gilman (R-NY) to insert language to prevent regulators from interfering with collective bargaining. That language is found in Section 505 of the new law.
The coalition NALC helped foster held together, more or less, for over a decade. It proved essential to defeating onerous proposals. For instance, United Parcel Service sought to force the Postal Service out of the parcel delivery market by treating single piece parcels as a “competitive product” and by manipulating the rules for setting parcel prices outlined in the bill. The final bill rebuffed UPS and the Bush administration on all these matters.
In H.R. 6407 Congress also rejected nearly every anti-labor recommendation included in the final report of the President’s Commission on the USPS from 2003. Among these were:
- A requirement that the Postal Regulatory Commission vet postal collective bargaining agreements for compliance with Postal Service’s pay comparability standard.
- A recommendation that NALC and other postal unions negotiate with the USPS for
pension and health benefits, perhaps forcing letter carriers out of government-wide programs such FEHBP and FERS.
- A change in the interest arbitration process that favored postal management by instructing neutral arbitrators to give extra consideration to the Postal Service’s finances before issuing their awards.
- The final bill did include part of one of the Commission’s anti-labor recommendations—that concerning the three-day wait for Continuation of Pay benefits for injured workers (see above). But thanks to NALC’s opposition, a Senate proposal to cut workers’ compensation benefits, from 67 percent or 75 percent of monthly pay to 50 percent when the recipient reached Social Security retirement age, was dropped.
Your union’s broader role
NALC did not restrict itself to purely labor matters. We worked for years to secure the basic financial components to ensure a viable Postal Service. We demanded the release of the CSRS escrow account set up by the 2003 pension funding reform, with some flexibility to use the funds for operations. And we demanded that the Bush administration reverse its decision to saddle the USPS for $27 billion in military pension benefits earned by postal employees before they were hired.
The Bush administration had different ideas. It sought to complete the heist of the $27 billion and it tried to inflexibly earmark 100 percent of escrow savings for retiree health benefits.
In both cases, we prevailed over the White House. The new law sets out a 10-year schedule for using the escrow and military pension savings to dramatically reduce the Postal Service’s massive unfunded liability for retiree health insurance, while also providing some flexibility for other uses. In so doing, we secured more than $100 billion for the Postal Service in the decades to come and protected the interests of our current and future retirees, whose health benefits will be fully funded.
NALC also devoted years to improving the legislation’s rate-setting provisions. The new law features a streamlined process permitting USPS to increase postage rates in line with increases in the Consumer Price Index. Although postage rates historically have generally tracked inflation, major mailers demanded more predictability to encourage continued investment in mail-based messaging, marketing and invoicing systems. NALC set out several conditions for supporting such a system and worked with members of Congress and the mailing industry to achieve them.
First, NALC demanded elimination of a “productivity offset” in the indexing system, whereby rates would be held below the rise in the CPI to share efficiency gains with consumers. Such offsets are common in price-indexing systems, but inappropriate for postal rate-setting. The CPI embodies average productivity growth in the economy and the Postal Service should not be expected to achieve above-average efficiency gains. At our request, the House dropped its offset provision.
Second, NALC demanded that any price indexing system permit the USPS to “bank” (save for later use) any unused authority to raise rates in any given year. NALC worked with major mailers to reach a compromise. As a result, under the law’s banking provision, if the USPS chooses not to raise rates by the full CPI amount in any given year, it will be able to tap the unused authority for up to five years afterwards.
Third, NALC demanded flexibility in the price indexing system, to allow USPS to raise rates by more than the CPI if events warrant. Over the fierce resistance of the White House, which sought a “tight cap,” the union brokered a compromise with the mailers on this issue that will allow the USPS to go to the Postal Regulatory Commission to request higher rates (in excess of the CPI increase) if fuel prices spike or Congress acts to boost USPS costs unexpectedly or in other so-called “exigent” circumstances.
In the final rush to passage, Rep. Waxman even agreed to President Young’s suggestion that the price indexing system expire after 10 years. This “sunset” provision provides a good period of stability, but gives us a chance to reassess and to change the rate-setting system in the future if need be.
Living to fight another day
Postal reform finally passed not because everybody was happy with it. Nobody—and certainly not the NALC—was completely satisfied. But that is true for any major legislation that affects millions of people and businesses. No, it passed because all the competing interests in the postal industry—mailers, vendors, competitors, unions, and management associations—judged that it was the most that could be achieved at this time. Indeed, each of the unions (including NALC and APWU) and many of the other key stakeholders could have attempted to block the measure by having just one senator speak up. No senator objected because none of the key stakeholders in the postal community requested it.
A consensus emerged that, with the return of a divided government in 2007, no bill would likely pass in the 110th Congress and that the escrow savings and the military pension credits would likely be lost to deficit reduction if not secured for the Postal Service now. That judgment and bill’s acceptable treatment of collective bargaining rights and other key matters paved the way for passage.
As President Young said on December 8, “It is not a perfect bill, but it will definitely help the Postal Service survive to fight another day.”
Of course, the PAEA will not be the last word on postal reform. It will not by itself “save the Postal
Service,” just as the PRA did not ensure the success of the USPS after 1970. What happens in the U.S. economy, how the postal industry adapts to new technologies and how the postal unions and postal management react in turn, will be more important. Indeed, the world is changing so fast that NALC and the broader postal community will have no choice but to constantly revisit the legislation. It will not take three decades to return to the subject of postal reform. It may not even take a single decade.
There are changes in the law that NALC may want to pursue immediately. Reversing the unfair COP rule is just one of them. For example, the Postal Service is entitled to employer subsidies for retiree prescription drugs under the new Medicare law, but the Bush administration refuses to pay. Similarly, it may require federal legislation to halt misguided efforts at the state level to control direct mail through Do-Not-Mail registries.
As President Young recently remarked, “The fact is, our legislative and political work will never be done. Each generation of letter carriers must do its part to protect the health of the Postal Service and the security of our jobs. That is why NALC is committed to building its political and legislative program in the years to come.
“We are determined to fight for a brighter future for America’s letter carriers. That is the mission of the union. That is what we do.”