DONE DEAL

POSTAL OVERHAUL BECOMES LAW

President Bush signs postal reform into law on Wednesday, December 20, 2006. Watching him are (from l): Sen. Tom Carper, Rep. Tom Davis, Sen. Susan Collins and Rep. John McHugh.

ore than a decade of legislative wrangling and political intrigue ended with the stroke of a pen December 20 at the White House when, with NALC President William H. Young as a witness, President George Bush signed into law the Postal Accountability and Enhancement Act of 2006. Congressional leaders in the postal reform campaign and other labor and industry officials also attended the ceremony, which was the fulfillment of NALCs top legislative priority. The measure seeks to provide the U.S. Postal Service with the financial and structural flexibility it

needs to compete in the Information Age. With first class mail being steadily siphoned away by electronic communication, the USPS needs the freedom to react to market conditions, develop new products and services, and adapt its business model in order to survive and thrive. Although the NALC objected strenuously to one provisionrequiring injured postal employees to wait three days before beginning Continuation of Pay benefitsthe union played a crucial role in developing many of its most important provisions. This law is the culmination of years of hard work by many NALC officers, the unions legislative staff and our committed members, Young said. The NALC was instrumental in creating a coalition of postal industry, labor and management groups that propelled the process. The coalition members placed the overall good of the postal community and the country above self-serving, parochial considerations, Young said. As a result, the Postal Service can continue top quality six-day universal service to all Americans. The NALC leader added pointedly, It is time for Postmaster General Potter and the USPS Board of Governors to rethink their decision during negotiations to trash our successful partnership by opening the door to contracting out city letter carriers jobs. Final passage occurred in the early morning hours of December 9, shortly before the 109th Congress adjourned sine diePresident Young was able to announce the imminent approval the evening of December 8 during installation ceremonies for NALCs new Executive Council (see page 14). The law is the first substantive overhaul of the Postal Service since the Postal Reorganization Act of 1970. A description of the long road to passage and a summary of provisions of the new law follow.

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AFTER A DOZEN YEARS, WE HAVE PAEA

END OF A MARATHON
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.

n 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 Services finances, the way it sets rates, and how it is governed and regulated. It wont affect the basic structure and mission of the Postal Serviceit remains a government-owned enterprise with universal, six-day delivery financed by a monopolynor will it change the pay, benefits, working conditions or union rights of Americas letter carriers and other postal employees. (See page 9 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 Bushs 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 bills chief sponsor in the Senate. In an e-Activist message sent on December 9, NALC President Bill Young thanked Waxman and Carper for advocating NALCs interests in the legislation. He also thanked Sens. Joe

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 (see page 7). Senator Collins maintained that she and the Bush administration absolutely had to have the provision. In his installation speech (see page 14), 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 Services 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.

POSTAL REFORM
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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: USPSs core first class mail business is stagnating, even shrinking, in the face of electronic diversion, while its universal service costs grow with the relent-

Military pension benefits

ne major hurdle that stood in the way of postal reform was the issue of military pension benefits payable to postal employees who served in the Armed Forces before being hired by the Postal Service. Historically, the cost of retirement annuity benefits resulting from CSRS credit attributable to military service has been payable by the U.S. Treasury. Since everyone benefits from such military service, it is appropriate that taxpayers in general pay for the associated retirement benefits. In 2003, Congress enacted a pension funding reform law to correct the over-funding of CSRS benefits by the USPS called Public Law 108-18. As a condition for moving the bill, which averts more than $105 billion in excess payments to the CSRS Fund, President Bush insisted the

Postal Service take on $27 billion in military pension liabilities associated with current and past postal employees. P.L. 108-18 transferred these obligations to the USPS. NALC and other postal industry interests vowed to reverse the unfair transfer. Three years later, the Postal Accountability and Enforcement Act does just that, shifting the payment obligation back to the Treasury. Present and future CSRS annuitants who have prior military service credit are not affected by the change in the postal reform law at all. They will continue to receive the benefits they have earned, administered by the Office of Personnel Management. The change in the law simply affects financial transfers between the Postal Service and the OPMs accounts at the Treasury.

less 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 Presidents 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.... Its 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 Services structural problems to push for privatization, down-

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Workers compensation change

he PAEA establishes a three-day waiting period for Continuation of Pay benefits, which previously existed only for compensation benefits. The three-day waiting period for COP is unfair and discriminatory toward postal employees since the change does not apply to other federal workers. On a positive note, the law now allows the injured worker to use annual or sick leave, or leave without pay, during the three-day wait. Prior to the change, paid leave could not be used during

the waiting period for compensation benefits. Fortunately, a second provision to require a reduction in compensation (FECA) benefits at the Social Security retirement age (age 65-67, depending on the workers year of birth) was dropped from the bill thanks to NALCs relentless lobbying. Letter carriers currently receiving COP benefits or FECA benefits for past injuries, including those with limited duty assignments, will not be affected in any way by the change in the law.

