Washington, February 8, 2016 – On Friday, the American Catalog Mailers Association (ACMA) submitted a letter to Sen. Ron Johnson (R-WI), Chairman of U.S. Senate Committee on Homeland Security and Governmental Affairs, Senate Minority Leader Tom Carper (D-DE), and the entire Committee, alerting them that they missed the mark on several important points during a recent hearing on the state of the US Postal Service.

Most notably, more than one witness who testified during the Jan. 21 hearing indicated there was widespread mailing industry support for “baking in” the 4.3% exigent surcharge. “This is not the case. Even within ACMA members, support is split on this,” the ACMA letter reads.

“Realizing that some issues remain highly polarizing, ACMA favors limited postal reform,” the letter added. “We would hope that those items generally acceptable to the majority of stakeholders can be expeditiously passed into legislation, while more controversial items remain on the table for further debate and discussion. However, we are firmly opposed to extraneous postage increases with little cost improvement and overhead reduction in sight and felt some inaccurate messages were expressed during the hearing.”

The text of the ACMA letter can be found here…

February 5, 2016
The Honorable Ron Johnson
Chairman
U.S. Senate Committee on Homeland Security and Governmental Affairs
340 Dirksen Senate Office Building
Washington, DC 20510

Dear Senator Johnson:

On behalf of the members of the American Catalog Mailers Association (ACMA), I would like to thank you, Senator Carper, and Members of the Committee for holding the January 21st hearing on the US Postal Service and the reforms necessary to restore this great institution to financial solvency. It is clear that legislative measures are required if the Postal Service is to remain a valued service to all Americans without imposing a financial burden on the US taxpayer.

ACMA is the association representing catalog marketers and their key suppliers. The catalog industry represents $400 billion in annual commerce and is part of the larger mailing industry that represents $1.4 trillion of GDP and employs 7.5 million Americans, all of whom depend on the Postal Service. ACMA members need an efficient, reliable and predictable Postal Service to conduct our business. Catalogs are some of the largest USPS customers, are interested in expanding their use of mail, and mail across a variety of postal products.

Realizing that some issues remain highly polarizing, ACMA favors limited postal reform. We would hope that those items generally acceptable to the majority of stakeholders can be expeditiously passed into legislation, while more controversial items remain on the table for further debate and discussion. However, we are firmly opposed to extraneous postage increases with little cost improvement and overhead reduction in sight and felt some inaccurate messages were expressed during the hearing.

Specifically, some of the witnesses suggested a broad mailing industry consensus around “baking in” the 4.3% exigency surcharge. This is not the case. Even within ACMA members, support is split on this. Moreover, for nearly fifty years, Congress, in its wisdom, has decided not to directly set postal rates. Given that rate setting is rife with the potential for unintended consequences, we believe this is best left to expert bodies instead.

We do not favor revenue-based solutions to addressing Postal Service losses. In 2006, mail volume was 213 billion pieces and total expense was $71.7 billion. This past fiscal year, mail volume was 154 billion pieces and total expense was $73.8 billion. Mail volume has fallen nearly a third while total expenses are up slightly. While we applaud cost improvement initiatives, despite a significant reduction in mail volume, total expense has really not changed. Expense side solutions are clearly required before prices of mail services are increased. The numbers suggest significant excess capacity and cost still remains in the system. These must be addressed or no amount of volume-sapping price increases will close the gap. Just as in private businesses, hard choices must be made.

If the economics of mailing become even less favorable, mail will leave the system at a faster rate, leaving the taxpayer on the hook for the liabilities. This need not happen. While reducing the fixed costs of the USPS is critical given the continuing volume declines, there is no reason we cannot have a smaller but still profitable and efficient postal service supported by ratepayers not taxpayers. Either expense side controls are required or the Postal Service revenues must be capped to impose the required financial discipline.

Rate increases destroy postal volumes in a high fixed cost system that needs mail volume to cover these prodigious fixed costs. In 2007, catalog rates went up over 20% only to have catalog volume decline more than 30%. The exigent surcharge of 4.3% removed more than 6% from demand. These are facts. Just as competitive market pressures to improve efficiency and prevent businesses from unrestrained price increases, the USPS needs a countervailing force encouraging cost leadership and efficiency.

Addressing the legacy costs is also of great value. Only Congress can do some of these. Therefore, we urge you to pass legislation that 1.) reduces retiree healthcare costs using full Medicare integration; 2.) requires realistic and attainable prefunding requirements; 3.) specifies that postal-specific actuarial inputs be used in all calculations; 4.) enables the investment of existing pension and healthcare funds in more competitive vehicles than requiring sole use of lower yielding treasuries; and 5.) permits the Postal Service to engage in additional business activities that are aligned with its core competencies while not competing directly with the private sector.

We appreciate the opportunity to comment and respectfully request this letter be entered into the official hearing transcript as some of the issues discussed during the hearing and positions ascribed to mailers do not align with the interests of a majority of our membership.

In conclusion, we cannot support imposing additional price increases for mailers without a clear plan of continued cost improvement and overhead reduction. However, we do support moving forward on those provisions that enjoy broad support.

Thank you very much for considering our views.

Sincerely,
Hamilton Davison
President & Executive Director
American Catalog Mailers Association

cc: Members of Senate Homeland Security and Government Affairs Committee

Hon. Thomas R. Carper, Ranking Member
Hon. Kelly Ayotte
Hon. Tammy Baldwin
Hon. Cory A. Booker
Hon. Michael B. Enzi
Hon. Joni Ernst
Hon. Heidi Heitkamp
Hon. James Lankford
Hon. John McCain
Hon. Claire McCaskill
Hon. Rand Paul
Hon. Gary C. Peters
Hon. Rob Portman
Hon. Ben Sasse
Hon. Jon Tester

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