Direct Marketing Association president and CEO H. Robert Wientzen urged modernization of the U.S. Postal Service in testimony before the U.S. Senate’s Committee on Governmental Affairs on Thursday.
Addressing recommendations made in the final report of the President’s Commission on the U.S. Postal Service (USPS), Wientzen stressed the economic importance of the direct marketing industry and urged Congress to implement legislative reforms to secure the USPS’s future viability.
“Direct mail, including catalogs and fundraising materials, has been – and remains – a primary marketing channel to reach current and prospective customers and donors,” Wientzen told the Senators. “Direct mail in 2002 generated an economic impact estimated at $634.4 billion in the consumer and business-to-business segments alone, and nearly $50 billion was directly raised by nonprofits via the mail.”
“If we do not move ahead expeditiously with significant modernization,” Wientzen added, “the choices facing the Postal Service — as outlined in previous testimony of Co-Chairman James A. Johnson and in the final report of the President’s Commission — will be dramatic service rollbacks, or rate increases of an unprecedented scale, or falling further into debt, which ultimately would require a taxpayer bailout.”
Wientzen noted that while the existing rate setting scheme may have been tolerable in an earlier era, “the length of time, complexity and cost involved in litigating rate cases now results in diminishing returns for both the Postal Service and its customers.
“Recognizing that there may be exigent circumstances, I believe that any pricing flexibility granted the Postal Service must be tempered with a degree of systematic discipline,” he said. “As a general principle, rate adjustments should, as nearly as is practicable, mirror the lesser of the rate of inflation as measured by a government created index or the actual cost of providing services and should occur no more frequently than once a year.”
And just as the Postal Service needs flexibility, so do mailers need a semblance of predictability, he added. “Separate from the manner in which specific rates are developed, the magnitude and timing of rate changes are critical considerations in terms of business’ and nonprofits’ ability to plan and ensure overall economic efficiency.”
Wientzen also reiterated the need for a resolution of issues associated with the Postal Civil Service Retirement System Funding Reform Act of 2003. He noted that the Act imposed a legal obligation unique to the Postal Service, where it is required to underwrite retirement costs associated with the military service time of its employees.
He added that the law requires the USPS to divert sizable future funds to an escrow account. However, he pointed out that the funds in the account — which will no longer be needed to fund pensions — would remain dormant pending Congressional authorization on where and how to use them, rather than allowing the USPS to incorporate that money into its business plan.
“Current estimates suggest that without CSRS reform, the new rates would increase at least 5.4%,” testified Wientzen.
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