THE REPORT OF THE PRESIDENT

1
THE REPORT OF THE PRESIDENTS POSTAL COMMISSION

• Bruce Moyer
• NAPS Legislative Counsel

2
Postal Commission Report

• What Does It Say?
• Whats Likely to Happen Next?
• Where Does NAPS Stand?
• What Should I Do?

3
Why a Postal Commission?

• Mailers urged Bush to name Commission
• Big postage increase looming/bailout?
• Potential political liability for White House
• Precedent Kappel Commission, 1970 Act
• Would push responsibility to Congress
• Established Dec. 11, 2002 EO 13278

4
Commission Structure Process

• Nine-member, bipartisan commission
• Co-chairs James Johnson and Harry Pearce
• Short Life (7 months) - July 31 report due
• Mission to ensure the efficient operation of
  the USPS while minimizing the financial exposure
  of the American taxpayers
• Four subcommittees

5
Commission Structure Process

• Nine public meetings (70 witnesses / NAPS)
• Public comment process
• Outside consultant reports
• Visits to postal facilities
• Subcommittee/co-chair recommendations
• Report issued July 31 posted on website

6
NAPS Recommendations To Postal Commission (Feb.
2003)

• Preserve six-day delivery and monopoly
• Retain USPS control of upstream mail processing
  facilities
• Consolidate some post offices
• Reduce workplace grievances
• Expand pay-for-performance to all levels
• Give USPS greater flexibility to set prices
• Reduce Inspector General expenses

7
Embracing the Future Making the Tough Choices
to Preserve Universal Mail Service

• Serious-minded, balanced report
• 15-20 year horizon
• Universal mail service at risk
• Ambitious overhaul of USPS required
• Tough choices without modernization
• Biggest threat Being too timid, incremental

8
Overall Findings/Recommendations

• Universal postal service is at risk
• USPS should remain a public institution
• Postal monopoly clarify and narrow it over time
• Core value Universal mail service
• Best corporate leadership business practices
• Broader oversight, simplified rate-setting
• Overhaul of 1950s era postal network

9
Universal Service at Risk The Primary
Challenges

• Rising operating costs vs. declining First-Class
  volume
• Electronic diversion is accelerating volume
  decline
• Bill payment most vulnerable subcategory
• Labor/infrastructure costs are outpacing revenue
  growth
• Stagnant revenues significant barrier to
  breaking-even
• Postal law (archaic ratemaking) predates the
  internet
• Entrenched interests no postal reform in 30
  years

10
Universal Service at Risk A New Business Model

• Realign and redeploy USPS with
• Sophisticated technology
• Experienced and capable leadership
• Skilled workforce
• Additional partners
• Aggressive productivity, cost-savings strategies

11
Core Modern Purpose of USPS

• Delivery of high-quality, essential
• postal services
• To all persons and communities
• By the most cost-effective and efficient means
  possible
• At affordable and, where appropriate, uniform
  rates.

12
Modernize, Not Privatize

• Entire privatization poses substantial risks
• Remain independent federal organization
• Retain self-sustaining mandate
• Adopt best practices throughout organization
• Maintain but clarify (and review) monopoly
• Extend monopoly to envelopes falling within
  weight (12-oz.) and price (6X 1st-class stamp)
  limits
• Retain sole access to customer mailboxes

13
Goal Affordable Universal Service

• Product coverage delivery of only traditional
  governmental mail products and services
• Uniform rates (but reviewed)
• Six-day delivery
• Retail access beyond post offices
• More private sector partners
• Logistics and delivery
• Retail
• Worksharing

14
Best-Execution, Business Leadership

• USPS 11th on Fortune 500 (66B in revenues)
• 2nd largest American employer
• Empowered, accountable managers
• Strong, strategic Board of Directors, focused on
  oversight, accountability big picture
• Enhanced oversight/financial transparency
• SEC financial reporting requirements

