[Congressional Record Volume 150, Number 72 (Thursday, May 20, 2004)]
[Senate]
[Pages S5986-S6002]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. COLLINS (for herself, Mr. Carper, Mr. Stevens, Mr. 
        Voinovich, Mr. Sununu, Mr. Lieberman, Mr. Akaka, and Mr. 
        Durbin):
  S. 2468. A bill to reform the postal laws of the United States; to 
the Committee on Governmental Affairs.
  Ms. COLLINS. Mr. President, I rise today with my friend and 
colleague, Senator Carper, to introduce the Postal Accountability and 
Enhancement Act of 2004, a bill designed to help the 225-year-old 
Postal Service meet the challenges of the 21st Century. This 
legislation represents the culmination of a process that began in the 
summer of 2002 when I introduced a bill to establish a Presidential 
Commission charged with examining the problems the Postal Service 
faces, and developing specific recommendations and legislative 
proposals that Congress and the Postal Service could implement.
  It has long been acknowledged that the financial and operational 
problems confronting the Postal Service are serious. At present, the 
Postal Service has more than $90 billion in unfunded liabilities and 
obligations, which include $6.5 billion in debt to the U.S. Treasury, 
nearly $7 billion for Workers' Compensation claims, $5 billion for 
retirement costs, and as much as $45 billion to cover retiree health 
care costs. The General Accounting Office's Comptroller General, David 
Walker, has pointed to the urgent need for ``fundamental reforms to 
minimize the risk of a significant taxpayer bailout or dramatic postal 
rate increases.'' The Postal Service has been on GAO's ``High-Risk'' 
List since April of 2001. The Postal Service is at risk of a ``death 
spiral'' of decreasing volume and increasing rates that lead to further 
decreases in volume.
  In December of 2003, President Bush announced the creation of a 
bipartisan commission charged with identifying the operational, 
structural, and financial challenges facing the U.S. Postal Service. 
The President charged this commission with examining all significant 
aspects of the Postal Service with the goal of recommending legislative 
and administrative reforms to ensure its long-term viability.
  The President's Commission conducted seven public hearings across the 
country at which they heard from numerous witnesses. On July 31, 2003, 
the Commission released its final report, making 35 legislative and 
administrative recommendations for the reform of the Postal Service.
  As I read through the Commission's report, I was struck by what I 
considered the Commission's wake up call to Congress: its statement 
that ``an incremental approach to Postal Service reform will yield too 
little, too late given the enterprise's bleak fiscal outlook, the depth 
of current debt and unfunded obligations, the downward trend in First-
Class mail volumes and the limited potential of its legacy postal 
network that was built for a bygone era.'' That is a very strong 
statement, and one that challenged both the Postal Service and Congress 
to embrace far-reaching reforms.
  To the relief of many, including myself, the Commission did not 
recommend privatization of the Postal Service. Instead, the Commission 
sought to find a way for the Postal Service to do, as Co-Chair Jim 
Johnson described to me, ``an overwhelmingly better job under the same 
general structure.''
  The Postal Service plays a vital role in our economy. The Service 
itself employs more than 750,000 career employees. Less well known is 
the fact that it is also the linchpin of a $900-billion mailing 
industry that employs 9 million Americans in fields as diverse as 
direct mailing, printing, catalog production, paper manufacturing, and 
financial services. The health of the Postal Service is essential to 
the vitality of thousands of companies and the millions that they 
employ.
  One of the greatest challenges for the Postal Service is the decrease 
in mail volume as business communications, bills and payments move more 
and more to the Internet. The Postal Service has experienced declining 
volumes of First-Class mail for the past four years. This is highly 
significant, given that First-Class mail accounts for 48 percent of 
total mail volume, and the revenue it generates pays for more than two-
thirds of the Postal Service's institutional costs.
  The Postal Service also faces the difficult task of trying to cut 
costs from its nationwide infrastructure and transportation network. 
These costs are difficult to cut. Even though volumes may be 
decreasing, carriers must still deliver six days a week to more than 
139 million addresses.
  As Chairman of the Committee on Governmental Affairs, I held a series 
of eight hearings, including a joint hearing with the House, during 
which we reviewed the recommendations of the President's Commission. 
The bill Senator Carper and I introduce today is the culmination of 
everything the Committee learned from dozens of witnesses over the past 
eight months.
  First and foremost, the Collins-Carper bill preserves the basic 
features of universal service-affordable rates, frequent delivery, and 
convenient community access to retail postal services. As a Senator 
representing a large, rural State, I want to ensure that my 
constituents living in the northern woods, or on the islands, or in our 
many rural small towns have the same access to postal services as the 
people of our cities. If the Postal Service were no longer to provide 
universal service and deliver mail to every customer, the affordable 
communication link upon which many Americans rely would be jeopardized. 
Most commercial enterprises would find it uneconomical, if not 
impossible, to deliver mail and packages to rural Americans at rates 
charged by the Postal Service.
  The Collins-Carper bill allows the Postal Service to maintain its 
current mail monopoly, and retain its sole access to customer 
mailboxes. It grants the Postal Service Board of Governors the 
authority to set rates for competitive products like Express Mail and 
Parcel Post, as long as these prices do not result in cross subsidy 
from market-dominant products. As a safeguard, our bill establishes a 
30 day prior review period during which the proposed rate changes shall 
be reviewed by the Postal Regulatory Commission.
  It replaces the current lengthy and litigious rate-setting process 
with a rate cap-based structure for market-dominant products such as 
First-Class Mail, periodicals and library mail. This would allow the 
Postal Service to react more quickly to changes in the mailing 
industry. The rate caps would be linked to an inflation indicator 
selected by the Postal Regulatory Commission. The goal would be to make 
rate increases more predictable and less frequent and to provide 
incentives for the Postal Service to operate efficiently. Price changes 
for market-dominant products would be subject to a 45-day prior review 
period by the Postal Regulatory Commission.

  Our bill would introduce new safeguards against unfair competition by 
the Postal Service in competitive markets. Subsidization of competitive 
products by market-dominant products would be expressly forbidden, and 
an equitable allocation of institutional costs to competitive products 
would be required.
  The President's Commission recommended that the regulator be granted 
the authority to make changes to the Postal Service's universal service 
obligation and monopoly. The vast majority of the postal community, 
however, shared my belief that these are important policy 
determinations that should be retained by Congress. The

[[Page S5987]]

Collins-Carper bill keeps those public policy decisions in 
congressional hands.
  The existing Postal Rate Commission would be transformed into the 
Postal Regulatory Commission with greatly enhanced authority. Under 
current law, the Rate Commission has very narrow authority. We wanted 
to ensure that the Postal Service management has both greater latitude 
and stronger oversight. Among other things, the Postal Regulatory 
Commission will have the authority to regulate rates for non-
competitive products and services; ensure financial transparency; 
establish limits on the accumulation of retained earnings by the Postal 
Service; obtain information from the Postal Service, if need be, 
through the use of new subpoena power; and review and act on complaints 
filed by those who believe the Postal Service has exceeded its 
authority. Members of the Postal Regulatory Board will be selected 
solely on the basis of their demonstrated experience and professional 
standing. Senate confirmation of all Board Members will be required.
  The Governmental Affairs Committee dedicated two hearings to the 
examination of the Commission's workforce-related recommendations. The 
Postal Service is a highly labor intensive organization, using $3 out 
of every $4 to pay the wages and benefits of its employees. Their 
workforce is comprised of more than 700,000 dedicated letter carriers, 
clerks, mail handlers, postmasters, and others, who place great value 
on their right to collectively bargain. Our bill reaffirms that right. 
This bill only makes changes to the bargaining process that have been 
agreed to by both the Postal Service and the four major unions. We 
replace the rarely used fact-finding process with mediation, and 
shorten statutory deadlines for certain phases of the bargaining 
process.
  Additionally, the Collins-Carper bill corrects what I believe to be 
an anomaly in the Federal workers' compensation law that results in 
high costs for the Postal Service. Under the Federal Employees 
Compensation Act (FECA), Federal employees with dependents are eligible 
for 75 percent of their take-home pay, tax free, plus cost of living 
allowances. In addition, there is no maximum dollar cap on FECA 
payments. As a result, employees often opt not to retire, staying on 
the more generous workers' compensation program permanently.
  According to a March 2003 audit issued by the Postal Service's Office 
of Inspector General, the Postal Service's workers' compensation rolls 
include 81 cases that originated 40 to 50 years ago, with the oldest 
recipient being 102 years old. The IG's office found 778 cases that 
originated 30 to 40 years ago; and 1,189 cases that originated 20 to 29 
years ago.
  The Collins-Carper bill works to protect the financial resources of 
the Postal Service by converting workers' compensation benefits for 
total or partial disability to a retirement annuity when the affected 
employee reaches 65 years of age. This change would reflect the fact 
that disabled postal employees would likely retire at some point were 
they not receiving workers' compensation. I would like to note that the 
average postal employee retires far earlier than age 65, so this is 
still a generous program. It is important to point out that the Postal 
Service has reduced their workplace injury rate by twenty-eight percent 
over the past three years.
  The Collins--Carper bill also puts into place a three-day waiting 
period before an employee is eligible to receive 45 days of 
continuation of pay. This is consistent with every state's workers' 
compensation program that requires a three- to seven-day waiting period 
before benefits are paid.
  Our bill has reached an important compromise on the issue of 
workshare discounts. Some have raised concerns that the Postal Service 
has set rates so that mailers get a discount greater than the cost 
avoided by the Postal Service. While this may have occurred in a 
handful of instances, those mailers are still covering their 
attributable costs, as well as making a healthy contribution to 
overhead. The language in our bill sets a policy that the Postal 
Service shall not create new discounts greater than the cost avoided by 
the Postal Service. The only exception is in those cases where the 
Postal Regulatory Commission believes those rates are necessary.
  The bill has also, for the first time, explicitly created the 
authority for the Postal Service to enter into negotiated service 
agreements with individual customers. This will allow the Postal 
Service to create agreements with customers to increase its revenue. I 
would point out that these agreements must cover all attributable 
costs, and will likely result in greater contribution to overhead. In 
addition, our bill requires that other similarly situated mailers will 
be able to enter into such agreements with the Postal Service.
  Finally, our bill would repeal a provision of Public Law 108-18 which 
requires that money owed to the Postal Service due to an overpayment 
into the Civil Service Retirement System Fund be held in an escrow 
account. Repealing this provision would essentially ``free up'' $78 
billion over a period of 60 years. These savings would be used to not 
only pay off debt to the U.S. Treasury and to fund health care 
liabilities, but to mitigate rate increases as well. In fact, failure 
to release these escrow funds would mean, for mailers, a double-digit 
rate increase in 2006--an expense most American businesses and many 
consumers are ill-equipped to afford.
  The bill would also return to the Department of Treasury the 
responsibility for funding CSRS pension benefits relating to the 
military service of postal retirees. No other agency is required to 
make this payment. Ratepayers should not be held responsible for this 
$27 billion obligation.
  The Postal Service has reached a critical juncture. If we are to save 
and strengthen this vital service upon which so many Americans rely for 
communication and their livelihoods, the time to act is now.
  Our bill has the strong endorsements of the National Rural Letter 
Carriers Association, the National Association of Letter Carriers, the 
National Association of Postmasters of the United States, and the 
Coalition for a 21st Century Postal Service--which represents thousands 
of the major mailers, employee groups, small businesses, and other 
users of the mail. I am also very pleased to add Senators Ted Stevens, 
George Voinovich and John Sununu as originated cosponsors of this bill.
  I look forward to working with all of my colleagues in the Senate, 
and House Government Reform and Oversight Committee Chairman Tom Davis, 
who just last week passed a postal reform bill out of his committee by 
a vote of 40-0.
  I ask unanimous consent that the text of the bill be printed in the 
Record, along with a letter sent to me from David Walker, Comptroller 
General of the General Accounting Office, addressing the need for 
comprehensive postal reform.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2468

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Postal 
     Accountability and Enhancement Act''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.

                 TITLE I--DEFINITIONS; POSTAL SERVICES

Sec. 101. Definitions.
Sec. 102. Postal services.

                    TITLE II--MODERN RATE REGULATION

Sec. 201. Provisions relating to market-dominant products.
Sec. 202. Provisions relating to competitive products.
Sec. 203. Provisions relating to experimental and new products.
Sec. 204. Reporting requirements and related provisions.
Sec. 205. Complaints; appellate review and enforcement.
Sec. 206. Clerical amendment.

                  TITLE III--MODERN SERVICE STANDARDS

Sec. 301. Establishment of modern service standards.
Sec. 302. Postal service plan.

           TITLE IV--PROVISIONS RELATING TO FAIR COMPETITION

Sec. 401. Postal Service Competitive Products Fund.
Sec. 402. Assumed Federal income tax on competitive products income.
Sec. 403. Unfair competition prohibited.
Sec. 404. Suits by and against the Postal Service.

                      TITLE V--GENERAL PROVISIONS

Sec. 501. Qualification and term requirements for Governors.

[[Page S5988]]

Sec. 502. Obligations.
Sec. 503. Private carriage of letters.
Sec. 504. Rulemaking authority.
Sec. 505. Noninterference with collective bargaining agreements.

