LEGISLATIVE ISSUES — CAN A LAME DUCK FLY?

JUST WHEN it appeared passage of the 1,000-pound gorilla known as postal reform appeared a fait accompli for Congress, in steps the National Association of Letter Carriers (NALC) throwing a curve ball that would make Roger Clemens blush.

As the hours leading up to Congress’ election day break ticked off, the NALC somewhat surprisingly voiced its displeasure with some elements of the bill dealing with workman’s compensation. The NALC, a large and respected union, weighed in just late enough in the process to prevent a vote from being taken on legislation that would have updated the 30+-year-old, antiquated business practices of the United States Postal Service (USPS).

As you read this, Congress may or may not be working toward postal reform legislation. And you, the commercial printer, may or may not be interested in the outcome. As statistics show, at least half of you should be worried: Ben Cooper, who is a driving force behind the Coalition for a 21st Century Postal Service, points out that 45 percent to 47 percent of printed material requires distribution through the mail stream.

And since the USPS is obligated to increase rates in order to cover their costs, postal rate increases of 7 percent to 10 percent could become an annual event, prompting your direct mail and publishing customers to re-evaluate their distribution plans.

Postal reform is just one of several key legislative issues that printers should be mindful of as 2006 rolls into 2007. Here is a sampling of topics that are most relevant to our industry.

POSTAL REFORM: The elements of this legislation that pertain to printers have pretty much been successfully addressed, but USPS reform impacts many interested parties. Cooper notes that many of the big-ticket items have been negotiated; despite the NALC wanting to wet its beak, it would seem that legislation should be within grasp.

But they don’t call it ‘Lame Duck’ for nothing. The Democrats’ overwhelming takeover of the U.S. House of Representatives and shocking Senate majority on mid-term election day last month left Republicans dazed and perhaps confused enough to knock off early for Christmas recess.

“I don’t think any of the four principle members of Congress are keen on letting this reform issue roll over to a future Congress,” Cooper notes. “There is a willingness on the part of the four to get it done.

“But they’ve put themselves and postal reform in a terribly tight spot because now we’re depending on House and Senate leadership to make time for a bill, so everything has to be worked out in order for it to get to the floor. When anything gets difficult in Congress, the role of naysayers becomes dominant.”

This is particularly true during the Lame Duck session. A Democrat-controlled Congress, which presumably would lean toward labor-based issues in a future examination of postal reform, may view the business interests in legislation “subordinate to some degree to the interests of the employee groups,” Cooper explains.

“Once you start the process all over again, some of the other reforms in the bill start to fall away, so you lose some of the items that the business side desires. The dynamics aren’t particularly good for the next Congress. My own estimation: if it doesn’t pass this year, we’re likely looking at four years away before we’d have a chance to do it again.”

Lisbeth Lyons, the vice president of government affairs for the PIA/GATF and the person who succeeded Cooper when he left the post earlier this year, echoed his sentiment regarding postal reform’s bleak outlook should it not be salvaged in the Lame Duck session.

“Throughout this battle, we’ve been told by Congress that this is the time and there’s no guarantee there will be a shot for us in the 110th Congress,” she says. “We were told that even before there was a notion that there could be a shift in control of one or both chambers.”

Failing a reform bill before the stroke of midnight, Lyons feels the PIA/GATF would be willing to pick up the cause in the 110th session. But if that support cannot be rekindled, the focus will shift to effecting change in the rule-making process, addressing rate cases, rules and the regulatory aspects of USPS.

Clearly, a reform bill is the preferred avenue for change. The next rate increase in May of 2007 sees across-the-board increases in the 9 percent to 10 percent range. The USPS would presumably file in 2007 for another increase for the following year. These increases fly in the face of what is viewed as one of the most critical aspects of the reform bill, which is to tie future rate cases to the Consumer Price Index (CPI).

As Cooper points out, future rate increases, when married to the CPI, provide cost certainty for mailers when planning future campaigns. This is critical for a magazine industry struggling to retain advertising dollars, especially since postage costs outweigh printing costs.

Another perk tied into reform is the retooling of the process for filing rate increases, currently a 10-month process that is litigation-intensive.