15
Expanded Accountability and Public Oversight

• Powerful Postal Regulatory Board (PRB)
• Would replace Postal Regulatory Commission
• Broad authority over
• Rates and cross-subsidies
• Monopoly
• Financial transparency
• Universal service
• Service standards
• Retained earnings
• Employee pay comparability

16
Expanded Accountability and Public Oversight

• Simplify the Rate-Setting Process
• Establish after-the-fact review of
  non-competitive products
• Must fall within rate ceilings based on
  inflation/productivity
• Incentive-based regulatory system
• Reduce from 18-months to 2-months
• Reexamine size/cost of Inspector General

17
Smaller, Stronger Postal Network

• Current network aging, too large,
  cost-inefficient
• Rationalize the network
• Most tangible/important deliverable of
  Transformation
• Rightsizing and Standardization Strategy
• Reduce high, fixed infrastructure costs
• Consolidate plants
• Close low-volume post offices unnecessary for USO
• End-to-end network standardization common
  footprint
• Improve service consistency, efficiencies,
  productivity
• Leverage private sector worksharing,
  outsourcing, NSAs
• Improve real estate and procurement efforts
• Pursue intelligent mail applications

18
Postal Network Optimization Commission (P-NOC)

• Defense base closure-like commission for plants
  but not for post offices
• Commission gives latitude to USPS leadership
  to make tough closure decisions
• Reality Insulates USPS from Hill interference
  and gives Hill political cover
• Two rounds of consolidations/closures (more
  possible)
• 9 members (8 selected by President 1 by unions)
• Establishment would require Congressional
  approval

19
P-NOC Process

• USPS sets decision-making criteria
• 4-month commission process
• Public meetings to hear from affected communities
• Presidential approval of list
• Congressional approval assumed, unless specific
  rejection of entire list
• USPS implementation within 12 months
• Employee soft-landing/facility transition
  assistance

20
Low-Activity Post Offices

• Not covered by P-NOC process
• Close, unless necessary for USO
• Give USPS disposal flexibility
• Repeal economic ban on PO closures and avoid
  limitations in appropriations laws
• Tradeoff Expand retail access (24/7)
• USPS sale or transfer of property to locals

21
Creating a Leaner Workforce and
Controlling Costs

• The critical issue for controlling future USPS
  costs
• PRB pay comparability to cover wages and
  benefits
• Two-tiered system for current and future craft
  workers
• No layoff protection for future employees
• Shorten collective bargaining use med/arb
  LBFO
• Bargain for retirement and retiree FEHBP benefits
• Repeal USPS responsibility for military pensions
• Expand pay-for-performance to craft/Reduce
  grievances
• Increase executive compensation - repeal salary
  cap
• Rein in workers compensation liabilities
• Realign and reduce management ranks

22
What Does All This Mean?Whats Likely to Happen
Next?

• Overall reaction solid, serious report
• Commission adopted most NAPS recommendations
• The ball now is in Congress court White House
  off-hook
• Most recommended changes require Congressional OK
• No postal crisis makes legislative action
  uncertain
• Entrenched interests may continue to block reform
• Unions oppose all changes in bargaining, economic
  security
• Piecemeal reform possible
• Postal governance, ratesetting flexibility
• USPS discretion on plant consolidation remains

23
Where Does NAPS Stand?President Palladino
Statement

• Useful report that validates serious challenges
  to mail, governmental character, and need to
  modernize
• Support for rate flexibility, expansion of
  pay-for-performance and closure of low-volume
  POs
• Opposition to powerful PRB, pay comparability
  authority
• Opposition to P-NOC
• Should include post offices within review
  authority
• Or continue to vest closure authority in PMG
• Commitment to work with Congress and USPS for
  responsible postal reform

24
What Should I Do?

• Educate Congress about NAPS views
• Contact Members local office and Washington
• Dont wait until the LTS!
• Arrange Congressional visits to your facility
• Stay informed Read NAPS Legislative News
• www.naps.org