sizing, 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 Presidents 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 Services 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 Services finances before issuing their awards. The final bill did include part of one of the Commissions anti-labor recommendationsthat concerning the three-day wait for Continuation of Pay benefits for injured workers (see above). But thanks to NALCs 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 unions 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 (see story, page 6). 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 Services 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

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JANUARY 2007 I POSTAL RECORD 7

Instrumental in getting the legislation passed were Democrats Sen. Tom Carper (l) and Rep. Henry Waxman.

the interests of our current and future retirees, whose health benefits will be fully funded. NALC also devoted years to improving the legislations 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 laws 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 Youngs 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. Nobodyand certainly not the NALCwas 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 associationsjudged 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 bills 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

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Postal Accountability and Enhancement Act of 2006

Summary of the major elements
Title I: Definitions; Postal Services Defines postal services; distinguishes market-dominant services (most letter mail, publications and single-piece parcels) from competitive services (Express Mail, Priority Mail, bulk parcel post and international mail). Each will be regulated using different rules. Gives the PRC two years to decide if USPS should continue providing any current, non-postal service, considering public need and private-sector ability to provide it. Title II: Modern Rate Regulation Spells out rules for regulating rates of market-dominant, competitive and experimental products. Specifies annual reporting requirements for USPS and PRC; outlines complaint-making process for mailers and USPS customers. PRC will have 18 months to write regulations implementing a price indexing system for market-dominant products that will tie annual postage rate hikes to increases in the Consumer Price Index (CPI). USPS can save and use later any unused rate-hiking authority (for up to five years) and may seek a waiver of the CPI limit from the PRC in extraordinary or exceptional circumstances in order to maintain quality services. After 10 years, PRC will review the price indexing system and make any necessary changes. Places limits on the use of work-sharing discounts to ensure they do not permanently exceed avoided costs. USPS Board of Governors will set rates of competitive services according to regulations drafted by the PRC to ensure transparency and fairness to customers and competitors. USPS granted the right to introduce new services on an experimental basis; PRC granted the power to assign such services to either competitive or marketdominant categories. PRC is required to report annually on USPS compliance with Title II; USPS is required to file financial reports similar to those required of private sector companies by the SEC. Title III: Modern Service Standards Requires USPS, in consultation with PRC, to establish service standards for market-dominant products by December 20, 2007. Requires USPS to submit a plan to meet service standards within six months of establishment. The plan must report on any planned changes in mail processing, transportation, or delivery networks and describe USPS long-term vision for rationalizing its workforce and infrastructure. USPS must submit a plan to rationalize and/or consolidate distribution and sorting facilities. Title IV: Provisions Relating to Fair Competition Requires USPS to create a Competitive Products Fund separate from the Postal Service Fund. All revenue from competitive services will be deposited into this fund; all expenses for such services will be paid from it. Debt incurred to provide or improve competitive services will be secured by the assets of the Competitive Services Fund; profits earned on competitive products must be invested in Treasury securities. USPS Competitive Products Fund will be charged an assumed federal income tax rate on any profits earned on competitive services. The amount of the assumed tax will be transferred to the general Postal Service Fund once a year. PRC is directed to issue regulations to prohibit unfair competition by USPS. USPS is to be covered by the federal anti-trust laws and is to be subject to commercial lawsuits (without sovereign immunity protection). Title V: General Provisions Governors: Sets out the qualifications for new appointments to the USPS Board of Governors. New appointees must have experience in public service, law or accounting or have a demonstrated ability to manage organizations or corporations of substantial size. Four Governors must have experience with managing organizations or corporations with at least 50,000 employees. Term of office is cut from nine years to seven, with a two-term limit. Private express statutes: Minimum charge required for private carriage of addressed letters (those covered by the postal monopoly) is changed from $3 or double postage, whichever is greater, to at least six times the rate then currently charged for the first ounce of a single-piece First-Class letter. Exemption from the general prohibition on private carriage is automatic for letters weighing at least 12.5 ounces and may be extended to other types of letters by USPS regulation. Non-interference with collective bargaining: Provides for mandatory mediation when postal collective bargaining parties fail to reach an agreement on new contracts; states that nothing in the Act shall restrict, expand or otherwise affect any of the rights, privileges or benefits of either employees, or of labor organizations representing employees, under existing law, including Title 39 of the USC and the National Labor Relations Act, any labor contract, or any USPS handbook or manual. Bonus authority: USPS can pay top executives increased bonuses, but total compensation can not exceed that of the vice president of the United States. Title VI: Enhanced Regulatory Commission Postal Rate Commission is re-designated as Postal Regulatory Commission. The five commissioners are appointed by the president and confirmed by the Senate for six-year terms; must have demonstrated expertise in economics, accounting, law or public administration. PRC is granted authority to issue subpoenas to USPS officials to carry out its duties under the law. Title VII: Evaluations PRC and other organizations are to conduct a series of regular and one-time evaluations and assessments and report their findings to Congress. PRC is to conduct an assessment of the overall system of rate-setting every five years, a one-time study on the cost of universal service within five years, and several special studies on publication and cooperative mailing rates. The Board of Governors is directed to evaluate diversity in its executive workforce and the extent of its contracting with women, minorities and small businesses. FTC is to study the fairness and application of U.S. laws to competitive products. GAO is directed to assess USPS programs for encouraging use of recycled paper and to evaluate USPS business model to determine its ability to maintain universal service. USPS Inspector General is to study workplace safety and injuries, as well as fraud in the use of non-profit mailing rates. Title VIII: Postal Service and Health Benefit Funding Repeals the requirement that USPS deposit savings from the 2003 CSRS funding reform law into an escrow account; returns to the Treasury responsibility for funding postal employee CSRS annuity benefits attributable to prior military service. Savings are to be used in part to pre-fund future retiree health benefits. A Postal Service Retiree Health Benefit Fund is to be established with the surplus resulting from a new actuarial valuation of USPS assets and liabilities related to CSRS. The new valuation will generate a surplus, since the $27 billion cost of military pension benefits is returned to the Treasury. The law sets out a 10-year schedule of additional payments into the new Fund (drawn mainly from escrow savings but include USPS existing payments for current retiree health benefits) that range between $5.4 billion and $5.8 billion annually. USPS is provided a process to appeal actuarial methods used by OPM under this statute (about which there is disagreement) and to seek relief from Congress. Title IX: Compensation for Work Injuries Establishes a three-day waiting period for COP benefits, which previously existed only for compensation benefits. The three-day waiting period for COP is unfair and discriminatory toward postal employees, since the change does not apply to other federal workers. However, the change does allow the injured worker to use annual or sick leave, or LWOP, during the three-day waiting period. Before the change, paid leave could not be used during the three-day waiting period for compensation benefits.