                TITLE VI--ENHANCED REGULATORY COMMISSION

Sec. 601. Reorganization and modification of certain provisions 
              relating to the Postal Regulatory Commission.
Sec. 602. Authority for Postal Regulatory Commission to issue 
              subpoenas.
Sec. 603. Appropriations for the Postal Regulatory Commission.
Sec. 604. Redesignation of the Postal Rate Commission.
Sec. 605. Financial transparency.

                         TITLE VII--EVALUATIONS

Sec. 701. Assessments of ratemaking, classification, and other 
              provisions.
Sec. 702. Report on universal postal service and the postal monopoly.
Sec. 703. Study on equal application of laws to competitive products.

   TITLE VIII--POSTAL SERVICE RETIREMENT AND HEALTH BENEFITS FUNDING

Sec. 801. Short title.
Sec. 802. Civil Service Retirement System.
Sec. 803. Health insurance.
Sec. 804. Repeal of disposition of savings provision.
Sec. 805. Effective dates.

                TITLE IX--COMPENSATION FOR WORK INJURIES

Sec. 901. Temporary disability; continuation of pay.
Sec. 902. Disability retirement for postal employees.

                 TITLE I--DEFINITIONS; POSTAL SERVICES

     SEC. 101. DEFINITIONS.

       Section 102 of title 39, United States Code, is amended by 
     striking ``and'' at the end of paragraph (3), by striking the 
     period at the end of paragraph (4) and inserting a semicolon, 
     and by adding at the end the following:
       ``(5) `postal service' refers to the physical delivery of 
     letters, printed matter, or packages weighing up to 70 
     pounds, including physical acceptance, collection, sorting, 
     transportation, or other services ancillary thereto;
       ``(6) `product' means a postal service with a distinct cost 
     or market characteristic for which a rate is applied;
       ``(7) `rates', as used with respect to products, includes 
     fees for postal services;
       ``(8) `market-dominant product' or `product in the market-
     dominant category of mail' means a product subject to 
     subchapter I of chapter 36; and
       ``(9) `competitive product' or `product in the competitive 
     category of mail' means a product subject to subchapter II of 
     chapter 36; and
       ``(10) `year', as used in chapter 36 (other than 
     subchapters I and VI thereof), means a fiscal year.''.

     SEC. 102. POSTAL SERVICES.

       (a) In General.--Section 404 of title 39, United States 
     Code, is amended--
       (1) in subsection (a), by striking paragraph (6) and by 
     redesignating paragraphs (7) through (9) as paragraphs (6) 
     through (8), respectively; and
       (2) by adding at the end the following:
       ``(c) Nothing in this title shall be considered to permit 
     or require that the Postal Service provide any special 
     nonpostal or similar services.''.
       (b) Conforming Amendments.--(1) Section 1402(b)(1)(B)(ii) 
     of the Victims of Crime Act of 1984 (98 Stat. 2170; 42 U.S.C. 
     10601(b)(1)(B)(ii)) is amended by striking ``404(a)(8)'' and 
     inserting ``404(a)(7)''.
       (2) Section 2003(b)(1) of title 39, United States Code, is 
     amended by striking ``and nonpostal''.

                    TITLE II--MODERN RATE REGULATION

     SEC. 201. PROVISIONS RELATING TO MARKET-DOMINANT PRODUCTS.

       (a) In General.--Chapter 36 of title 39, United States 
     Code, is amended by striking sections 3621, 3622, and 3623 
     and inserting the following:

     ``Sec. 3621. Applicability; definitions

       ``(a) Applicability.--This subchapter shall apply with 
     respect to--
       ``(1) first-class mail letters;
       ``(2) first-class mail cards;
       ``(3) periodicals;
       ``(4) standard mail;
       ``(5) single-piece parcel post;
       ``(6) media mail;
       ``(7) bound printed matter;
       ``(8) library mail;
       ``(9) special services; and
       ``(10) single-piece international mail,
     subject to any changes the Postal Regulatory Commission may 
     make under section 3642.
       ``(b) Rule of Construction.--Mail matter referred to in 
     subsection (a) shall, for purposes of this subchapter, be 
     considered to have the meaning given to such mail matter 
     under the mail classification schedule.

     ``Sec. 3622. Modern rate regulation

       ``(a) Authority Generally.--The Postal Regulatory 
     Commission shall, within 12 months after the date of the 
     enactment of this section, by regulation establish (and may 
     from time to time thereafter by regulation revise) a modern 
     system for regulating rates and classes for market-dominant 
     products.
       ``(b) Objectives.--Such system shall be designed to achieve 
     the following objectives:
       ``(1) To reduce the administrative burden and increase the 
     transparency of the ratemaking process.
       ``(2) To create predictability and stability in rates.
       ``(3) To maximize incentives to reduce costs and increase 
     efficiency.
       ``(4) To enhance mail security and deter terrorism by 
     promoting secure, sender-identified mail.
       ``(5) To allow the Postal Service pricing flexibility, 
     including the ability to use pricing to promote intelligent 
     mail and encourage increased mail volume during nonpeak 
     periods.
       ``(6) To assure adequate revenues, including retained 
     earnings, to maintain financial stability and meet the 
     service standards established under section 3691.
       ``(7) To allocate the total institutional costs of the 
     Postal Service equitably between market-dominant and 
     competitive products.
       ``(c) Factors.--In establishing or revising such system, 
     the Postal Regulatory Commission shall take into account--
       ``(1) the establishment and maintenance of a fair and 
     equitable schedule for rates and classification system;
       ``(2) the value of the mail service actually provided each 
     class or type of mail service to both the sender and the 
     recipient, including but not limited to the collection, mode 
     of transportation, and priority of delivery;
       ``(3) the direct and indirect postal costs attributable to 
     each class or type of mail service plus that portion of all 
     other costs of the Postal Service reasonably assignable to 
     such class or type;
       ``(4) the effect of rate increases upon the general public, 
     business mail users, and enterprises in the private sector of 
     the economy engaged in the delivery of mail matter other than 
     letters;
       ``(5) the available alternative means of sending and 
     receiving letters and other mail matter at reasonable costs;
       ``(6) the degree of preparation of mail for delivery into 
     the postal system performed by the mailer and its effect upon 
     reducing costs to the Postal Service;
       ``(7) simplicity of structure for the entire schedule and 
     simple, identifiable relationships between the rates or fees 
     charged the various classes of mail for postal services;
       ``(8) the relative value to the people of the kinds of mail 
     matter entered into the postal system and the desirability 
     and justification for special classifications and services of 
     mail;
       ``(9) the importance of providing classifications with 
     extremely high degrees of reliability and speed of delivery 
     and of providing those that do not require high degrees of 
     reliability and speed of delivery;
       ``(10) the desirability of special classifications from the 
     point of view of both the user and of the Postal Service;
       ``(11) the educational, cultural, scientific, and 
     informational value to the recipient of mail matter; and
       ``(12) the policies of this title as well as such other 
     factors as the Commission deems appropriate.
       ``(d) Requirements.--The system for regulating rates and 
     classes for market-dominant products shall--
       ``(1) require the Postal Rate Commission to set annual 
     limitations on the percentage changes in rates based on 
     inflation using indices, such as the Consumer Price Index, 
     the Employment Cost Index, the Gross Domestic Product Price 
     Index, or any similar measure as the Postal Rate Commission 
     may prescribe;
       ``(2) establish a schedule whereby rates, when necessary 
     and appropriate, would increase at regular intervals by 
     predictable amounts;
       ``(3) not later than 45 days before the implementation of 
     any adjustment in rates under this section--
       ``(A) require the Postal Service to provide public notice 
     of the adjustment;
       ``(B) provide an opportunity for review by the Postal Rate 
     Commission;
       ``(C) provide for the Postal Rate Commission to notify the 
     Postal Service of any noncompliance of the adjustment with 
     the limitation under paragraph (1); and
       ``(D) require the Postal Service to respond to the notice 
     provided under subparagraph (C) and describe the actions to 
     be taken to comply with the limitation under paragraph (1).
       ``(4) notwithstanding any limitation set under paragraphs 
     (1) and (3), establish procedures whereby rates may be 
     adjusted on an expedited basis due to unexpected and 
     extraordinary circumstances.
       ``(e) Workshare Discounts.--
       ``(1) Definition.--In this subsection, the term `workshare 
     discount' refers to rate discounts provided to mailers for 
     the presorting, prebarcoding, handling, or transportation of 
     mail, as further defined by the Postal Regulatory Commission 
     under subsection (a).
       ``(2) Regulations.--As part of the regulations established 
     under subsection (a), the Postal Regulatory Commission shall 
     establish rules for workshare discounts that ensure that such 
     discounts do not exceed the cost that the Postal Service 
     avoids as a result of workshare activity, unless--
       ``(A) the discount is--
       ``(i) associated with a new postal service or with a change 
     to an existing postal service; and

[[Page S5989]]

       ``(ii) necessary to induce mailer behavior that furthers 
     the economically efficient operation of the Postal Service;
       ``(B) a reduction in the discount would--
       ``(i) lead to a loss of volume in the affected category of 
     mail and reduce the aggregate contribution to institutional 
     costs of the Postal Service from the mail matter subject to 
     the discount below what it otherwise would have been if the 
     discount had not been reduced to costs avoided;
       ``(ii) result in a further increase in the rates paid by 
     mailers not able to take advantage of the discount; or
       ``(iii) impede the efficient operation of the Postal 
     Service;
       ``(C) the amount of the discount above costs avoided--
       ``(i) is necessary to mitigate rate shock; and
       ``(ii) will be phased out over time;
       ``(D) the workshare discount is provided in connection with 
     subclasses of mail consisting exclusively of mail matter of 
     educational, cultural, or scientific value; or
       ``(E) the Postal Regulatory Commission determines that such 
     discounts are reasonable and equitable and consistent with 
     the objectives and factors taken into account under 
     subsections (b) and (c).
       ``(3) Report.--Whenever the Postal Service establishes or 
     maintains a workshare discount, the Postal Service shall, at 
     the time it publishes the workshare discount rate, submit to 
     the Postal Regulatory Commission a detailed report and 
     explanation of the Postal Service's reasons for establishing 
     or maintaining the rate, setting forth the data, economic 
     analyses, and other information relied on by the Postal 
     Service to justify the rate.
       ``(f) Transition Rule.--Until regulations under this 
     section first take effect, rates and classes for market-
     dominant products shall remain subject to modification in 
     accordance with the provisions of this chapter and section 
     407, as such provisions were last in effect before the date 
     of the enactment of this section.

     ``Sec. 3623. Service agreements for market-dominant products

       ``(a) In General.--
       ``(1) Authority.--The Postal Service may enter into service 
     agreements with a customer or group of customers that provide 
     for the provision of postal services under terms, conditions, 
     or service standards that differ from those that would apply 
     under the otherwise applicable classification of market-
     dominant mail.
       ``(2) Agreements.--An agreement under this section may 
     involve--
       ``(A) performance by the contracting mail user of mail 
     preparation, processing, transportation, or other functions;
       ``(B) performance by the Postal Service of additional mail 
     preparation, processing, transportation, or other functions; 
     or
       ``(C) other terms and conditions that meet the requirements 
     of subsections (b) and (c).
       ``(b) Requirements.--A service agreement under this section 
     may be entered into only if each of the following conditions 
     is met:
       ``(1) The total revenue generated under the agreement--
       ``(A) will cover all Postal Service costs attributable to 
     the postal services covered by the agreement; and
       ``(B) will result in no less contribution to the 
     institutional costs of the Postal Service than would have 
     been generated had the agreement not been entered into.
       ``(2) Rates or fees for other mailers will not increase as 
     a result of the agreement.
       ``(3) The agreement pertains exclusively to products in the 
     market-dominant category of mail.
       ``(4) The agreement will not preclude or materially hinder 
     similarly situated mail users from entering into agreements 
     with the Postal Service on the same, or substantially the 
     same terms or conditions, and the Postal Service remains 
     willing and able to enter into such.
       ``(c) Limitations.--A service agreement under this section 
     shall--
       ``(1) be for a term not to exceed 3 years; and
       ``(2) provide that such agreement shall be subject to the 
     cancellation authority of the Commission under section 3662.
       ``(d) Notice Requirements.--
       ``(1) In general.--At least 30 days before a service 
     agreement under this section is to take effect, the Postal 
     Service shall file with the Postal Regulatory Commission and 
     publish in the Federal Register the following information 
     with respect to such agreement:
       ``(A) A description of the postal services the agreement 
     involves.
       ``(B) A description of the functions the customer is to 
     perform under the agreement.
       ``(C) A description of the functions the Postal Service is 
     to perform under the agreement.
       ``(D) The rates and fees payable by the customer during the 
     term of the agreement.
       ``(E) With respect to each condition under subsection (b), 
     information sufficient to demonstrate the bases for the view 
     of the Postal Service that such condition would be met.
       ``(2) Agreements less than national in scope.--In the case 
     of a service agreement under this section that is less than 
     national in scope, the information described under paragraph 
     (1) shall also be published by the Postal Service in a manner 
     designed to afford reasonable notice to persons within any 
     geographic area to which such agreement (or any amendment to 
     that agreement) pertains.
       ``(e) Equal Treatment Required.--If the Postal Service 
     enters into a service agreement with a mailer under this 
     section, the Postal Service shall make such agreement 
     available to similarly situated mailers on functionally 
     equivalent terms and conditions consistent with the 
     regulatory system established under section 3622 without 
     unreasonable distinctions based on mailer profiles, provided 
     that such distinctions, if ignored, would not render any 
     subsequent agreement uneconomic or impractical.
       ``(f) Complaints.--Any person who believes that a service 
     agreement under this section is not in conformance with the 
     requirements of this section, or who is aggrieved by a 
     decision of the Postal Service not to enter into an agreement 
     under this section, may file a complaint with the Postal 
     Regulatory Commission in accordance with section 3662.
       ``(g) Postal Regulatory Commission Role.--
       ``(1) Regulations.--The Postal Regulatory Commission may 
     promulgate such regulations regarding service agreements as 
     the Commission determines necessary to implement the 
     requirements of this section.
       ``(2) Review.--The Postal Regulatory Commission may review 
     any agreement or proposed agreement under this section and 
     may suspend, cancel, or prevent such agreement if the 
     Commission finds that the agreement does not meet the 
     requirements of this section.
       ``(h) Interpretation.--The determination of whether the 
     revenue generated under the agreement meets the requirements 
     of subsection (b)(1)(B) shall be based, to the extent 
     practicable, on the actual contribution of the mail involved, 
     not on the average contribution made by the mail 
     classification most similar to the services performed under 
     the agreement. If mailer-specific data is not available, the 
     bases for the determination used shall be provided and shall 
     include a discussion of the suitability of the data used, in 
     accordance with regulations established by the Postal 
     Regulatory Commission.''.
       (b) Repealed Sections.--Sections 3624, 3625, and 3628 of 
     title 39, United States Code, are repealed.
       (c) Redesignation.--Chapter 36 of title 39, United States 
     Code (as in effect after the amendment made by section 601, 
     but before the amendment made by section 202) is amended by 
     striking the heading for subchapter II and inserting the 
     following:

   ``SUBCHAPTER I--PROVISIONS RELATING TO MARKET-DOMINANT PRODUCTS''.