“The postal service has to create ‘X’ number of dollars, and they do that by deciding winners and losers among some 5,000 different rate subclasses of mail,” Cooper notes. “If you’re a loser in that process, the cost can be significant. Practically every mailer hires an attorney—either individually or through their association—to argue on behalf of their class, subclass or sub-subclass of mail. Fractions of a cent, one way or another, can mean millions and millions of dollars.”

The prevailing theory is that as rates increase, mail volume decreases. As a result, the USPS increases rates further to recoup monies lost to the diminishing volume, creating a vicious cycle. Commonly known as the “death spiral,” a diminishing USPS role is not in the best interest of mailers, the printers they employ or, indeed, for the postal service itself.

HEALTHCARE: PIA/GATF’s Lyons says it is unlikely that the Democrats will put forth legislation embracing market-based reforms, such as association health plans (AHPs). Lyons says the Democrats have been focused more on laying out their plans for other healthcare issues, such as Medicare and drug importation.

She notes that the House has passed AHPs eight times in the last 12 years via bipartisan vote, but the trend will not continue under the new majority. On the Senate side, Lyons doesn’t envision small business health plans (SBHPs) being revived; the Dems’ alternative Lincoln-Durbin bill introduced this past year will likely return in the 110th Congress. Lincoln-Durbin uses the pooling concept, but calls for considerable government funding, while the PIA-backed SBHP was predominantly a market-driven reform, Lyons says.

Additionally, Congress is likely to revisit proposals concerning employer-sponsored healthcare and mandated benefits.

“We may have to defend against healthcare reforms that our members have traditionally opposed, which might be a co-pay or government run universal healthcare-type initiative,” Lyons remarks.

LABOR: This is an issue in which the PIA/GATF is taking a defensive stand. A union-backed initiative seeks to remove secret ballot elections on the question of organizing and replacing it with a “card check” campaign, where worker signatures are collected in order to garner a majority. Lyons points out that, statistically, unionizing efforts are far less successful through secret ballot than they are via card check elections.

Losing anonymity can open the door for strong-arm tactics and other heavy-handed influencing tactics by would-be union organizers.

“Card check elections take away anonymity, and a lot of anecdotal evidence shows that it leads to coercion and intimidation,” Lyons adds. “Given that union membership continues to dwindle, they’re looking to gain their market share and the Miller-Kennedy card checks are one way to do it. With the changes of control in Congress, both (George) Miller (D-CA) and (Ted) Kennedy (D-MA) have gained chairmanships over the committees of jurisdiction on this issue.”

IMMIGRATION REFORM: This is a highly hot button, national issue that has significant ramifications on industries such as food service and agriculture. While some printers and trade finishers rely on foreign-born, undocumented employees to handle unskilled tasks, the subject of immigration reform hasn’t been considered a key graphic arts industry issue. But in a recent PIA/GATF survey immigration reform and, in particular, the employee liability ramifications of immigration reform, ranked in the top 15 issues of concern for printers nationwide.

However, future immigration bills could impact businesses across the spectrum, particularly those with provisions that call for owners to have more accountability in terms of verification. “There are some in Congress who would like employers to be the immigration police, and we don’t believe that employers should be forced into the role of policing immigration policies,” Lyons contends.

She feels it is unreasonable to expect businesses to be able to spot a counterfeit document—printers may have an advantage over most vocations in their ability to pick out phony documents, but a restaurant owner likely has no experience in evaluating them.

ESTATE TAX: Talk about the myriad of issues surrounding postal reform to a group of commercial printers, and you’ll receive some polite nods. Change the subject to the permanent repeal of the “death tax,” and you’ll have those printers leaning forward in their seats. Alas, you cannot force people to fall in love with a cause; they gravitate toward whatever they feel lies in their best interests.

The estate tax repeal sunsets on December 31, 2010, notes the PIA/GATF vice president of government affairs. Making the repeal permanent before then, while ideal, isn’t realistic under the current Democratic Congressional hold.

According to USA Today, the tax rate is up to 46 percent on estates that exceed $2 million. Barring permanent repeal or reform, that high end rate will reach 60 percent in 2011 and the tax will kick in at $1 million. Increasing the exemption trigger substantially could be the basis for reform.

“Until this year, PIA has always argued that we want full, permanent repeal or nothing,” Lyons concludes. “This year, PIA did amend its position to say we would agree to permanent reform if the reform was expansive enough to include enough printers in its exemption.” PI