Transcript

Chris: Hi, this is Chris Lien.

     Anita: And I’m Anita Pursley. Welcome to Industry Corner, a podcast where we share postal industry news to help you stay informed.

Chris: On today’s podcast we discuss the recent activities with Board of Governors and recap the Senate hearing on the President’s Task Force released in December of 2018. So let’s get into it.

Chris: Welcome to the podcast. Hi Anita.

     Anita: Hi Chris. Good morning.

Chris: Good morning. Hope all is well. I see actually some sunshine here in Rochester, which is a rarity, but we’ll welcome at any time that happens.

     Anita: Hey, we went for a boat ride yesterday. It was 70 degrees here.

Chris: Oh, oh, I can’t wait. It’ll be awhile before we see that here in Rochester, in late March. But speaking of things heating up, Anita, there’s some activity going on with the Board of Governors. Maybe you could bring our listeners up to speed with what’s occurring there.

     Anita: Right. We have three nominees now. So I know we’d mentioned before that Ron Bloom and Roman Martinez were nominated quite some time ago and we hope to have a Senate confirmation hearing very, very soon. I keep looking at the website and nothing’s on the schedule yet, but they could be sworn in as early as the April Board of Governors meeting.

Chris: That’s fantastic. And now that would give a quorum, right? That would actually allow us to have a quorum for the Board of Governors.

     Anita: Right. And then the temporary emergency committee would dissolve. So that’s pretty exciting.

Chris: Yeah, that’d be great. It’d be back to normal. The way it’s supposed to be. Right.

     Anita: The way it’s supposed to be. Certainly not a compliment of nine governors but having a quorum is big news. And then John Barger I believe is the new nominee and he was just nominated by President Trump last week. So he’s just starting the process. But I understand he has a lot of experience turning around failing companies.

Chris: Oh good. Okay. So he’s got some business experience and maybe can bring that cause there are certainly areas to improve with the United States Postal Service… Challenges, some of which is of course related to legislation that was passed. But I think some of it is also just getting the ship on the right path relative to mail volume and how people are using the mails.

     Anita: Right. So he is a lawyer from California and that’s about all I know about.

Chris: Okay. Well looking forward to finding out more through the confirmation process and certainly excited to hear that we may be on a path now to get a quorum with the Board of Governors so that we can return to some state of normalcy and it would be fantastic if that could even happen before the National Postal Forum in early May.

     Anita: Yeah, and they’re going to have a board meeting that week right after the forum.

Chris: Oh, is that right. Okay.

     Anita: And they’re going to be in Indianapolis. So any of the listeners want to stick around and actually witness the open meeting of the Board of Governors. That would be interesting. I think it’s on the 10th though. And I think the last day of the form is the 8th. So you’d kind of have to stick around a little bit too long in my opinion. Most people are ready to get out of dodge after four days.

Chris: I’m looking forward to the National Postal Forum. We’ll have to do a podcast on that in the near future. Shifting to a different topic, sort of related to the Board of Governors. The Senate had a hearing to look at the President’s Task Force and I recall listening to that and watching that with you. And, there was some criticism I heard right off the bat about the fact that the postal service doesn’t have a Board of Governors and we expected some finger pointing, but sounded like there was some blame maybe on both sides of the aisle. Right?

     Anita: Chairman Johnson said that there was plenty of bipartisan blame for why they’re in that embarrassing situation. So we had always heard that it was Senator Sanders who was the hold up on moving governors forward. But, it sounds like there’s more to the story. Well first let me tell you who the witnesses were. We had Gary Grippo, the deputy assistant secretary for public finance at the Treasury Department, and he is the one that Steven Mnuchin had assigned as the lead on this entire task force. And then we had Robert Taub, the chairman of the postal regulatory commission. Of course we all know him well. And then David Williams, the vice chairman of the Board of Governors, and he’s the vice chairman of the Board of Governors. He’s the chairman of the temporary emergency committee. And we can discuss that when we get a quorum. And then there was a second panel, the deputy director of office of management budget. I always say that wrong. OMB, and she’s the acting director of the office of personnel management. I don’t recall how to pronounce her last name. Her first name was Margaret. So those were the witnesses. And let’s get into it.