     SEC. 202. PROVISIONS RELATING TO COMPETITIVE PRODUCTS.

       Chapter 36 of title 39, United States Code, is amended by 
     inserting after section 3629 the following:

      ``SUBCHAPTER II--PROVISIONS RELATING TO COMPETITIVE PRODUCTS

     ``Sec. 3631. Applicability; definitions and updates

       ``(a) Applicability.--This subchapter shall apply with 
     respect to--
       ``(1) priority mail;
       ``(2) expedited mail;
       ``(3) bulk parcel post;
       ``(4) bulk international mail; and
       ``(5) mailgrams;
     subject to subsection (d) and any changes the Postal 
     Regulatory Commission may make under section 3642.
       ``(b) Definition.--For purposes of this subchapter, the 
     term `costs attributable', as used with respect to a product, 
     means the direct and indirect postal costs attributable to 
     such product.
       ``(c) Rule of Construction.--Mail matter referred to in 
     subsection (a) shall, for purposes of this subchapter, be 
     considered to have the meaning given to such mail matter 
     under the mail classification schedule.
       ``(d) Limitation.--Notwithstanding any other provision of 
     this section, nothing in this subchapter shall be considered 
     to apply with respect to any product then currently in the 
     market-dominant category of mail.

     ``Sec. 3632. Action of the Governors

       ``(a) Authority To Establish Rates and Classes.--The 
     Governors, with the written concurrence of a majority of all 
     of the Governors then holding office, shall establish rates 
     and classes for products in the competitive category of mail 
     in accordance with the requirements of this subchapter and 
     regulations promulgated under section 3633.
       ``(b) Procedures.--
       ``(1) In general.--Rates and classes shall be established 
     in writing, complete with a statement of explanation and 
     justification, and the date as of which each such rate or 
     class takes effect.
       ``(2) Public notice; review; and compliance.--Not later 
     than 30 days before the date of implementation of any 
     adjustment in rates under this section--
       ``(A) the Governors shall provide public notice of the 
     adjustment and an opportunity for review by the Postal 
     Regulatory Commission;
       ``(B) the Postal Rate Commission shall notify the Governors 
     of any noncompliance of the adjustment with section 3633; and
       ``(C) the Governors shall respond to the notice provided 
     under subparagraph (B) and describe the actions to be taken 
     to comply with section 3633.
       ``(c) Transition Rule.--Until regulations under section 
     3633 first take effect, rates and classes for competitive 
     products shall remain subject to modification in accordance 
     with the provisions of this chapter and section 407, as such 
     provisions were as last in effect before the date of the 
     enactment of this section.

[[Page S5990]]

     ``Sec. 3633. Provisions applicable to rates for competitive 
       products

       ``The Postal Regulatory Commission shall, within 180 days 
     after the date of the enactment of this section, promulgate 
     (and may from time to time thereafter revise) regulations 
     to--
       ``(1) prohibit the subsidization of competitive products by 
     market-dominant products;
       ``(2) ensure that each competitive product covers its costs 
     attributable; and
       ``(3) ensure that all competitive products collectively 
     cover their share of the institutional costs of the Postal 
     Service.''.

     SEC. 203. PROVISIONS RELATING TO EXPERIMENTAL AND NEW 
                   PRODUCTS.

       Subchapter III of chapter 36 of title 39, United States 
     Code, is amended to read as follows:

 ``SUBCHAPTER III--PROVISIONS RELATING TO EXPERIMENTAL AND NEW PRODUCTS

     ``Sec. 3641. Market tests of experimental products

       ``(a) Authority.--
       ``(1) In general.--The Postal Service may conduct market 
     tests of experimental products in accordance with this 
     section.
       ``(2) Provisions waived.--A product shall not, while it is 
     being tested under this section, be subject to the 
     requirements of sections 3622, 3633, or 3642, or regulations 
     promulgated under those sections.
       ``(b) Conditions.--A product may not be tested under this 
     section unless it satisfies each of the following:
       ``(1) Significantly different product.--The product is, 
     from the viewpoint of the mail users, significantly different 
     from all products offered by the Postal Service within the 2-
     year period preceding the start of the test.
       ``(2) Market disruption.--The introduction or continued 
     offering of the product will not create an unfair or 
     otherwise inappropriate competitive advantage for the Postal 
     Service or any mailer, particularly in regard to small 
     business concerns (as defined under subsection (h)).
       ``(3) Correct categorization.--The Postal Service 
     identifies the product, for the purpose of a test under this 
     section, as either market-dominant or competitive, consistent 
     with the criteria under section 3642(b)(1). Costs and 
     revenues attributable to a product identified as competitive 
     shall be included in any determination under section 3633(3) 
     (relating to provisions applicable to competitive products 
     collectively). Any test that solely affects products 
     currently classified as competitive, or which provides 
     services ancillary to only competitive products, shall be 
     presumed to be in the competitive product category without 
     regard to whether a similar ancillary product exists for 
     market-dominant products.
       ``(c) Notice.--
       ``(1) In general.--At least 30 days before initiating a 
     market test under this section, the Postal Service shall file 
     with the Postal Regulatory Commission and publish in the 
     Federal Register a notice--
       ``(A) setting out the basis for the Postal Service's 
     determination that the market test is covered by this 
     section; and
       ``(B) describing the nature and scope of the market test.
       ``(2) Safeguards.--For a competitive experimental product, 
     the provisions of section 504(g) shall be available with 
     respect to any information required to be filed under 
     paragraph (1) to the same extent and in the same manner as in 
     the case of any matter described in section 504(g)(1). 
     Nothing in paragraph (1) shall be considered to permit or 
     require the publication of any information as to which 
     confidential treatment is accorded under the preceding 
     sentence (subject to the same exception as set forth in 
     section 504(g)(3)).
       ``(d) Duration.--
       ``(1) In general.--A market test of a product under this 
     section may be conducted over a period of not to exceed 24 
     months.
       ``(2) Extension authority.--If necessary in order to 
     determine the feasibility or desirability of a product being 
     tested under this section, the Postal Regulatory 
     Commission may, upon written application of the Postal 
     Service (filed not later than 60 days before the date as 
     of which the testing of such product would otherwise be 
     scheduled to terminate under paragraph (1)), extend the 
     testing of such product for not to exceed an additional 12 
     months.
       ``(e) Dollar-Amount Limitation.--
       ``(1) In general.--A product may only be tested under this 
     section if the total revenues that are anticipated, or in 
     fact received, by the Postal Service from such product do not 
     exceed $10,000,000 in any year, subject to paragraph (2) and 
     subsection (g).
       ``(2) Exemption authority.--The Postal Regulatory 
     Commission may, upon written application of the Postal 
     Service, exempt the market test from the limit in paragraph 
     (1) if the total revenues that are anticipated, or in fact 
     received, by the Postal Service from such product do not 
     exceed $50,000,000 in any year, subject to subsection (g). In 
     reviewing an application under this paragraph, the Postal 
     Regulatory Commission shall approve such application if it 
     determines that--
       ``(A) the product is likely to benefit the public and meet 
     an expected demand;
       ``(B) the product is likely to contribute to the financial 
     stability of the Postal Service; and
       ``(C) the product is not likely to result in unfair or 
     otherwise inappropriate competition.
       ``(f) Cancellation.--If the Postal Regulatory Commission at 
     any time determines that a market test under this section 
     fails to meet 1 or more of the requirements of this section, 
     it may order the cancellation of the test involved or take 
     such other action as it considers appropriate. A 
     determination under this subsection shall be made in 
     accordance with such procedures as the Commission shall by 
     regulation prescribe.
       ``(g) Adjustment for Inflation.--For purposes of each year 
     following the year in which occurs the deadline for the 
     Postal Service's first report to the Postal Regulatory 
     Commission under section 3652(a), each dollar amount 
     contained in this section shall be adjusted by the change in 
     the Consumer Price Index for such year (as determined under 
     regulations of the Commission).
       ``(h) Definition of a Small Business Concern.--The criteria 
     used in defining small business concerns or otherwise 
     categorizing business concerns as small business concerns 
     shall, for purposes of this section, be established by the 
     Postal Regulatory Commission in conformance with the 
     requirements of section 3 of the Small Business Act.
       ``(i) Effective Date.--Market tests under this subchapter 
     may be conducted in any year beginning with the first year in 
     which occurs the deadline for the Postal Service's first 
     report to the Postal Regulatory Commission under section 
     3652(a).

     ``Sec. 3642. New products and transfers of products between 
       the market-dominant and competitive categories of mail

       ``(a) In General.--Upon request of the Postal Service or 
     users of the mails, or upon its own initiative, the Postal 
     Regulatory Commission may change the list of market-dominant 
     products under section 3621 and the list of competitive 
     products under section 3631 by adding new products to the 
     lists, removing products from the lists, or transferring 
     products between the lists.
       ``(b) Criteria.--All determinations by the Postal 
     Regulatory Commission under subsection (a) shall be made in 
     accordance with the following criteria:
       ``(1) The market-dominant category of products shall 
     consist of each product in the sale of which the Postal 
     Service exercises sufficient market power that it can 
     effectively set the price of such product substantially above 
     costs, raise prices significantly, decrease quality, or 
     decrease output, without risk of losing substantial business 
     to other firms offering similar products. The competitive 
     category of products shall consist of all other products.
       ``(2) Exclusion of products covered by postal monopoly.--A 
     product covered by the postal monopoly shall not be subject 
     to transfer under this section from the market-dominant 
     category of mail. For purposes of the preceding sentence, the 
     term `product covered by the postal monopoly' means any 
     product the conveyance or transmission of which is reserved 
     to the United States under section 1696 of title 18, subject 
     to the same exception as set forth in the last sentence of 
     section 409(e)(1).
       ``(3) Additional considerations.--In making any decision 
     under this section, due regard shall be given to--
       ``(A) the availability and nature of enterprises in the 
     private sector engaged in the delivery of the product 
     involved;
       ``(B) the views of those who use the product involved on 
     the appropriateness of the proposed action; and
       ``(C) the likely impact of the proposed action on small 
     business concerns (within the meaning of section 3641(h)).
       ``(c) Transfers of Subclasses and Other Subordinate Units 
     Allowable.--Nothing in this title shall be considered to 
     prevent transfers under this section from being made by 
     reason of the fact that they would involve only some (but not 
     all) of the subclasses or other subordinate units of the 
     class of mail or type of postal service involved (without 
     regard to satisfaction of minimum quantity requirements 
     standing alone).
       ``(d) Notification and Publication Requirements.--
       ``(1) Notification requirement.--The Postal Service shall, 
     whenever it requests to add a product or transfer a product 
     to a different category, file with the Postal Regulatory 
     Commission and publish in the Federal Register a notice 
     setting out the basis for its determination that the product 
     satisfies the criteria under subsection (b) and, in the case 
     of a request to add a product or transfer a product to the 
     competitive category of mail, that the product meets the 
     regulations promulgated by the Postal Regulatory Commission 
     under section 3633. The provisions of section 504(g) shall be 
     available with respect to any information required to be 
     filed.
       ``(2) Publication requirement.--The Postal Regulatory 
     Commission shall, whenever it changes the list of products in 
     the market-dominant or competitive category of mail, 
     prescribe new lists of products. The revised lists shall 
     indicate how and when any previous lists (including the lists 
     under sections 3621 and 3631) are superseded, and shall be 
     published in the Federal Register.
       ``(e) Prohibition.--Except as provided in section 3641, no 
     product that involves the physical delivery of letters, 
     printed matter, or packages may be offered by the Postal 
     Service unless it has been assigned to the market-dominant or 
     competitive category of mail (as appropriate) either--
       ``(1) under this subchapter; or
       ``(2) by or under any other provision of law.''.

