Could Limit Pay Hikes
Postal Overhaul Is Authorized by Bush

By GINGER ADAMS OTIS

The same week that the U.S. Postal Service hit its busiest season, President Bush signed legislation allowing a long-awaited overhaul of the agency's operations and changing how some employees' pensions and health benefits are handled.

WILLIAM BURRUS: Fears impact on raises.

It also tied future postal rate increases to the rate of inflation, prompting one union leader to warn that the changes could limit future wage hikes.

In a White House ceremony Dec. 20, Mr. Bush signed the Postal Accountability and Enhancement Act that had been approved by both houses of Congress earlier in the month.

Timely Approval

Postmaster General John E. Potter said that the new law "could not have come at a better time" for the agency. Attempts to pass a measure modernizing some of its operations stretch back more than a decade.

The pre-Christmas ceremony marked the first sweeping overhaul of Postal Service operations since its reorganization in 1971.

The new law allows the USPS to alter its prices to meet market demands, just as commercial businesses do. But the legislation also ensures that price increases are kept below an inflation-based ceiling.

PRESIDENT BUSH: First shakeup in 35 years.

It loosens regulations governing what products the USPS can carry, freeing the agency to bring in new services or tailor existing ones to meet customers' needs.

Unions Have Concerns

Postal labor unions had mixed emotions about the legislation, which was a compromise solution reached after years of lobbying Congress.

William H. Young, head of the National Association of Letter Carriers, told reporters that the enactment of the legislation was "bittersweet."

In a message to union members, he added that the law "preserves our collective bargaining rights - rights that many workers at Homeland Security and the Department of Defense lost earlier in the Bush years."

But he was critical of a provision that requires workers to wait three days after filing claims for injuries on the job to receive benefits. "[That] really sticks in my craw," Mr. Young said.

'An Artificial Wage Cap'

American Postal Workers' Union President William Burrus said linking future postal rate increases to the rate of inflation, regardless of USPS costs, "will result in an artificial cap on Postal Workers' wages."

But the unions were pleased that the new law shifted responsibility for funding military pensions of USPS employees to the Treasury Department, and ended a mandate that the Postal Service put funds into an escrow account to pre-fund retiree health benefits.

"We are grateful that the funding for USPS retiree military service obligations will be borne by the Treasury," Postmaster Potter said. "This, combined with release of the escrow funds, will be used for retiree health benefits. We are now on firm financial footing for the future."

Initially, the Bush administration had insisted that the bill include a provision requiring USPS to pre-pay at least $3 billion a year in retiree health benefits.

Fixes Pension Glitches

The legislation also corrected a flaw in USPS's pension formula that led to significant overpayments and higher employee contributions than were necessary.

It gave the Postal Regulatory Commission subpoena power, among other tools, to ensure that USPS complies with the law. At the same time, the bill added an Inspector General to monitor the commission's expanded powers.

U.S. Rep. John McHugh, a Republican from New York, has pushed for postal reform legislation for years and helped broker the final compromise. He called the law a "monumental achievement" and "a huge and decisive step to ensure the future of a service that virtually all Americans have come to rely on in their daily lives."

Another of the measure's key sponsors, House Government Reform Committee Chairman Tom Davis, (R-Va.), praised the bipartisan approach to passing the bill, saying it "solves the structural, legal and financial constraints that have brought the Postal Service to the brink of utter breakdown. This compromise will reverse the 'death spiral' at the Postal Service and bring it into the 21st century."