Quadracci Urges Congress to Solve USPS Woes

Among the core provisions Quadracci said are necessary for meaningful postal reform:

• Provide the USPS with the authority to streamline its operations. The USPS has infrastructure and capacity to handle and process 300 billion pieces of mail annually. According to USPS estimates, mail volume will only be 153 billion pieces in 2013. It’s important that the USPS be able to right-size its operations for the realities of its projected volumes, Quadracci said.
• Adopt a five-day mail/six-day package delivery schedule as part of a comprehensive reform package. Quadracci said Quad/Graphics and other mailers support a move to five-day mail/six-day package delivery, along with the proposed conversion to curbside and, where feasible, cluster box delivery. These changes will result in major savings to the USPS annually. “The mailing industry will make the necessary changes to adjust if five-day mail delivery is implemented as part of a comprehensive plan to ensure the Postal Service’s financial viability, and with an adequate period of time (at least six months) to prepare for the change,” Quadracci testified. Additionally, he noted that Quad/Graphics is already prepared to help its clients through the transition while continuing to add value.
• Address volume declines by maintaining the postage rate cap to the Consumer Price Index (CPI). An increase in postage has a direct and profoundly negative impact on postal volumes, resulting in a “death spiral” where additional price increases are necessary to cover costs, Quadracci testified. “Ultimately, this will drive additional volume out of the mailstream. Congress, in its wisdom, capped postage rate increases to the CPI as part of the 2006 Postal Accountability and Enhancement Act. Doing so has provided an enormous incentive for the USPS to move quickly and prudently to improve the cost-efficiency of its services without substantially reducing the quality of its mail services. Without such an incentive, the fiscal position of the USPS would be much worse than it currently is.”
• Lengthen the amount of time the USPS has to pre-fund health care benefits for retirees. The current 10-year amortization schedule has resulted in unaffordable $5.5 billion annual payments on which the USPS has already defaulted twice. Extending payments over a longer period of time would relieve some short-term financial pressure while still enabling the USPS to meet its retiree benefit obligations long-term.
• Return to the USPS overpayments to the Federal Employees Retirement System for its use in reducing its debt, making necessary capital investments, and moving forward with its efforts to restructure and right-size its operations.
• Provide the USPS the flexibility to manage escalating health care costs without disadvantaging employees or retirees. Quadracci shared that it is possible to improve the quality of health care while reducing costs, and cited Quad/Graphics’ own success through its 23-year-old QuadMed subsidiary. “Our costs are 20 to 30 percent lower than all industry,” Quadracci said. “There are many health care options but too often the costs are simply shifted from one group to another. By focusing on wellness, our model actually reduces costs rather than shifting who pays.”

During his oral testimony, Quadracci stressed that while print remains an extremely effective medium for marketing and communications—and one that connects and integrates well with other media channels—clients are apprehensive about the future of the USPS. “We are at a stage where our customers are concerned,” he said. “We have to make sure we have the ability to deliver [mail] in an efficient manner.”