[[Page S5991]]

     SEC. 204. REPORTING REQUIREMENTS AND RELATED PROVISIONS.

       (a) Redesignation.--Chapter 36 of title 39, United States 
     Code (as in effect before the amendment made by subsection 
     (b)) is amended--
       (1) by striking the heading for subchapter IV and inserting 
     the following:

``SUBCHAPTER V--POSTAL SERVICES, COMPLAINTS, AND JUDICIAL REVIEW''; and

       (2) by striking the heading for subchapter V and inserting 
     the following:

                      ``SUBCHAPTER VI--GENERAL''.

       (b) Reports and Compliance.--Chapter 36 of title 39, United 
     States Code, is amended by inserting after subchapter III the 
     following:

     ``SUBCHAPTER IV--REPORTING REQUIREMENTS AND RELATED PROVISIONS

     ``Sec. 3651. Annual reports by the Commission

       ``(a) In General.--The Postal Regulatory Commission shall 
     submit an annual report to the President and the Congress 
     concerning the operations of the Commission under this title, 
     including the extent to which regulations are achieving the 
     objectives under sections 3622, 3633, and 3691.
       ``(b) Information From Postal Service.--The Postal Service 
     shall provide the Postal Regulatory Commission with such 
     information as may, in the judgment of the Commission, be 
     necessary in order for the Commission to prepare its reports 
     under this section.

     ``Sec. 3652. Annual reports to the Commission

       ``(a) Costs, Revenues, Rates, and Service.--Except as 
     provided in subsection (c), the Postal Service shall, no 
     later than 90 days after the end of each year, prepare and 
     submit to the Postal Regulatory Commission a report (together 
     with such nonpublic annex to the report as the Commission may 
     require under subsection (e))--
       ``(1) which shall analyze costs, revenues, rates, and 
     quality of service in sufficient detail to demonstrate that 
     all products during such year complied with all applicable 
     requirements of this title; and
       ``(2) which shall, for each market-dominant product 
     provided in such year, provide--
       ``(A) product information, including mail volumes; and
       ``(B) measures of the service afforded by the Postal 
     Service in connection with such product, including--
       ``(i) the level of service (described in terms of speed of 
     delivery and reliability) provided; and
       ``(ii) the degree of customer satisfaction with the service 
     provided.

     Before submitting a report under this subsection (including 
     any annex to the report and the information required under 
     subsection (b)), the Postal Service shall have the 
     information contained in such report (and annex) audited by 
     the Inspector General. The results of any such audit shall be 
     submitted along with the report to which it pertains.
       ``(b) Information Relating to Workshare Discounts.--The 
     Postal Service shall include, in each report under subsection 
     (a), the following information with respect to each market-
     dominant product for which a workshare discount was in effect 
     during the period covered by such report:
       ``(1) The per-item cost avoided by the Postal Service by 
     virtue of such discount.
       ``(2) The percentage of such per-item cost avoided that the 
     per-item workshare discount represents.
       ``(3) The per-item contribution made to institutional 
     costs.
       ``(c) Service Agreements and Market Tests.--In carrying out 
     subsections (a) and (b) with respect to service agreements 
     (including service agreements entered into under section 
     3623) and experimental products offered through market tests 
     under section 3641 in a year, the Postal Service--
       ``(1) may report summary data on the costs, revenues, and 
     quality of service by service agreement and market test; and
       ``(2) shall report such data as the Postal Regulatory 
     Commission requires.
       ``(d) Supporting Matter.--The Postal Regulatory Commission 
     shall have access, in accordance with such regulations as the 
     Commission shall prescribe, to the working papers and any 
     other supporting matter of the Postal Service and the 
     Inspector General in connection with any information 
     submitted under this section.
       ``(e) Content and Form of Reports.--
       ``(1) In general.--The Postal Regulatory Commission shall, 
     by regulation, prescribe the content and form of the public 
     reports (and any nonpublic annex and supporting matter 
     relating to the report) to be provided by the Postal Service 
     under this section. In carrying out this subsection, the 
     Commission shall give due consideration to--
       ``(A) providing the public with timely, adequate 
     information to assess the lawfulness of rates charged;
       ``(B) avoiding unnecessary or unwarranted administrative 
     effort and expense on the part of the Postal Service; and
       ``(C) protecting the confidentiality of commercially 
     sensitive information.
       ``(2) Revised requirements.--The Commission may, on its own 
     motion or on request of an interested party, initiate 
     proceedings (to be conducted in accordance with regulations 
     that the Commission shall prescribe) to improve the quality, 
     accuracy, or completeness of Postal Service data required by 
     the Commission under this subsection whenever it shall appear 
     that--
       ``(A) the attribution of costs or revenues to products has 
     become significantly inaccurate or can be significantly 
     improved;
       ``(B) the quality of service data has become significantly 
     inaccurate or can be significantly improved; or
       ``(C) such revisions are, in the judgment of the 
     Commission, otherwise necessitated by the public interest.
       ``(f) Confidential Information.--
       ``(1) In general.--If the Postal Service determines that 
     any document or portion of a document, or other matter, which 
     it provides to the Postal Regulatory Commission in a 
     nonpublic annex under this section or under subsection (d) 
     contains information which is described in section 410(c) of 
     this title, or exempt from public disclosure under section 
     552(b) of title 5, the Postal Service shall, at the time of 
     providing such matter to the Commission, notify the 
     Commission of its determination, in writing, and describe 
     with particularity the documents (or portions of documents) 
     or other matter for which confidentiality is sought and the 
     reasons therefor.
       ``(2) Treatment.--Any information or other matter described 
     in paragraph (1) to which the Commission gains access under 
     this section shall be subject to paragraphs (2) and (3) of 
     section 504(g) in the same way as if the Commission had 
     received notification with respect to such matter under 
     section 504(g)(1).
       ``(g) Other Reports.--The Postal Service shall submit to 
     the Postal Regulatory Commission, together with any other 
     submission that the Postal Service is required to make under 
     this section in a year, copies of its then most recent--
       ``(1) comprehensive statement under section 2401(e);
       ``(2) strategic plan under section 2802;
       ``(3) performance plan under section 2803; and
       ``(4) program performance reports under section 2804.

     ``Sec. 3653. Annual determination of compliance

       ``(a) Opportunity for Public Comment.--After receiving the 
     reports required under section 3652 for any year, the Postal 
     Regulatory Commission shall promptly provide an opportunity 
     for comment on such reports by users of the mails, affected 
     parties, and an officer of the Commission who shall be 
     required to represent the interests of the general public.
       ``(b) Determination of Compliance or Noncompliance.--Not 
     later than 90 days after receiving the submissions required 
     under section 3652 with respect to a year, the Postal 
     Regulatory Commission shall make a written determination as 
     to--
       ``(1) whether any rates or fees in effect during such year 
     (for products individually or collectively) were not in 
     compliance with applicable provisions of this chapter (or 
     regulations promulgated thereunder); or
       ``(2) whether any service standards in effect during such 
     year were not met.

     If, with respect to a year, no instance of noncompliance is 
     found under this subsection to have occurred in such year, 
     the written determination shall be to that effect.
       ``(c) If Any Noncompliance Is Found.--If, for a year, a 
     timely written determination of noncompliance is made under 
     subsection (b), the Postal Regulatory Commission shall take 
     any appropriate remedial action authorized by section 
     3662(c).
       ``(d) Rebuttable Presumption.--A timely written 
     determination described in the last sentence of subsection 
     (b) shall, for purposes of any proceeding under section 3662, 
     create a rebuttable presumption of compliance by the Postal 
     Service (with regard to the matters described in paragraphs 
     (1) through (3) of subsection (b)) during the year to which 
     such determination relates.''.

     SEC. 205. COMPLAINTS; APPELLATE REVIEW AND ENFORCEMENT.

       Chapter 36 of title 39, United States Code, is amended by 
     striking sections 3662 and 3663 and inserting the following:

     ``Sec. 3662. Rate and service complaints

       ``(a) In General.--Interested persons (including an officer 
     of the Postal Regulatory Commission representing the 
     interests of the general public) who believe the Postal 
     Service is not operating in conformance with the requirements 
     of chapter 1, 4, or 6, or this chapter (or regulations 
     promulgated under any of those chapters) may lodge a 
     complaint with the Postal Regulatory Commission in such form 
     and manner as the Commission may prescribe.
       ``(b) Prompt Response Required.--
       ``(1) In general.--The Postal Regulatory Commission shall, 
     within 90 days after receiving a complaint under subsection 
     (a), either--
       ``(A) begin proceedings on such complaint; or
       ``(B) issue an order dismissing the complaint (together 
     with a statement of the reasons therefor).
       ``(2) Treatment of complaints not timely acted on.--For 
     purposes of section 3663, any complaint under subsection (a) 
     on which the Commission fails to act in the time and manner 
     required by paragraph (1) shall be treated in the same way as 
     if it had been dismissed under an order issued by the 
     Commission on the last day allowable for the issuance of such 
     order under paragraph (1).
       ``(c) Action Required If Complaint Found To Be Justified.--
     If the Postal Regulatory Commission finds the complaint to be 
     justified, it shall order that the Postal Service

[[Page S5992]]

     take such action as the Commission considers appropriate in 
     order to achieve compliance with the applicable requirements 
     and to remedy the effects of any noncompliance including 
     ordering unlawful rates to be adjusted to lawful levels, 
     ordering the cancellation of market tests, ordering the 
     Postal Service to discontinue providing loss-making products, 
     and requiring the Postal Service to make up for revenue 
     shortfalls in competitive products.
       ``(d) Authority To Order Fines in Cases of Deliberate 
     Noncompliance.--In addition, in cases of deliberate 
     noncompliance by the Postal Service with the requirements of 
     this title, the Postal Regulatory Commission may order, based 
     on the nature, circumstances, extent, and seriousness of the 
     noncompliance, a fine (in the amount specified by the 
     Commission in its order) for each incidence of noncompliance. 
     Fines resulting from the provision of competitive products 
     shall be paid out of the Competitive Products Fund 
     established in section 2011. All receipts from fines imposed 
     under this subsection shall be deposited in the general fund 
     of the Treasury of the United States.

     ``Sec. 3663. Appellate review

       ``A person, including the Postal Service, adversely 
     affected or aggrieved by a final order or decision of the 
     Postal Regulatory Commission may, within 30 days after such 
     order or decision becomes final, institute proceedings for 
     review thereof by filing a petition in the United States 
     Court of Appeals for the District of Columbia. The court 
     shall review the order or decision in accordance with 
     section 706 of title 5, and chapter 158 and section 2112 
     of title 28, on the basis of the record before the 
     Commission.

     ``Sec. 3664. Enforcement of orders

       ``The several district courts have jurisdiction 
     specifically to enforce, and to enjoin and restrain the 
     Postal Service from violating, any order issued by the Postal 
     Regulatory Commission.''.

     SEC. 206. CLERICAL AMENDMENT.

       Chapter 36 of title 39, United States Code, is amended by 
     striking the heading and analysis for such chapter and 
     inserting the following:

           ``CHAPTER 36--POSTAL RATES, CLASSES, AND SERVICES

    ``SUBCHAPTER I--PROVISIONS RELATING TO MARKET-DOMINANT PRODUCTS

``Sec.
``3621. Applicability; definitions.
``3622. Modern rate regulation.
``3623. Service agreements for market-dominant products.
``[3624. Repealed.]
``[3625. Repealed.]
``3626. Reduced Rates.
``3627. Adjusting free rates.
``[3628. Repealed.]
``3629. Reduced rates for voter registration purposes.

      ``SUBCHAPTER II--PROVISIONS RELATING TO COMPETITIVE PRODUCTS

``3631. Applicability; definitions and updates.
``3632. Action of the Governors.
``3633. Provisions applicable to rates for competitive products.
``3634. Assumed Federal income tax on competitive products.

 ``SUBCHAPTER III--PROVISIONS RELATING TO EXPERIMENTAL AND NEW PRODUCTS

``3641. Market tests of experimental products.
``3642. New products and transfers of products between the market-
              dominant and competitive categories of mail.

     ``SUBCHAPTER IV--REPORTING REQUIREMENTS AND RELATED PROVISIONS

``3651. Annual reports by the Commission.
``3652. Annual reports to the Commission.
``3653. Annual determination of compliance.

    ``SUBCHAPTER V--POSTAL SERVICES, COMPLAINTS, AND JUDICIAL REVIEW

``3661. Postal Services.
``3662. Rate and service complaints.
``3663. Appellate review.
``3664. Enforcement of orders.

                        ``SUBCHAPTER VI--GENERAL

``3681. Reimbursement.
``3682. Size and weight limits.
``3683. Uniform rates for books; films, other materials.
``3684. Limitations.
``3685. Filing of information relating to periodical publications.
``3686. Bonus authority.

               ``SUBCHAPTER VII--MODERN SERVICE STANDARDS

``3691. Establishment of modern service standards.''.

                  TITLE III--MODERN SERVICE STANDARDS

     SEC. 301. ESTABLISHMENT OF MODERN SERVICE STANDARDS.