Chris: Well, I mean the main topic for that hearing was the President’s Task Force. And again, that report came out in December of 2018 and Anita, you and I talked about it on a couple of different podcasts prior to that, but it was interesting to see the Senate’s take on those recommendations in the task force. And we’ll go through some of these here, but I have to see right off the bat, I’m very concerned because here we are again, it sounds very much like our representatives specifically in this case, the Senators, many of them don’t really understand, I think what the United States Postal Services is about how it’s funded, how it operates, universal service obligation, all of these things. And so a lot of education that we’ve been doing up to this point, to me it sounds like we have to start over again for the people that are there. Fortunately there’s a couple of senators that are well versed in it, Senator Carper, Senator Johnson, that do seem to be aware of that. But why don’t we walk through some of the highlights. What were, what were some of the things that, um, that you, you heard right away

     Anita: There were some things that everybody seemed to be an agreement on. Remember when we talked about Claire McCaskill and Heidi Heitkamp’s, failed reelection bids and we were wondering who is going to take up the rural interest? Well my gosh, that was a big topic. I mean everybody there is very keenly aware that the postal service needs to continue to deliver to rural areas. You know, nothing in the report would disadvantage rural areas I think is what was said. In fact it would actually protect them. And then of course the importance of governance, which we just covered the universal service obligation. And you and I have talked about that quite a bit. That it’s like a mission statement. How can the postal service clearly move forward without a clearly defined universal service obligation?

Chris: Right. And that USO has to be defined not only in terms of the delivery points, which of course grows every year over a million delivery points being added with that, recognizes the fact that the country moves on a regular basis. And then finally that there’s different costs to be able to deliver the mail, but we need to have that universal approach with that. I don’t think anybody really wants to have a situation where you’re going to have the haves and the have nots in terms of mail delivery and I know that that was a big, big part of it. Plus then finally what’s the frequency, right? How often should the postal service be delivering mail? And I know that that was part of the conversation that they had, you know, should they remove the Saturday delivery? And that’s been brought up a number of times before, which has always been a problem for champions of rural delivery.

     Anita: You’re absolutely right. Robert Taub, the PRC chairman, who was one of the witnesses, he actually gave a really great suggestion and that was that Congress should look at the 1996 telecommunications act. That’s a regulated industry as well. And the FCC had defined universal service obligation for the telecommunications industry and had certain guidelines they had to follow. But that was really like a carrot, you know, hey, take a look at this. This is someplace that Congress could start. So I really liked that suggestion.

Chris: I liked that too. And you and I both been involved in PostCom for a long time. That sounds a lot like a position that Ian Volner with Venable and PostCom pep talked about, right? I mean he’s always said that the postal service should be looked through a similar lens as what we saw with the telecommunications in terms of operating like a quasi-government utility.

     Anita: Makes total sense. Right. And then the other thing that everybody was in agreement on is that the postal service is in dire financial straits. In desperate need of reform, but it was to remain a government entity. So privatization, which is what everybody expected in this report was not there. And interestingly enough, it’s Senator Ron Johnson, who is the chairman of the committee and he’s always been known for someone who’s talked about privatizing the postal service. So I think he was probably a little disappointed

Chris: Privatization of the United States Postal Service that really doesn’t make any sense. And I know a lot of times people will point to the European countries and some of the privatization that’s happened over there in the European Post. But we have to remind the listeners that the United States is a very unique country when it comes to mail and mail delivery. It really does bind the nation here in so many different ways, which is a large part of its mission statement and not only is a protected by the constitution, I mean it’s codified in article one, section eight but the fact is that just the way that this country uses mail for marketing purposes, and I know there’s a whole other conversation on that with that federal register notice, but it really is essential, particularly with multichannel marketing. But I have to say that, and I touched on this before, there were some disappointing moments to me on that hearing and one in particular had to do with Senator Rick Scott, who was a former governor of Florida. His line of questions… there were two issues I had with that. One was, it sounded very much like he didn’t quite understand that United States Postal Services not funded by taxpayers because he started this line of question and we’ve seen this in the papers before, that, “Hey is the public subsidizing Amazon?”. No, that statement or that position is incorrect. Whether or not the postal service is having a financial loss on each package with Amazon. I mean that’s all part of, I’m sure details at the Board of Governors and specifically governor Williams is looking at, but to suggest that the taxpayer somehow were bailing out Amazon is absolutely incorrect.

     Anita: All right, we’ll have to give him a pass because he’s a new senator. But yeah, you and I were looking at each other rolling our eyes. It’s like, where did he come from?

Chris: It’s like, “oh no”, you know, and how am I going to start all over again? But the other thing, and this is really dangerous, and so I was kinda disappointed it was even brought up, but he started some line of questioning about can people refuse to receive mail in their mailbox? And it was directed at, I believe it was governor Williams asking him, you know, hey, can somebody just say I don’t want to receive mail anymore? And I thought that governor Williams answered it correctly. But just the fact that asking that question really concerns me because again, it brings up this whole idea of a do not mail list or any kind of attempted legislation we absolutely don’t want. Yeah, it’s very dangerous. We don’t want that out there because again, back to that universal service obligation and the importance of mail in this country. If you start having people turn that off, they’re going to miss out on a lot of opportunities and it’s going to start to erode all of the opportunities that are in front of us for multichannel marketing because mail is such an important foundation for that.

