PRC urges Congress to help, but does not explicitly endorse several USPS requests.

The 2006 Postal Accountability and Enhancement Act (PAEA) requires the regulator to write a report to Congress every five years on how the law is serving the nation. This is the second of these Section 701 reports.

The PRC made 17 recommendations. The USPS responded with its list of recommended legislative changes. And the Postal Service expressed its grave disappointment with its regulator for not “sounding the alarm” loudly enough.

Here are the PRC recommendations:

• The Commission recommends that Congress amend the current required RHBF prefunding level to comport with standard industry practice in both private and public sectors.
• The Commission recommends lengthening the amortization period of the current unfunded liability.
• The Commission recommends that Congress grant the Postal Service the authority to use available FERS surpluses to pay off current or future liabilities.
• With clearly defined and limited exceptions, the Commission recommends establishing a “soft floor” (a lower limit subject to certain exceptions) on worksharing discounts, which would benefit the postal community by providing appropriate pricing signals to incentivize efficient mail preparation.
• The Commission again recommends that the definition of a post office be clarified to adopt the plain meaning of the term post office, inclusive of branches and stations.
• The Commission recommends clarification on whether CPUs and nonpostal operation units also fall under the Commission’s administrative review authority under section 404(d).
• The Commission recommends consideration of the duration of emergency suspensions of post offices.
• The Commission recommends that Congress consider clarifying under which circumstances the Postal Service is required to consult with the Commission when making proposed service standard changes.
• The Commission recommends that Congress clarify the meaning of section 3691 and the requirement that the Postal Service set service standards “in consultation with” the Commission.
• The Commission recommends that if the Postal Service is permitted to offer new nonpostal services, proposed nonpostal services be subject to the same regulatory review the Commission applied when reviewing existing nonpostal services pursuant to section 404(e)(3).
• The Commission recommends that where a proposed nonpostal service meets the statutory test, the Commission should have the authority to designate the service as a Market Dominant, Competitive, or experimental product. Section 701 Report Appendix A Page 2 of 2
• The Commission recommends that Congress consider adding language to 39 U.S.C. § 3661 that requires the Postal Service, upon receipt of the Commission’s advisory opinion, and prior to implementation, to provide a written response to Congress addressing the Commission’s recommendations.
• The Commission recommends that Congress consider raising the maximum revenue limitation on market test products thereby providing the Postal Service with more opportunities for advancement of new postal products to bolster revenue streams.
• The Commission recommends that Congress increase the maximum duration on market tests for experimental products.
• The Commission recommends Congress consider allowing the Postal Service to satisfy the requirements of section 3641(b)(2) by setting forth a reasonable basis for its belief that an experimental product would not cause market disruption.
• The Commission urges Congress to consider and balance all the features of universal service as part of any review of changes necessary to preserve a financially viable Postal Service.
• The Commission concurs with commenters that the postal industry and general public could benefit from an updated FTC Report with a more current accounting for the value of relevant legal differences between the Postal Service and its private competitors.

And here are the USPS recommendations:

1) Retiree health benefits (RHB) should be fully integrated with Medicare.

2) The RHB liability should be calculated using net claims costs, rather than premium costs, in accordance with sound actuarial practice.

3) RHB Fund assets should be invested prudently, as is the practice among other governmental retiree benefits funds.

4) The RHB funding target should be lowered from 100 percent to 80 percent.

5) Pension liabilities should be calculated on the basis of postal-specific economic and demographic assumptions.

6) Any current Federal Employees Retirement System (FERS) surplus should be used to pay down debt; future surpluses should be applied against pension or RHB liabilities or debt.

 7) The amortization period for supplemental Civil Service Retirement System (CSRS) liability should be lengthened to match the period for RHB. 8) The exigent surcharge should be restored as a policy matter (regardless of whether the Commission-ordered rollback of the surcharge is a reasonable application of the current statute).

9) The Postal Service should be given increased flexibility to offer services to state and local governments, as well as new commercial nonpostal services that meet certain conditions (including approval by the Commission).

The Postal Service gave the PRC a failing grade for its Section 701 report:

Despite its acknowledgment of the importance of recommendations aimed at improving the Postal Service’s financial problems, and despite the presence of these and other substantive reform proposals in the comments that the Commission had solicited, the Commission’s report misses the opportunity to make any such “important legislative recommendations.” Instead of offering the President and Congress with an analysis and endorsement of any up-to-date proposals, the Commission largely retreads its recommendations from 2011, few of which have garnered much support in the meantime. More to the point, almost none of the Commission’s 17 recommendations would meaningfully improve the Postal Service’s financial condition. Most of the recommendations amount to minor tinkering with the regulatory structure governing the Postal Service, rather than reforms that would materially mitigate expenses or enhance revenues. Of the three recommendations aimed at the Postal Service’s staggering benefits costs, one (regarding pensions) would have only theoretical benefit, and the other two (regarding RHB) would only lower funding obligations without reducing the size of the liability that the Postal Service will ultimately have to cover, even though there are straightforward ways, consistent with universal practice among other employers, for that liability to be reduced.