       Chapter 36 of title 39, United States Code, as amended by 
     this Act, is further amended by adding at the end the 
     following:

               ``SUBCHAPTER VII--MODERN SERVICE STANDARDS

     ``Sec. 3691. Establishment of modern service standards

       ``(a) Authority Generally.--The Postal Regulatory 
     Commission shall, within 12 months after the date of the 
     enactment of this section, by regulation establish (and may 
     from time to time thereafter by regulation revise) a set of 
     service standards for market-dominant products consistent 
     with sections 101 (a) and (b) and 403.
       ``(b) Objectives.--Such standards shall be designed to 
     achieve the following objectives:
       ``(1) To enhance and preserve the value of postal services 
     to both senders and recipients.
       ``(2) To provide a system of objective external performance 
     measurements for each market-dominant product as a basis for 
     measurement of Postal Service performance.
       ``(3) To guarantee Postal Service customers delivery 
     reliability, speed and frequency consistent with reasonable 
     rates and best business practices.
       ``(c) Factors.--In establishing or revising such standards, 
     the Postal Regulatory Commission shall take into account--
       ``(1) the actual level of service that Postal Service 
     customers receive under any service guidelines previously 
     established by the Postal Service or service standards 
     established under this section;
       ``(2) the degree of customer satisfaction with Postal 
     Service performance in the acceptance, processing and 
     delivery of mail;
       ``(3) mail volume and revenues projected for future years;
       ``(4) the projected growth in the number of addresses the 
     Postal Service will be required to serve in future years;
       ``(5) the current and projected future cost of serving 
     Postal Service customers;
       ``(6) the effect of changes in technology, demographics and 
     population distribution on the efficient and reliable 
     operation of the postal delivery system; and
       ``(7) the policies of this title as well as such other 
     factors as the Commission determines appropriate.''.

     SEC. 302. POSTAL SERVICE PLAN.

       (a) In General.--Within 6 months after the establishment of 
     the service standards under section 3691 of title 39, United 
     States Code, as added by this Act, the Postal Service shall, 
     in consultation with the Postal Regulatory Commission, 
     develop and submit to Congress a plan for meeting those 
     standards.
       (b) Content.--The plan under this section shall--
       (1) establish performance goals;
       (2) describe any changes to the Postal Service's 
     processing, transportation, delivery, and retail networks 
     necessary to allow the Postal Service to meet the performance 
     goals; and
       (3) describe any changes to planning and performance 
     management documents previously submitted to Congress to 
     reflect new performance goals.
       (c) Postal Facilities.--The Postal Service plan shall 
     include a description of its long-term vision for 
     rationalizing its infrastructure and workforce and how it 
     intends to implement that vision, including--
       (1) a strategy for how it intends to rationalize the postal 
     facilities network and remove excess processing capacity and 
     space from the network, including estimated timeframes, 
     criteria and processes to be used for making changes to the 
     facilities network, and the process for engaging policy 
     makers and the public in related decisions;
       (2) an update on how postal decisions related to mail 
     changes, security, automation initiatives, worksharing, 
     information technology systems, and other areas will impact 
     network rationalization plans;
       (3) a discussion of what impact any facility changes may 
     have on the postal workforce and whether the Postal Service 
     has sufficient flexibility to make needed workforce changes; 
     and
       (4) an identification of anticipated costs, cost savings, 
     and other benefits associated with the infrastructure 
     rationalization alternatives discussed in the plan.
       (d) Alternate Retail Options.--The Postal Service plan 
     shall include plans to expand and market retail access to 
     postal services, in addition to post offices, including--
       (1) vending machines;
       (2) the Internet;
       (3) Postal Service employees on delivery routes; and
       (4) retail facilities in which overhead costs are shared 
     with private businesses and other government agencies.
       (e) Reemployment Assistance and Retirement Benefits.--The 
     Postal Service plan shall include--
       (1) a plan under which reemployment assistance shall be 
     afforded to employees displaced as a result of the automation 
     or privatization of any of its functions or the closing and 
     consolidation of any of its facilities; and
       (2) a plan, developed in consultation with the Office of 
     Personnel Management, to offer early retirement benefits.
       (f) Inspector General Report.--
       (1) In general.--Before submitting the plan under this 
     section to Congress, the Postal Service shall submit the plan 
     to the Inspector General of the United States Postal Service 
     in a timely manner to carry out this subsection.
       (2) Report.--The Inspector General shall prepare a report 
     describing the extent to which the Postal Service plan--
       (A) is consistent with the continuing obligations of the 
     Postal Service under title 39, United States Code; and
       (B) provides for the Postal Service to meet the service 
     standards established under section 3691.
       (3) Submission of report.--The Postal Service shall submit 
     the report of the Inspector General under this subsection 
     with the plan submitted to Congress under subsection (a).

[[Page S5993]]

           TITLE IV--PROVISIONS RELATING TO FAIR COMPETITION

     SEC. 401. POSTAL SERVICE COMPETITIVE PRODUCTS FUND.

       (a) Provisions Relating to Postal Service Competitive 
     Products Fund and Related Matters.--
       (1) In general.--Chapter 20 of title 39, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 2011. Provisions relating to competitive products

       ``(a) There is established in the Treasury of the United 
     States a revolving fund, to be called the Postal Service 
     Competitive Products Fund, which shall be available to the 
     Postal Service without fiscal year limitation for the payment 
     of--
       ``(1) costs attributable to competitive products; and
       ``(2) all other costs incurred by the Postal Service, to 
     the extent allocable to competitive products.

     For purposes of this subsection, the term `costs 
     attributable' has the meaning given such term by section 
     3631.
       ``(b) There shall be deposited in the Competitive Products 
     Fund, subject to withdrawal by the Postal Service--
       ``(1) revenues from competitive products;
       ``(2) amounts received from obligations issued by the 
     Postal Service under subsection (e);
       ``(3) interest and dividends earned on investments of the 
     Competitive Products Fund; and
       ``(4) any other receipts of the Postal Service (including 
     from the sale of assets), to the extent allocable to 
     competitive products.
       ``(c) If the Postal Service determines that the moneys of 
     the Competitive Products Fund are in excess of current needs, 
     it may invest such amounts as it considers appropriate in 
     accordance with regulations which the Secretary of the 
     Treasury shall prescribe within 12 months after the date of 
     enactment of the Postal Accountability and Enhancement Act.
       ``(d) The Postal Service may, in its sole discretion, 
     provide that moneys of the Competitive Products Fund be 
     deposited in a Federal Reserve bank or a depository for 
     public funds.
       ``(e)(1) Subject to the limitations specified in section 
     2005(a), the Postal Service is authorized to borrow money and 
     to issue and sell such obligations as it determines necessary 
     to provide for competitive products and deposit such amounts 
     in the Competitive Products Fund, except that the Postal 
     Service may pledge only assets related to the provision of 
     competitive products (as determined under subsection (h) or, 
     for purposes of any period before accounting practices and 
     principles under subsection (h) have been established and 
     applied, the best information available from the Postal 
     Service, including the audited statements required by section 
     2008(e)), and the revenues and receipts from such products, 
     for the payment of the principal of or interest on such 
     obligations, for the purchase or redemption thereof, and for 
     other purposes incidental thereto, including creation of 
     reserve, sinking, and other funds which may be similarly 
     pledged and used, to such extent and in such manner as the 
     Postal Service determines necessary or desirable.
       ``(2) The Postal Service may enter into binding covenants 
     with the holders of such obligations, and with the trustee, 
     if any, under any agreement entered into in connection with 
     the issuance thereof with respect to--
       ``(A) the establishment of reserve, sinking, and other 
     funds;
       ``(B) application and use of revenues and receipts of the 
     Competitive Products Fund;
       ``(C) stipulations concerning the subsequent issuance of 
     obligations or the execution of leases or lease purchases 
     relating to properties of the Postal Service; and
       ``(D) such other matters as the Postal Service considers 
     necessary or desirable to enhance the marketability of such 
     obligations.
       ``(3) Obligations issued by the Postal Service under this 
     subsection--
       ``(A) may not be purchased by the Secretary of the 
     Treasury;
       ``(B) shall not be exempt either as to principal or 
     interest from any taxation now or hereafter imposed by any 
     State or local taxing authority;
       ``(C) shall not be obligations of, nor shall payment of the 
     principal thereof or interest thereon be guaranteed by, the 
     Government of the United States, and the obligations shall so 
     plainly state; and
       ``(D) notwithstanding the provisions of the Federal 
     Financing Bank Act of 1973 or any other provision of law 
     (except as specifically provided by reference to this 
     subparagraph in a law enacted after this subparagraph takes 
     effect), shall not be eligible for purchase by, commitment to 
     purchase by, or sale or issuance to, the Federal Financing 
     Bank.
       ``(4)(A) This paragraph applies with respect to the period 
     beginning on the date of the enactment of this paragraph and 
     ending at the close of the 5-year period which begins on the 
     date on which the Postal Service makes its submission under 
     subsection (h)(1).
       ``(B) During the period described in subparagraph (A), 
     nothing in subparagraph (A) or (D) of paragraph (3) or the 
     last sentence of section 2006(b) shall, with respect to any 
     obligations sought to be issued by the Postal Service under 
     this subsection, be considered to affect such obligations' 
     eligibility for purchase by, commitment to purchase by, or 
     sale or issuance to, the Federal Financing Bank.
       ``(C) The Federal Financing Bank may elect to purchase such 
     obligations under such terms, including rates of interest, as 
     the Bank and the Postal Service may agree, but at a rate of 
     yield no less than the prevailing yield on outstanding 
     marketable securities of comparable maturity issued by 
     entities with the same credit rating as the rating then most 
     recently obtained by the Postal Service under subparagraph 
     (D), as determined by the Bank.
       ``(D) In order to be eligible to borrow under this 
     paragraph, the Postal Service shall first obtain a credit 
     rating from a nationally recognized credit rating 
     organization. Such rating--
       ``(i) shall be determined taking into account only those 
     assets and activities of the Postal Service which are 
     described in section 3634(a)(2) (relating to the Postal 
     Service's assumed taxable income from competitive products); 
     and
       ``(ii) may, before final rules of the Postal Regulatory 
     Commission under subsection (h) are issued (or deemed to have 
     been issued), be based on the best information available from 
     the Postal Service, including the audited statements required 
     by section 2008(e).
       ``(f) The receipts and disbursements of the Competitive 
     Products Fund shall be accorded the same budgetary treatment 
     as is accorded to receipts and disbursements of the Postal 
     Service Fund under section 2009a.
       ``(g) A judgment against the Postal Service or the 
     Government of the United States (or settlement of a claim) 
     shall, to the extent that it arises out of activities of the 
     Postal Service in the provision of competitive products, be 
     paid out of the Competitive Products Fund.
       ``(h)(1) The Postal Service, in consultation with an 
     independent, certified public accounting firm and such other 
     advisors as it considers appropriate, shall develop 
     recommendations regarding--
       ``(A) the accounting practices and principles that should 
     be followed by the Postal Service with the objectives of 
     identifying the capital and operating costs incurred by the 
     Postal Service in providing competitive products, and 
     preventing the cross-subsidization of such products by 
     market-dominant products; and
       ``(B) the substantive and procedural rules that should be 
     followed in determining the Postal Service's assumed Federal 
     income tax on competitive products income for any year 
     (within the meaning of section 3634).

     Such recommendations shall be submitted to the Postal 
     Regulatory Commission no later than 12 months after the 
     effective date of this section.
       ``(2)(A) Upon receiving the recommendations of the Postal 
     Service under paragraph (1), the Commission shall give 
     interested parties, including the Postal Service, enterprises 
     in the private sector of the economy engaged in the delivery 
     of mail matter other than letters, users of the mails, and an 
     officer of the Commission who shall be required to represent 
     the interests of the general public, an opportunity to 
     present their views on those recommendations through 
     submission of written data, views, or arguments with or 
     without opportunity for oral presentation, or in such other 
     manner as the Commission considers appropriate.
       ``(B) After due consideration of the views and other 
     information received under subparagraph (A), the Commission 
     shall by rule--
       ``(i) provide for the establishment and application of the 
     accounting practices and principles which shall be followed 
     by the Postal Service;
       ``(ii) provide for the establishment and application of the 
     substantive and procedural rules described in paragraph 
     (1)(B); and
       ``(iii) provide for the submission by the Postal Service to 
     the Postal Regulatory Commission of annual and other periodic 
     reports setting forth such information as the Commission may 
     require.
     Final rules under this subparagraph shall be issued not later 
     than 12 months after the date on which the Postal Service 
     makes its submission to the Commission under paragraph (1) 
     (or by such later date as the Commission and the Postal 
     Service may agree to). If final rules are not issued by the 
     Commission by the deadline under the preceding sentence, the 
     recommendations submitted by the Postal Service under 
     paragraph (1) shall be treated as the final rules. The 
     Commission is authorized to promulgate regulations 
     revising such rules.
       ``(C) Reports described in subparagraph (B)(iii) shall be 
     submitted at such time and in such form, and shall include 
     such information, as the Commission by rule requires. The 
     Commission may, on its own motion or on request of an 
     interested party, initiate proceedings (to be conducted in 
     accordance with such rules as the Commission shall prescribe) 
     to improve the quality, accuracy, or completeness of Postal 
     Service data under such subparagraph whenever it shall appear 
     that--
       ``(i) the quality of the information furnished in those 
     reports has become significantly inaccurate or can be 
     significantly improved; or
       ``(ii) such revisions are, in the judgment of the 
     Commission, otherwise necessitated by the public interest.
       ``(D) A copy of each report described in subparagraph 
     (B)(iii) shall also be transmitted by the Postal Service to 
     the Secretary of the Treasury and the Inspector General of 
     the United States Postal Service.

