WASHINGTON, D.C. — U.S. Senator Susan Collins, Ranking Member of the Senate Homeland Security and Governmental Affairs Committee and author of the 2006 Postal Accountability and Enhancement Act, today applauded the Postal Regulatory Commission’s (PRC) unanimous decision to reject the U.S. Postal Service’s requested rate hikes.

“American consumers and businesses that rely on the Postal Service won a major victory today,” said Senator Collins. “I am pleased with this decision, which I argued was required by the language of the 2006 postal reform law.

“By rejecting these proposed rate hikes, the PRC has given the Postal Service an opportunity to improve its operations and thrive. The Postal Service now needs to redouble its efforts to cut costs, develop new services to increase volume, re-invent its business model and work with the Administration to remedy an overpayment to the federal retirement fund. I will continue to press the Administration and Postal Service on these vital reforms,” Senator Collins said.

The Postal Service is the linchpin of a $1 trillion mailing industry that employs approximately 7.5 million Americans in fields as diverse as direct mail, printing, catalog production, paper manufacturing, and financial services.
The 2006 postal reform law that Senator Collins authored allowed for rate increases above the level of inflation “only if the Postal Service could prove ‘extraordinary or exceptional circumstances,’ such as terrorist attacks or natural disasters, have had a profound effect on its operations, well outside normal business cycles,” said Senator Collins.

In its decision released today, the PRC found that the Postal Service failed to prove that its financial condition met the standard of the narrowly worded law.

Senator Collins believes the PRC’s decision will help prevent further declines in mail volumes because unexpectedly higher postage rates would prompt businesses and customers to seek less expensive, digital alternatives. This would have resulted in customers using the Postal Service less, ever-sinking mail volumes and even higher net losses for the Postal Service.

Senator Collins also cited the findings of three recent investigations into Postal Service operations that she requested the Inspector General (IG) conduct. The three probes found stunning evidence of waste, fraud and abuse, especially in the contracting area. All told, the Postal Service could save more than $800 million in 2011 if it implemented all the IG recommendations. Specifically, the IG investigations found that:

• 359 non-competitive contracts were given to former employees, some of whom were hired back to train their replacements at twice their former pay;

• the Postal Service pays 100 percent of health insurance premiums for 835 of its top employees, an expensive perk that occurs at no other federal agency, at an annual cost of $10 million;

• postal employees participate in many of the same health insurance and life insurance programs as federal employees, yet the Postal Services pays a greater share of the premiums;

• the Postal Service’s contract management did not protect the USPS from waste, fraud, and abuse;

• the Postal Service could not even identify how many contracts were awarded without competition, and the IG found that 35 percent of the no-bid contracts lacked justification; and,

• significant savings could be achieved by consolidating the USPS’s area and district field offices.

On July 6, the Postal Service filed its exigent rate case with the PRC, seeking approval for a wide array of rate increases. Today, the Postal Service expects to post a loss of more than $7 billion for fiscal year 2010.

Its requested increases, averaging 4 to 6 percent, would have far exceeded the rate of inflation. For one class of mail, for example, the proposed increase would have been a whopping 23 percent. For catalog mail, the Postal Service proposed a postage hike of more than 5 percent, which owners warned would prompt many catalog businesses to reduce mail usage and direct customers to websites.

Publishers would have responded in a similar way. One national company, which has relied heavily on direct mail, said the proposed increases would have forced it to reduce mail usage by 15 to 20 percent. The rate hikes, had they taken effect, would have made direct mail less of a financially viable, large-volume advertising medium.