Burrus: USPS Postage Discounts Are Illegal, Self-Defeating

Postage discounts for major mailers are illegal and “self-defeating,” APWU President William Burrus told lawmakers May 12. Excessive discounts for corporate mailers who engage in worksharing “deprive the USPS of revenue that is essential to maintain the nation’s mail network,” he said.

“Workshare discounts artificially reduce the mailing costs of favored customers — large mailers — at the expense of individual citizens and small businesses,” Burrus told the House Subcommittee on Federal Workforce, Postal Service, and the District of Columbia

“The law that requires the Postal Service to provide universal service at uniform rates is absolute,” he said. “There are no exceptions for large or small mailers, or for great or short distances between senders and receivers.”

“Unfortunately,” Burrus said, “the Postal Service, encouraged by major mailers, has implemented discounts that violate the standard of universal service at uniform rates.”

Rates Violate the Law

The 2006 Postal Accountability and Enhancement Act (PAEA) stipulates that workshare discounts may not exceed “postal costs avoided,” yet the Postal Regulatory Commission has repeatedly found that discounts exceed this standard, Burrus told the subcommittee. “Most recently, on March 29, 2010, the commission found that 30 types of worksharing discounts exceed the postal costs avoided,” he said.

“Workshare discounts were introduced in the early 1970s, when most mail was sorted manually, as a way to ease the transition to mechanized sortation and eventually to automated mail processing,” the union president observed.

“With the transition to automated mail processing essentially complete, workshare discounts have become unnecessary,” he said. “In fact, as early as 1990, the USPS acknowledged that the ‘relative value of presort is declining.’”

However, “Contrary to sound economic principles, as postal efficiency has increased, workshare discounts also have increased, from 7.6 percent of the postage rate in 1976 to 23.9 percent in 2009,” Burrus noted.

Bernie Madoff Would be Proud

“This is a PONZI-like scheme Bernie Madoff would be proud of,” he added in oral comments. The Postal Service diverts mail volume to the private sector, using an exaggerated per-piece cost to set postage discounts. At the same time, discount-funded private mail processing plants are opened, while more efficient USPS processing centers are consolidated, he said.

“The results benefit major mailers, while making the USPS less efficient and more expensive,” Burrus said.

“In response to reduced mail volume and the crushing burden of pre-funding future retiree healthcare liabilities, some have opined that postal workers must make wage- and benefit concessions to fund the transfer of revenue and productivity to the private sector,” the union president noted.

“As a matter of principle, I refer subjects more appropriately addressed at the bargaining table to the proper forum,” Burrus said. However, he reported to the subcommittee that he has challenged the Postmaster General to set employee compensation at a rate that is lower than the discounts offered to major mailers, which is allegedly based on the “postal costs avoided.” The Postmaster General has not responded.

Public Entitled to Know Why

The APWU has criticized deviations from the universal-service at uniform-rate requirement for more than a decade, the union president said, and has attempted to expose the illegality of excessive rate discounts and the detrimental effects they have on the Postal Service. “So now the Postal Service and major mailers are attempting to change the rules,” he said. “They seek to change the standard — so that the indefensible rates can be justified.

“We urge Congress to reject any such change.”

Burrus also urged lawmakers to “attempt to uncover the motivation for the deliberate misapplication of the uniform rate standard.”

“The American public is entitled to know why this standard has been breached, and I respectfully ask that Congress provide the answers,” he said. Postage discounts have only a marginal effect on mail volume, Burrus observed, so Congress must ask why, when the Postal Service is suffering from severe financial difficulties, management would forego billions of dollars per year in revenue.

The subcommittee held its May 12 hearing to examine USPS discounts to large mailers and other products that do not fit the “costs avoided standard.”

Also testifying at the hearing were Maura Robinson, Vice President, Pricing, U.S. Postal Service; John Waller, Director, Office of Accountability and Compliance, Postal Regulatory Commission; Lawrence Buc, President, SLS Consulting Inc.; Michael Riley, Former Chief Financial Officer, U.S. Postal Service (1993-1998); James O’Brien, Vice President, Distribution and Postal Affairs, Time Inc.; and Hamilton Davison, President & Executive Director, American Catalog Mailers Association. [Click here to links to their testimony and to view a webcast of the hearing.]