[[Page S5994]]

       ``(i) The Postal Service shall render an annual report to 
     the Secretary of the Treasury concerning the operation of the 
     Competitive Products Fund, in which it shall address such 
     matters as risk limitations, reserve balances, allocation or 
     distribution of moneys, liquidity requirements, and measures 
     to safeguard against losses. A copy of its then most recent 
     report under this subsection shall be included with any other 
     submission that it is required to make to the Postal 
     Regulatory Commission under section 3652(g).''.
       (2) Clerical amendment.--The analysis for chapter 20 of 
     title 39, United States Code, is amended by adding after the 
     item relating to section 2010 the following:

``2011. Provisions relating to competitive products.''.

       (b) Technical and Conforming Amendments.--
       (1) Definition.--Section 2001 of title 39, United States 
     Code, is amended by striking ``and'' at the end of paragraph 
     (1), by redesignating paragraph (2) as paragraph (3), and by 
     inserting after paragraph (1) the following:
       ``(2) `Competitive Products Fund' means the Postal Service 
     Competitive Products Fund established by section 2011; and''.
       (2) Capital of the postal service.--Section 2002(b) of 
     title 39, United States Code, is amended by striking 
     ``Fund,'' and inserting ``Fund and the balance in the 
     Competitive Products Fund,''.
       (3) Postal service fund.--
       (A) Purposes for which available.--Section 2003(a) of title 
     39, United States Code, is amended by striking ``title.'' and 
     inserting ``title (other than any of the purposes, functions, 
     or powers for which the Competitive Products Fund is 
     available).''.
       (B) Deposits.--Section 2003(b) of title 39, United States 
     Code, is amended by striking ``There'' and inserting ``Except 
     as otherwise provided in section 2011, there''.
       (4) Relationship between the treasury and the postal 
     service.--Section 2006 of title 39, United States Code, is 
     amended--
       (A) in subsection (b), by adding at the end the following: 
     ``Nothing in this chapter shall be considered to permit or 
     require the Secretary of the Treasury to purchase any 
     obligations of the Postal Service other than those issued 
     under section 2005.''; and
       (B) in subsection (c), by inserting ``under section 2005'' 
     before ``shall be obligations''.

     SEC. 402. ASSUMED FEDERAL INCOME TAX ON COMPETITIVE PRODUCTS 
                   INCOME.

       Subchapter II of chapter 36 of title 39, United States 
     Code, as amended by section 202, is amended by adding at the 
     end the following:

     ``Sec. 3634. Assumed Federal income tax on competitive 
       products income

       ``(a) Definitions.--For purposes of this section--
       ``(1) the term `assumed Federal income tax on competitive 
     products income' means the net income tax that would be 
     imposed by chapter 1 of the Internal Revenue Code of 1986 on 
     the Postal Service's assumed taxable income from competitive 
     products for the year; and
       ``(2) the term `assumed taxable income from competitive 
     products', with respect to a year, refers to the amount 
     representing what would be the taxable income of a 
     corporation under the Internal Revenue Code of 1986 for the 
     year, if--
       ``(A) the only activities of such corporation were the 
     activities of the Postal Service allocable under section 
     2011(h) to competitive products; and
       ``(B) the only assets held by such corporation were the 
     assets of the Postal Service allocable under section 2011(h) 
     to such activities.
       ``(b) Computation and Transfer Requirements.--The Postal 
     Service shall, for each year beginning with the year in which 
     occurs the deadline for the Postal Service's first report to 
     the Postal Regulatory Commission under section 3652(a)--
       ``(1) compute its assumed Federal income tax on competitive 
     products income for such year; and
       ``(2) transfer from the Competitive Products Fund to the 
     Postal Service Fund the amount of that assumed tax.
       ``(c) Deadline for Transfers.--Any transfer required to be 
     made under this section for a year shall be due on or before 
     the January 15th next occurring after the close of such 
     year.''.

     SEC. 403. UNFAIR COMPETITION PROHIBITED.

       (a) Specific Limitations.--Chapter 4 of title 39, United 
     States Code, is amended by adding after section 404 the 
     following:

     ``Sec. 404a. Specific limitations

       ``(a) Except as specifically authorized by law, the Postal 
     Service may not:
       ``(1) establish any rule or regulation (including any 
     standard) the effect of which is to preclude competition or 
     establish the terms of competition unless the Postal Service 
     demonstrates that the regulation does not create an unfair 
     competitive advantage for itself or any entity funded (in 
     whole or in part) by the Postal Service;
       ``(2) compel the disclosure, transfer, or licensing of 
     intellectual property to any third party (such as patents, 
     copyrights, trademarks, trade secrets, and proprietary 
     information); or
       ``(3) obtain information from a person that provides (or 
     seeks to provide) any product, and then offer any postal 
     service that uses or is based in whole or in part on such 
     information, without the consent of the person providing that 
     information, unless substantially the same information is 
     obtained (or obtainable) from an independent source or is 
     otherwise obtained (or obtainable).
       ``(b) The Postal Regulatory Commission shall prescribe 
     regulations to carry out this section.
       ``(c) Any party (including an officer of the Commission 
     representing the interests of the general public) who 
     believes that the Postal Service has violated this section 
     may bring a complaint in accordance with section 3662.''.
       (b) Conforming Amendments.--
       (1) General powers.--Section 401 of title 39, United States 
     Code, is amended by striking ``The'' and inserting ``Subject 
     to the provisions of section 404a, the''.
       (2) Specific powers.--Section 404(a) of title 39, United 
     States Code, is amended by striking ``Without'' and inserting 
     ``Subject to the provisions of section 404a, but otherwise 
     without''.
       (c) Clerical Amendment.--The analysis for chapter 4 of 
     title 39, United States Code, is amended by inserting after 
     the item relating to section 404 the following:

``404a. Specific limitations.''.

     SEC. 404. SUITS BY AND AGAINST THE POSTAL SERVICE.

       (a) In General.--Section 409 of title 39, United States 
     Code, is amended by striking subsections (d) and (e) and 
     inserting the following:
       ``(d)(1) For purposes of the provisions of law cited in 
     paragraphs (2)(A) and (2)(B), respectively, the Postal 
     Service--
       ``(A) shall be considered to be a `person', as used in the 
     provisions of law involved; and
       ``(B) shall not be immune under any other doctrine of 
     sovereign immunity from suit in Federal court by any person 
     for any violation of any of those provisions of law by any 
     officer or employee of the Postal Service.
       ``(2) This subsection applies with respect to--
       ``(A) the Act of July 5, 1946 (commonly referred to as the 
     `Trademark Act of 1946' (15 U.S.C. 1051 and following)); and
       ``(B) the provisions of section 5 of the Federal Trade 
     Commission Act to the extent that such section 5 applies to 
     unfair or deceptive acts or practices.
       ``(e)(1) To the extent that the Postal Service, or other 
     Federal agency acting on behalf of or in concert with the 
     Postal Service, engages in conduct with respect to any 
     product which is not reserved to the United States under 
     section 1696 of title 18, the Postal Service or other Federal 
     agency (as the case may be)--
       ``(A) shall not be immune under any doctrine of sovereign 
     immunity from suit in Federal court by any person for any 
     violation of Federal law by such agency or any officer or 
     employee thereof; and
       ``(B) shall be considered to be a person (as defined in 
     subsection (a) of the first section of the Clayton Act) for 
     purposes of--
       ``(i) the antitrust laws (as defined in such subsection); 
     and
       ``(ii) section 5 of the Federal Trade Commission Act to the 
     extent that such section 5 applies to unfair methods of 
     competition.

     For purposes of the preceding sentence, any private carriage 
     of mail allowable by virtue of section 601 shall not be 
     considered a service reserved to the United States under 
     section 1696 of title 18.
       ``(2) No damages, interest on damages, costs or attorney's 
     fees may be recovered under the antitrust laws (as so 
     defined) from the Postal Service or any officer or employee 
     thereof acting in an official capacity for any conduct with 
     respect to a product in the market-dominant category of mail.
       ``(3) This subsection shall not apply with respect to 
     conduct occurring before the date of the enactment of this 
     subsection.
       ``(f) To the extent that the Postal Service engages in 
     conduct with respect to the provision of competitive 
     products, it shall be considered a person for the purposes of 
     the Federal bankruptcy laws.
       ``(g)(1) Each building constructed or altered by the Postal 
     Service shall be constructed or altered, to the maximum 
     extent feasible as determined by the Postal Service, in 
     compliance with 1 of the nationally recognized model building 
     codes and with other applicable nationally recognized codes.
       ``(2) Each building constructed or altered by the Postal 
     Service shall be constructed or altered only after 
     consideration of all requirements (other than procedural 
     requirements) of zoning laws, land use laws, and applicable 
     environmental laws of a State or subdivision of a State which 
     would apply to the building if it were not a building 
     constructed or altered by an establishment of the Government 
     of the United States.
       ``(3) For purposes of meeting the requirements of 
     paragraphs (1) and (2) with respect to a building, the Postal 
     Service shall--
       ``(A) in preparing plans for the building, consult with 
     appropriate officials of the State or political subdivision, 
     or both, in which the building will be located;
       ``(B) upon request, submit such plans in a timely manner to 
     such officials for review by such officials for a reasonable 
     period of time not exceeding 30 days; and
       ``(C) permit inspection by such officials during 
     construction or alteration of the building, in accordance 
     with the customary schedule of inspections for construction 
     or alteration of buildings in the locality, if such officials 
     provide to the Postal Service--
       ``(i) a copy of such schedule before construction of the 
     building is begun; and
       ``(ii) reasonable notice of their intention to conduct any 
     inspection before conducting such inspection.


[[Page S5995]]


     Nothing in this subsection shall impose an obligation on any 
     State or political subdivision to take any action under the 
     preceding sentence, nor shall anything in this subsection 
     require the Postal Service or any of its contractors to pay 
     for any action taken by a State or political subdivision to 
     carry out this subsection (including reviewing plans, 
     carrying out on-site inspections, issuing building permits, 
     and making recommendations).
       ``(4) Appropriate officials of a State or a political 
     subdivision of a State may make recommendations to the Postal 
     Service concerning measures necessary to meet the 
     requirements of paragraphs (1) and (2). Such officials may 
     also make recommendations to the Postal Service concerning 
     measures which should be taken in the construction or 
     alteration of the building to take into account local 
     conditions. The Postal Service shall give due consideration 
     to any such recommendations.
       ``(5) In addition to consulting with local and State 
     officials under paragraph (3), the Postal Service shall 
     establish procedures for soliciting, assessing, and 
     incorporating local community input on real property and land 
     use decisions.
       ``(6) For purposes of this subsection, the term `State' 
     includes the District of Columbia, the Commonwealth of Puerto 
     Rico, and a territory or possession of the United States.
       ``(h)(1) Notwithstanding any other provision of law, legal 
     representation may not be furnished by the Department of 
     Justice to the Postal Service in any action, suit, or 
     proceeding arising, in whole or in part, under any of the 
     following:
       ``(A) Subsection (d) or (e) of this section.
       ``(B) Subsection (f) or (g) of section 504 (relating to 
     administrative subpoenas by the Postal Regulatory 
     Commission).
       ``(C) Section 3663 (relating to appellate review).

     The Postal Service may, by contract or otherwise, employ 
     attorneys to obtain any legal representation that it is 
     precluded from obtaining from the Department of Justice under 
     this paragraph.
       ``(2) In any circumstance not covered by paragraph (1), the 
     Department of Justice shall, under section 411, furnish the 
     Postal Service such legal representation as it may require, 
     except that, with the prior consent of the Attorney General, 
     the Postal Service may, in any such circumstance, employ 
     attorneys by contract or otherwise to conduct litigation 
     brought by or against the Postal Service or its officers or 
     employees in matters affecting the Postal Service.
       ``(3)(A) In any action, suit, or proceeding in a court of 
     the United States arising in whole or in part under any of 
     the provisions of law referred to in subparagraph (B) or (C) 
     of paragraph (1), and to which the Commission is not 
     otherwise a party, the Commission shall be permitted to 
     appear as a party on its own motion and as of right.
       ``(B) The Department of Justice shall, under such terms and 
     conditions as the Commission and the Attorney General shall 
     consider appropriate, furnish the Commission such legal 
     representation as it may require in connection with any such 
     action, suit, or proceeding, except that, with the prior 
     consent of the Attorney General, the Commission may employ 
     attorneys by contract or otherwise for that purpose.
       ``(i) A judgment against the Government of the United 
     States arising out of activities of the Postal Service shall 
     be paid by the Postal Service out of any funds available to 
     the Postal Service, subject to the restriction specified in 
     section 2011(g).''.
       (b) Technical Amendment.--Section 409(a) of title 39, 
     United States Code, is amended by striking ``Except as 
     provided in section 3628 of this title,'' and inserting 
     ``Except as otherwise provided in this title,''.

