PAEA — What is Working and What is Not?
When asked what is working well and what is not working well from the last comprehensive postal reform legislation change (the Postal Accountability and Enhancement Act, enacted in 2006), Taub said the USPS has much greater ability since PAEA to introduce and price products more efficiently and quicker versus the year-long+ process in place before PAEA. Other positive changes include the enhanced mission of the PRC, he said, and USPS transparency/accountability. While there is always room for improvement, Taub said, the PAEA framework was a good one. On what could be improved, Taub said that the recession combined with acceleration of movement of physical mail to electronic media as well as some issues with the structure of the law that were not anticipated has created a USPS solvency problem which he hopes that Congress will fix. He also said the issue of defining the USPS’ universal service obligation (USO) needs to be undertaken.
USPS Governor Williams said PAEA forced the USPS to focus and use more disciplined processes to become a much leaner functional organization. He noted the changes to the PRC have been successful and set in motion the 10-year review with ability for subsequent reviews of the ratemaking system enacted with PAEA. He noted PAEA established the best pre-funded benefit plan in the world, but said it is now time to pause and ask where to go from here on that requirement because there are many ways to turn. PAEA also introduced a price cap to act as surrogate for efficient market forces, he said, which effectively controls runaway pricing which is always a risk with a government department.
On what could be improved with the PAEA, Williams said the legislation now is 13 years old and some of its aspects have become problematic because next steps were not taken by Congress. The pre-funding liability is causing problems and it is time to reassess that requirement, he said, and people are asking if the price cap should be altered in some way or reduced. He also said the alarming conditions around flats are a concern and that the USPS should not lose them because people love going to their mailbox for their catalogs and magazines. Williams also said the $15 billion line of credit from the Treasury with $3 billion maximum per year has caused the USPS to over-borrow in fear of a bad year.
Sec. McHugh noted that getting PAEA enacted took 11 years so conditions were different at the end than what was envisioned at the start. There have been some dramatic changes, particularly with ecommerce, and he noted that the USPS would be about $8 billion worse if not for the competitive marketplace changes. He said the changes for the PRC provided substantial transparency and predictability and noted that every time the PRC has been challenged in the courts, its decisions have been upheld. The CPI cap was a necessary provision for PAEA, McHugh said, because users of the system needed predictability and it also injected cost accountability into the USPS’ system.
On what is not working with PAEA, McHugh said the pre-funding requirement is an issue and noted that not everyone supported it when PAEA was being developed, but it now requires Congressional action and the USPS does not have 100 years to get it fixed.