     Anita: Yeah. Do you remember when, I don’t remember who it was, but asked Williams how pre-funding has affected the postal service. Do you remember his response?

Chris: I don’t remember it exactly, so you’ll have to remind me.

     Anita: He just said clearly it was devastating. It’s been devastated to the Postal Service. You know, they can’t make investments. But what really struck me was he said that they’ve been forced to do cutbacks at nearly a reckless pace. And you know, I thought that was really, really well said. Pre-Funding. That’s in my opinion, that’s the elephant in the room. But I think when, not chairman, he’s the former chairman, Senator Carper, he’s been around for a long time and he was asking about Medicare integration. You know, he said that that was the elephant in the room because I think that that would go a long way to improving the financial situation, the Postal Service and Gary Grippo, who is the Treasury Department representative, he was asked, you know, why does the Task Force oppose Medicare integration? And his explanation was that there were two elements to it. You know, one being the practical side of it and the other being a policy side where it would supply relief to the postal service but it doesn’t go to the core of the problem. It just delays it. So I thought that was a little bit interesting because I think the industry has really felt like that was the silver bullet. You know, we could just get Medicare integration, it would shift a little bit of money to the Treasury, but a very small percentage if I remember correctly. But anyway, that was one thing that I thought was interesting. Another thing, remember when we, they were talking about the salaries of the delivery force and they were comparing the postal service to UPS and Fedex.

Chris: That was Senator Johnson that brought up that line of questioning.

     Anita: It was him and then it was Dave Williams who responded by saying that he did not believe the numbers, that there was something wrong there. That I think he mentioned that the postal employee takes a longer time to get up to those salaries. So, in other words, they start out much lower and then the salaries they’re looking at $85,000 a year, I think it was.

Chris: Right, 85,000 for a postal compared to the ups.

     Anita: Yeah it was 70-something, 76,000 I think. And then 50 something for FedEx drivers who are not union.

Chris: So a 10 to $30,000 gap or a variance in terms of what on the surface ostensibly looks like the same job. Right. You’re delivering product whether it’s business or residential, although more residential with the US Postal Service. But yeah, it was an interesting line of questioning and position that he was taken with them.

     Anita: Right. And I have a feeling of the postal service has probably already crunched the numbers and gotten back to the committee because I think the docket was still open for a week or so after the hearings. But I think they’ll want to dispute that.

Chris: Anything else to cover on that?

     Anita: Yeah, we have to talk about essential versus commercial.

Chris: Right. Cause that was a big part of it. And you and I talked about that before. How do you define essential?

     Anita: Yeah, and it’s interesting because Dave Williams called it a fresh new idea and that disappointed me a little bit because this whole concept scares me but I think it is worth exploring but you’re right, how do we define it and who defines it? Right and when Grippo was asked about it, he mentioned as essential would be things like pharmaceuticals, transactional mail, person to person sounds like first class mail but he also mentioned package delivery and then when they talked about commercial he immediately went to marketing mail and catalogs. So I think that that needs to be vetted and take it off the table in my opinion.

Chris: I always had an issue with that because it’s so hard to define it. The one area that we really do need to define is the universal service obligation and that does seem to be what the general spirit was for everybody that was discussing there is we’ve got to get USO figured out. We’ve got to find a way to be able to help the postal service to get out of some of the financial issues and challenges they have. Most of which are related to the pre funded retiree healthcare benefits as part of the Postal Accountability Enhancement Act Law that was passed in December of 2006 and focus on those things first and then table for later discussions and ideas are ideations that come out of this concept of what’s essential, what’s not essential. And hopefully that’s something that later on when you have a quorum with governors, then they can take those discussions up.

     Anita: Right. I’m losing my voice now. It must be time to end the podcast.

Chris: All right, well thank you Anita for the preview. I guess final thoughts here, any next steps now that the Senate has talked about it?

     Anita: We really don’t know what next steps are. Unfortunately. You know, I think it’s been called a contribution to the conversation and of course it’s always a good idea to keep postal service issues front and center, but we need a champion. Don’t think it’s going to be Ron Johnson necessarily because the task force report didn’t put forth any meaningful things that I think he can put into a reform package, but we’ll just have to wait and see.

Chris: Agreed. Well, thanks Anita. I appreciate you’ve given the information here for our listeners today.

     Anita: You bet, that was a good conversation. As always, Chris, thank you so much

Chris: You’re welcome, and thank you to our listeners for attending the podcast. We really appreciate you doing that. Make sure to send some comments to us about today’s podcast or any other ones that you’ve listened to and be sure to visit BCCsoftware.com or give us a phone call. As always, we’d like to know how can we help? Thanks everyone. Have a great day.