                      TITLE V--GENERAL PROVISIONS

     SEC. 501. QUALIFICATION AND TERM REQUIREMENTS FOR GOVERNORS.

       (a) Qualifications.--
       (1) In general.--Section 202(a) of title 39, United States 
     Code, is amended by striking ``(a)'' and inserting ``(a)(1)'' 
     and by striking the fourth sentence and inserting the 
     following: ``The Governors shall represent the public 
     interest generally, and shall be chosen solely on the basis 
     of their demonstrated ability in managing organizations or 
     corporations (in either the public or private sector) of 
     substantial size. The Governors shall not be representatives 
     of specific interests using the Postal Service, and may be 
     removed only for cause.''.
       (2) Applicability.--The amendment made by paragraph (1) 
     shall not affect the appointment or tenure of any person 
     serving as a Governor of the United States Postal Service 
     under an appointment made before the date of the enactment of 
     this Act however, when any such office becomes vacant, the 
     appointment of any person to fill that office shall be made 
     in accordance with such amendment. The requirement set forth 
     in the fourth sentence of section 202(a)(1) of title 39, 
     United States Code (as amended by subsection (a)) shall be 
     met beginning not later than 9 years after the date of the 
     enactment of this Act.
       (b) Consultation Requirement.--Section 202(a) of title 39, 
     United States Code, is amended by adding at the end the 
     following:
       ``(2) In selecting the individuals described in paragraph 
     (1) for nomination for appointment to the position of 
     Governor, the President should consult with the Speaker of 
     the House of Representatives, the minority leader of the 
     House of Representatives, the majority leader of the Senate, 
     and the minority leader of the Senate.''.
       (c) 5-Year Terms.--
       (1) In general.--Section 202(b) of title 39, United States 
     code, is amended in the first sentence by striking ``9 
     years'' and inserting ``5 years''.
       (2) Applicability.--
       (A) Continuation by incumbents.--The amendment made by 
     paragraph (1) shall not affect the tenure of any person 
     serving as a Governor of the United States Postal Service on 
     the date of enactment of this Act and such person may 
     continue to serve the remainder of the applicable term.
       (B) Vacancy by incumbent before 5 years of service.--If a 
     person who is serving as a Governor of the United States 
     Postal Service on the date of enactment of this Act resigns, 
     is removed, or dies before the expiration of the 9-year term 
     of that Governor, and that Governor has served less than 5 
     years of that term, the resulting vacancy in office shall be 
     treated as a vacancy in a 5-year term.
       (C) Vacancy by incumbent after 5 years of service.--If a 
     person who is serving as a Governor of the United States 
     Postal Service on the date of enactment of this Act resigns, 
     is removed, or dies before the expiration of the 9-year term 
     of that Governor, and that Governor has served 5 years or 
     more of that term, that term shall be deemed to have been a 
     5-year term beginning on its commencement date for purposes 
     of determining vacancies in office. Any appointment to the 
     vacant office shall be for a 5-year term beginning at the end 
     of the original 9-year term determined without regard to the 
     deeming under the preceding sentence. Nothing in this 
     subparagraph shall be construed to affect any action or 
     authority of any Governor or the Board of Governors during 
     any portion of a 9-year term deemed to be 5-year term under 
     this subparagraph.
       (d) Term Limitation.--
       (1) In general.--Section 202(b) of title 39, United States 
     Code, is amended--
       (A) by inserting ``(1)'' after ``(b)''; and
       (B) by adding at the end the following:
       ``(2) No person may serve more than 3 terms as a 
     Governor.''.
       (2) Applicability.--The amendments made by paragraph (1) 
     shall not affect the tenure of any person serving as a 
     Governor of the United States Postal Service on the date of 
     enactment of this Act with respect to the term which that 
     person is serving on that date. Such person may continue to 
     serve the remainder of the applicable term, after which the 
     amendments made by paragraph (1) shall apply.

     SEC. 502. OBLIGATIONS.

       (a) Purposes for Which Obligations May Be Issued.--The 
     first sentence of section 2005(a)(1) of title 39, United 
     States Code, is amended by striking ``title.'' and inserting 
     ``title, other than any of the purposes for which the 
     corresponding authority is available to the Postal Service 
     under section 2011.''.
       (b) Increase Relating to Obligations Issued for Capital 
     Improvements.--Section 2005(a)(1) of title 39, United States 
     Code, is amended by striking the third sentence.
       (c) Amounts Which May Be Pledged.--
       (1) Obligations to which provisions apply.--The first 
     sentence of section 2005(b) of title 39, United States Code, 
     is amended by striking ``such obligations,'' and inserting 
     ``obligations issued by the Postal Service under this 
     section,''.
       (2) Assets, revenues, and receipts to which provisions 
     apply.--Subsection (b) of section 2005 of title 39, United 
     States Code, is amended by striking ``(b)'' and inserting 
     ``(b)(1)'', and by adding at the end the following:
       ``(2) Notwithstanding any other provision of this section--
       ``(A) the authority to pledge assets of the Postal Service 
     under this subsection shall be available only to the extent 
     that such assets are not related to the provision of 
     competitive products (as determined under section 2011(h) or, 
     for purposes of any period before accounting practices and 
     principles under section 2011(h) have been established and 
     applied, the best information available from the Postal 
     Service, including the audited statements required by section 
     2008(e)); and
       ``(B) any authority under this subsection relating to the 
     pledging or other use of revenues or receipts of the Postal 
     Service shall be available only to the extent that they are 
     not revenues or receipts of the Competitive Products Fund.''.

     SEC. 503. PRIVATE CARRIAGE OF LETTERS.

       (a) In General.--Section 601 of title 39, United States 
     Code, is amended by striking subsection (b) and inserting the 
     following:
       ``(b) A letter may also be carried out of the mails when--
       ``(1) the amount paid for the private carriage of the 
     letter is at least the amount equal to 6 times the rate then 
     currently charged for the 1st ounce of a single-piece first 
     class letter;
       ``(2) the letter weighs at least 12\1/2\ ounces; or
       ``(3) such carriage is within the scope of services 
     described by regulations of the United States Postal Service 
     (as in effect on July 1, 2001) that purport to permit private 
     carriage by suspension of the operation of this section (as 
     then in effect).
       ``(c) Any regulations necessary to carry out this section 
     shall be promulgated by the Postal Regulatory Commission.''.
       (b) Effective Date.--This section shall take effect on the 
     date as of which the regulations promulgated under section 
     3633 of

[[Page S5996]]

     title 39, United States Code (as amended by section 202) take 
     effect.

     SEC. 504. RULEMAKING AUTHORITY.

       Paragraph (2) of section 401 of title 39, United States 
     Code, is amended to read as follows:
       ``(2) to adopt, amend, and repeal such rules and 
     regulations, not inconsistent with this title, as may be 
     necessary in the execution of its functions under this title 
     and such other functions as may be assigned to the Postal 
     Service under any provisions of law outside of this title;''.

     SEC. 505. NONINTERFERENCE WITH COLLECTIVE BARGAINING 
                   AGREEMENTS.

       (a) Labor Disputes.--Section 1207 of title 39, United 
     States Code, is amended to read as follows:

     ``Sec. 1207. Labor disputes

       ``(a) If there is a collective-bargaining agreement in 
     effect, no party to such agreement shall terminate or modify 
     such agreement unless the party desiring such termination or 
     modification serves written notice upon the other party to 
     the agreement of the proposed termination or modification not 
     less than 90 days prior to the expiration date thereof, or 
     not less than 90 days prior to the time it is proposed to 
     make such termination or modification. The party serving such 
     notice shall notify the Federal Mediation and Conciliation 
     Service of the existence of a dispute within 45 days of such 
     notice, if no agreement has been reached by that time.
       ``(b) If the parties fail to reach agreement or to adopt a 
     procedure providing for a binding resolution of a dispute by 
     the expiration date of the agreement in effect, or the date 
     of the proposed termination or modification, the Director of 
     the Federal Mediation and Conciliation Service shall within 
     10 days appoint a mediator of nationwide reputation and 
     professional stature, and who is also a member of the 
     National Academy of Arbitrators. The parties shall cooperate 
     with the mediator in an effort to reach an agreement and 
     shall meet and negotiate in good faith at such times and 
     places that the mediator, in consultation with the parties, 
     shall direct.
       ``(c)(1) If no agreement is reached within 60 days after 
     the expiration or termination of the agreement or the date on 
     which the agreement became subject to modification under 
     subsection (a) of this section, or if the parties decide upon 
     arbitration but do not agree upon the procedures therefore, 
     an arbitration board shall be established consisting of 3 
     members, 1 of whom shall be selected by the Postal Service, 1 
     by the bargaining representative of the employees, and the 
     third by the 2 thus selected. If either of the parties fails 
     to select a member, or if the members chosen by the parties 
     fail to agree on the third person within 5 days after their 
     first meeting, the selection shall be made from a list of 
     names provided by the Director. This list shall consist of 
     not less then 9 names of arbitrators of nationwide reputation 
     and professional nature, who are also members of the National 
     Academy of Arbitrators, and whom the Director has determined 
     are available and willing to serve.
       ``(2) The arbitration board shall give the parties a full 
     and fair hearing, including an opportunity to present 
     evidence in support of their claims, and an opportunity to 
     present their case in person, by counsel or by other 
     representative as they may elect. Decisions of the 
     arbitration board shall be conclusive and binding upon the 
     parties. The arbitration board shall render its decision 
     within 45 days after its appointment.
       ``(3) Costs of the arbitration board and mediation shall be 
     shared equally by the Postal Service and the bargaining 
     representative.
       ``(d) In the case of a bargaining unit whose recognized 
     collective-bargaining representative does not have an 
     agreement with the Postal Service, if the parties fail to 
     reach the agreement within 90 days of the commencement of 
     collective bargaining, a mediator shall be appointed in 
     accordance with the terms in subsection (b) of this section, 
     unless the parties have previously agreed to another 
     procedure for a binding resolution of their differences. If 
     the parties fail to reach agreement within 180 days of the 
     commencement of collective bargaining, and if they have not 
     agreed to another procedure for binding resolution, an 
     arbitration board shall be established to provide conclusive 
     and binding arbitration in accordance with the terms of 
     subsection (c) of this section.''.
       (b) Noninterference With Collective Bargaining 
     Agreements.--Except as otherwise provided by the amendment 
     made by subsection (a), nothing in this Act shall restrict, 
     expand, or otherwise affect any of the rights, privileges, or 
     benefits of either employees of or labor organizations 
     representing employees of the United States Postal Service 
     under chapter 12 of title 39, United States Code, the 
     National Labor Relations Act, any handbook or manual 
     affecting employee labor relations within the United States 
     Postal Service, or any collective bargaining agreement.
       (c) Free Mailing Privileges Continue Unchanged.--Nothing in 
     this Act or any amendment made by this Act shall affect any 
     free mailing privileges accorded under section 3217 or 
     sections 3403 through 3406 of title 39, United States Code.

                TITLE VI--ENHANCED REGULATORY COMMISSION

     SEC. 601. REORGANIZATION AND MODIFICATION OF CERTAIN 
                   PROVISIONS RELATING TO THE POSTAL REGULATORY 
                   COMMISSION.

       (a) Transfer and Redesignation.--Title 39, United States 
     Code, is amended--
       (1) by inserting after chapter 4 the following:

               ``CHAPTER 5--POSTAL REGULATORY COMMISSION

``Sec.
``501. Establishment.
``502. Commissioners.
``503. Rules; regulations; procedures.
``504. Administration.

     ``Sec. 501. Establishment

       ``The Postal Regulatory Commission is an independent 
     establishment of the executive branch of the Government of 
     the United States.

     ``Sec. 502. Commissioners

       ``(a) The Postal Regulatory Commission is composed of 5 
     Commissioners, appointed by the President, by and with the 
     advice and consent of the Senate. The Commissioners shall be 
     chosen solely on the basis of their technical qualifications, 
     professional standing, and demonstrated expertise in 
     economics, accounting, law, or public administration, and may 
     be removed by the President only for cause. Each individual 
     appointed to the Commission shall have the qualifications 
     and expertise necessary to carry out the enhanced 
     responsibilities accorded Commissioners under the Postal 
     Accountability and Enhancement Act. Not more than 3 of the 
     Commissioners may be adherents of the same political 
     party.
       ``(b) No Commissioner shall be financially interested in 
     any enterprise in the private sector of the economy engaged 
     in the delivery of mail matter.
       ``(c) A Commissioner may continue to serve after the 
     expiration of his term until his successor has qualified, 
     except that a Commissioner may not so continue to serve for 
     more than 1 year after the date upon which his term otherwise 
     would expire under subsection (f).
       ``(d) One of the Commissioners shall be designated as 
     Chairman by, and shall serve in the position of Chairman at 
     the pleasure of, the President.
       ``(e) The Commissioners shall by majority vote designate a 
     Vice Chairman of the Commission. The Vice Chairman shall act 
     as Chairman of the Commission in the absence of the Chairman.
       ``(f) The Commissioners shall serve for terms of 6 
     years.'';
       (2) by striking, in subchapter I of chapter 36 (as in 
     effect before the amendment made by section 201(c)), the 
     heading for such subchapter I and all that follows through 
     section 3602; and
       (3) by redesignating sections 3603 and 3604 as sections 503 
     and 504, respectively, and transferring such sections to the 
     end of chapter 5 (as inserted by paragraph (1)).
       (b) Applicability.--The amendment made by subsection (a)(1) 
     shall not affect the appointment or tenure of any person 
     serving as a Commissioner on the Postal Regulatory Commission 
     (as so redesignated by section 604) under an appointment made 
     before the date of the enactment of this Act or any 
     nomination made before that date, but, when any such office 
     becomes vacant, the appointment of any person to fill that 
     office shall be made in accordance with such amendment.
       (c) Clerical Amendment.--The analysis for part I of title 
     39, United States Code, is amended by inserting after the 
     item relating to chapter 4 the following:

  ``5. Postal Regulatory Commission...........................501''....

