Live from the DMI Co-op: Impassioned Plea for Pension Bill
Time Inc.’s director of postal affairs Jim O’Brien hollered fire and brimstone at Direct Media’s Co-op on Thursday, evangelizing for the postal pension bill that was up for a House vote that afternoon.
Wednesday night, the Senate passed S 380, a bill that would allow the U.S. Postal Service to stop into the retirement funds of many former employees. And O’Brien entered a packed hall at the co-op, hopped up by the news of the Senate bill, and wanting to spread the word about the importance of the House bill.
“Without a law change, the USPS will have to pay $2.9 billion in September on the retirement fund and file for a rate increase,” he said.
In 1970, when the USPS retirement fund went into affect, the Postal Service thought it would earn 5% interest on money put aside for the fund. But it actually earned 6.5% interest.
Last year, when the General Accounting Office uncovered this fact, it declared that the retirement costs were nearly fully funded, O’Brien said. But by law, the USPS is supposed to continue paying into the account for 15 more years. It would take an act of Congress to halt those payments.
“If they continue to pay into it at the same rate, they would overpay by $78 billion [over the 15 years],” he said.
In fiscal year 2002, the postal service’s operating income was $1.2 billion, he said. But its outstanding debt is $11.1 billion. There have been three rate increases in 18 months. Overall mail volume declined by 3.4% in 2002. Standard mail volume fell by 4.5%.
The Postal Service cannot afford to overpay when it is already so fiscally beleaguered, he said. “The USPS is entering a death spiral,” he said.
“Congress was counting on that $2.9 billion to be paid to the Treasury,” he pointed out. But, “as mailers, we say, we’ve already paid our bill.”
The Senate bill that passed, sponsored by Sen. Susan Collins of Maine, would give the USPS some breathing room. The House bill, pending a vote at press time, is sponsored by Rep. Tom Davis of Virginia.
The Collins-Davis legislation is not perfect, he pointed out. It contains a provision that requires the USPS to set aside funds in escrow for the pension fund. In 2006, it would have to pay $3 billion to cover the escrow, he said. “Everybody ought to be mad as hornets,” he said. “In essence, it’s a stamp tax.”
“Even though we don’t like the escrow deal, we [have to give in] to get the whole bill passed,” O’Brien said.
He ended his talk with an impassioned call for grassroots activism on postal reform. For every lobbyist our industry produces, the USPS sends 10 lobbyists, he said. The Collins and Davis bills were the result of meetings arranged by Maine mailers, led by the Cuddledown catalog.
The mailers said in their meetings that although Congress is afraid of offending the USPS labor union, the direct marketing industry represents huge labor interests, too. The Maine meetings included 23 companies, representing 16,132 direct marketing employees.
“Tell [your representatives] how important this is in terms of jobs,” he said.