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Title X: Miscellaneous Outlines a series of provisions regarding the employment of postal police officers, purchasing reform, air mail contracts, hazardous materials and other minor provisions.

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JANUARY 2007 I POSTAL RECORD 9

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 Americas letter carriers. That is the mission of the union. That is what we do.

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tion! a r b e l e C LCPE O C l a u n An

Paying tribute to contributors who turned Congress around

As a result of the special edition, please note: There will be no Branch Items, State Summaries, Retiree Reports or Auxiliary Updates in next months issue. Correspondents and scribes should hold off until February to submit articles for the March issue. That means the next deadline is February 10. Election Notices and Mutual Exchange ads will be printed in February as usual. Those who give through payroll allotment, annuity deduction, or automatic funds transfer will be listed first, followed by occasional contributors and groups. Donors will be listed alphabetically by name within their branches, and branches will be listed by number within each state. The list will include all donations officially registered in the COLCPE account by the end of 2006. Last-minute sign-ups or checks that miss the closing of the accounts will be credited toward 2007 and acknowledged in the February 2008 issue.

Visit www.nalc.org to find out about contributing to COLCPE automatically. 10 POSTAL RECORD I JANUARY 2007

olitical activism payswe have the results that prove it. A labor-friendly majority is now in power on Capitol Hill. The long-sought postal reform bill is now law. And NALC members deserve substantial credit for these political victoriesespecially those letter carrier-activists who have been contributing to COLCPE, the NALCs political action committee. So, for the third February in a row, next months issue of The Postal Record will be dominated by a listing of contributors to the Committee on Letter Carrier Political Education in 2006. Its our way of publicly recognizing and saying thank you to each and every man and woman of this great union who walks the walk, said NALC President William H.Young. These brothers and sisters understand the value of making an investment in the future of their pay and benefits. The NALC uses COLCPE funds to support candidatesregardless of partywho support programs and legislation that benefit letter carriers. Money from the fund financed NALCs role in the Labor 2006 get-out-the-vote campaign.

Donations to COLCPE are NOT tax-deductible.

NATIONAL ASSOCIATION OF LETTER CARRIERS