     SEC. 602. AUTHORITY FOR POSTAL REGULATORY COMMISSION TO ISSUE 
                   SUBPOENAS.

       Section 504 of title 39, United States Code (as so 
     redesignated by section 601) is amended by adding at the end 
     the following:
       ``(f)(1) Any Commissioner of the Postal Regulatory 
     Commission, any administrative law judge appointed by the 
     Commission under section 3105 of title 5, and any employee of 
     the Commission designated by the Commission may administer 
     oaths, examine witnesses, take depositions, and receive 
     evidence.
       ``(2) The Chairman of the Commission, any Commissioner 
     designated by the Chairman, and any administrative law judge 
     appointed by the Commission under section 3105 of title 5 
     may, with respect to any proceeding conducted by the 
     Commission under this title--
       ``(A) issue subpoenas requiring the attendance and 
     presentation of testimony by, or the production of 
     documentary or other evidence in the possession of, any 
     covered person; and
       ``(B) order the taking of depositions and responses to 
     written interrogatories by a covered person.

     The written concurrence of a majority of the Commissioners 
     then holding office shall, with respect to each subpoena 
     under subparagraph (A), be required in advance of its 
     issuance.
       ``(3) In the case of contumacy or failure to obey a 
     subpoena issued under this subsection, upon application by 
     the Commission, the district court of the United States for 
     the district in which the person to whom the subpoena is 
     addressed resides or is served may issue an order requiring 
     such person to appear at any designated place to testify or 
     produce documentary or other evidence. Any failure to obey 
     the order of the court may be punished by the court as a 
     contempt thereof.
       ``(4) For purposes of this subsection, the term `covered 
     person' means an officer, employee, agent, or contractor of 
     the Postal Service.
       ``(g)(1) If the Postal Service determines that any document 
     or other matter it provides to the Postal Regulatory 
     Commission under a subpoena issued under subsection (f),

[[Page S5997]]

     or otherwise at the request of the Commission in connection 
     with any proceeding or other purpose under this title, 
     contains information which is described in section 410(c) of 
     this title, or exempt from public disclosure under section 
     552(b) of title 5, the Postal Service shall, at the time of 
     providing such matter to the Commission, notify the 
     Commission, in writing, of its determination (and the reasons 
     therefor).
       ``(2) Except as provided in paragraph (3), no officer or 
     employee of the Commission may, with respect to any 
     information as to which the Commission has been notified 
     under paragraph (1)--
       ``(A) use such information for purposes other than the 
     purposes for which it is supplied; or
       ``(B) permit anyone who is not an officer or employee of 
     the Commission to have access to any such information.
       ``(3)(A) Paragraph (2) shall not prohibit the Commission 
     from publicly disclosing relevant information in furtherance 
     of its duties under this title, provided that the Commission 
     has adopted regulations under section 553 of title 5, that 
     establish a procedure for according appropriate 
     confidentiality to information identified by the Postal 
     Service under paragraph (1). In determining the appropriate 
     degree of confidentiality to be accorded information 
     identified by the Postal Service under paragraph (1), the 
     Commission shall balance the nature and extent of the likely 
     commercial injury to the Postal Service against the public 
     interest in maintaining the financial transparency of a 
     government establishment competing in commercial markets.
       ``(B) Paragraph (2) shall not prevent the Commission from 
     requiring production of information in the course of any 
     discovery procedure established in connection with a 
     proceeding under this title. The Commission shall, by 
     regulations based on rule 26(c) of the Federal Rules of Civil 
     Procedure, establish procedures for ensuring appropriate 
     confidentiality for information furnished to any party.''.

     SEC. 603. APPROPRIATIONS FOR THE POSTAL REGULATORY 
                   COMMISSION.

       (a) Authorization of Appropriations.--Subsection (d) of 
     section 504 of title 39, United States Code (as so 
     redesignated by section 601) is amended to read as follows:
       ``(d) There are authorized to be appropriated, out of the 
     Postal Service Fund, such sums as may be necessary for the 
     Postal Regulatory Commission. In requesting an appropriation 
     under this subsection for a fiscal year, the Commission shall 
     prepare and submit to the Congress under section 2009 a 
     budget of the Commission's expenses, including expenses for 
     facilities, supplies, compensation, and employee benefits.''.
       (b) Budget Program.--
       (1) In general.--The next to last sentence of section 2009 
     of title 39, United States Code, is amended to read as 
     follows: ``The budget program shall also include separate 
     statements of the amounts which (1) the Postal Service 
     requests to be appropriated under subsections (b) and (c) of 
     section 2401, (2) the Office of Inspector General of the 
     United States Postal Service requests to be appropriated, out 
     of the Postal Service Fund, under section 8G(f) of the 
     Inspector General Act of 1978, and (3) the Postal Regulatory 
     Commission requests to be appropriated, out of the Postal 
     Service Fund, under section 504(d) of this title.''.
       (2) Conforming amendment.--Section 2003(e)(1) of title 39, 
     United States Code, is amended by striking the first sentence 
     and inserting the following: ``The Fund shall be available 
     for the payment of (A) all expenses incurred by the Postal 
     Service in carrying out its functions as provided by law, 
     subject to the same limitation as set forth in the 
     parenthetical matter under subsection (a); (B) all expenses 
     of the Postal Regulatory Commission, subject to the 
     availability of amounts appropriated under section 504(d); 
     and (C) all expenses of the Office of Inspector General, 
     subject to the availability of amounts appropriated under 
     section 8G(f) of the Inspector General Act of 1978.''.
       (c) Effective Date.--
       (1) In general.--The amendments made by this section shall 
     apply with respect to fiscal years beginning on or after 
     October 1, 2002.
       (2) Savings provision.--The provisions of title 39, United 
     States Code, that are amended by this section shall, for 
     purposes of any fiscal year before the first fiscal year to 
     which the amendments made by this section apply, continue to 
     apply in the same way as if this section had never been 
     enacted.

     SEC. 604. REDESIGNATION OF THE POSTAL RATE COMMISSION.

       (a) Amendments to Title 39, United States Code.--Title 39, 
     United States Code, is amended in sections 404, 503 and 504 
     (as so redesignated by section 601), 1001 and 1002, by 
     striking ``Postal Rate Commission'' each place it appears and 
     inserting ``Postal Regulatory Commission'';
       (b) Amendments to Title 5, United States Code.--Title 5, 
     United States Code, is amended in sections 104(1), 306(f), 
     2104(b), 3371(3), 5314 (in the item relating to Chairman, 
     Postal Rate Commission), 5315 (in the item relating to 
     Members, Postal Rate Commission), 5514(a)(5)(B), 
     7342(a)(1)(A), 7511(a)(1)(B)(ii), 8402(c)(1), 8423(b)(1)(B), 
     and 8474(c)(4) by striking ``Postal Rate Commission'' and 
     inserting ``Postal Regulatory Commission''.
       (c) Amendment to the Ethics in Government Act of 1978.--
     Section 101(f)(6) of the Ethics in Government Act of 1978 (5 
     U.S.C. App.) is amended by striking ``Postal Rate 
     Commission'' and inserting ``Postal Regulatory Commission''.
       (d) Amendment to the Rehabilitation Act of 1973.--Section 
     501(b) of the Rehabilitation Act of 1973 (29 U.S.C. 791(b)) 
     is amended by striking ``Postal Rate Office'' and inserting 
     ``Postal Regulatory Commission''.
       (e) Amendment to Title 44, United States Code.--Section 
     3502(5) of title 44, United States Code, is amended by 
     striking ``Postal Rate Commission'' and inserting ``Postal 
     Regulatory Commission''.
       (f) Other References.--Whenever a reference is made in any 
     provision of law (other than this Act or a provision of law 
     amended by this Act), regulation, rule, document, or other 
     record of the United States to the Postal Rate Commission, 
     such reference shall be considered a reference to the Postal 
     Regulatory Commission.

     SEC. 605. FINANCIAL TRANSPARENCY.

       Section 101 of title 39, United States Code, is amended--
       (1) by redesignating subsections (d) through (g) as 
     subsections (e) through (h), respectively; and
       (2) by inserting after subsection (c) the following:
       ``(d) As an independent establishment of the executive 
     branch of the Government of the United States, the Postal 
     Service shall be subject to a high degree of transparency to 
     ensure fair treatment of customers of the Postal Service's 
     market-dominant products and companies competing with the 
     Postal Service's competitive products.''.

                         TITLE VII--EVALUATIONS

     SEC. 701. ASSESSMENTS OF RATEMAKING, CLASSIFICATION, AND 
                   OTHER PROVISIONS.

       (a) In General.--The Postal Regulatory Commission shall, at 
     least every 3 years, submit a report to the President and 
     Congress concerning--
       (1) the operation of the amendments made by this Act; and
       (2) recommendations for any legislation or other measures 
     necessary to improve the effectiveness or efficiency of the 
     postal laws of the United States.
       (b) Postal Service Views.--A report under this section 
     shall be submitted only after reasonable opportunity has been 
     afforded to the Postal Service to review the report and to 
     submit written comments on the report. Any comments timely 
     received from the Postal Service under the preceding sentence 
     shall be attached to the report submitted under subsection 
     (a).

     SEC. 702. REPORT ON UNIVERSAL POSTAL SERVICE AND THE POSTAL 
                   MONOPOLY.

       (a) Report by the Postal Service.--
       (1) In general.--Not later than 12 months after the date of 
     enactment of this Act, the Postal Regulatory Commission shall 
     submit a report to the President and Congress on universal 
     postal service and the postal monopoly in the United States 
     (in this section referred to as ``universal service and the 
     postal monopoly''), including the monopoly on the delivery of 
     mail and on access to mailboxes.
       (2) Contents.--The report under this subsection shall 
     include--
       (A) a comprehensive review of the history and development 
     of universal service and the postal monopoly, including how 
     the scope and standards of universal service and the postal 
     monopoly have evolved over time for the Nation and its urban 
     and rural areas;
       (B) the scope and standards of universal service and the 
     postal monopoly provided under current law (including 
     sections 101 and 403 of title 39, United States Code), and 
     current rules, regulations, policy statements, and practices 
     of the Postal Service;
       (C) a description of any geographic areas, populations, 
     communities (including both urban and rural communities), 
     organizations, or other groups or entities not currently 
     covered by universal service or that are covered but that are 
     receiving services deficient in scope or quality or both; and
       (D) the scope and standards of universal service and the 
     postal monopoly likely to be required in the future in order 
     to meet the needs and expectations of the United States 
     public, including all types of mail users, based on 
     discussion of such assumptions, alternative sets of 
     assumptions, and analyses as the Postal Service considers 
     plausible.
       (b) Recommended Changes to Universal Service and the 
     Monopoly.--The Postal Regulatory Commission shall include in 
     the report under subsection (a), and in all reports submitted 
     under section 701 of this Act--
       (1) any recommended changes to universal service and the 
     postal monopoly as the Commission considers appropriate, 
     including changes that the Commission may implement under 
     current law and changes that would require changes to current 
     law, with estimated effects of the recommendations on the 
     service, financial condition, rates, and security of mail 
     provided by the Postal Service;
       (2) with respect to each recommended change described under 
     paragraph (1)--
       (A) an estimate of the costs of the Postal Service 
     attributable to the obligation to provide universal service 
     under current law; and
       (B) an analysis of the likely benefit of the current postal 
     monopoly to the ability of the Postal Service to sustain the 
     current scope and standards of universal service, including 
     estimates of the financial benefit of the postal monopoly to 
     the extent practicable, under current law; and

[[Page S5998]]

       (3) such additional topics and recommendations as the 
     Commission considers appropriate, with estimated effects of 
     the recommendations on the service, financial condition, 
     rates, and the security of mail provided by the Postal 
     Service.

     SEC. 703. STUDY ON EQUAL APPLICATION OF LAWS TO COMPETITIVE 
                   PRODUCTS.

       (a) In General.--The Federal Trade Commission shall prepare 
     and submit to the President and Congress, and to the Postal 
     Regulatory Commission, within 1 year after the date of the 
     enactment of this Act, a comprehensive report identifying 
     Federal and State laws that apply differently to the United 
     States Postal Service with respect to the competitive 
     category of mail (within the meaning of section 102 of title 
     39, United States Code, as amended by section 101) and 
     similar products provided by private companies.
       (b) Recommendations.--The Federal Trade Commission shall 
     include such recommendations as it considers appropriate for 
     bringing such legal discrimination to an end, and in the 
     interim, to account under section 3633 of title 39, United 
     States Code (as added by this Act), for the net economic 
     advantages provided by those laws.
       (c) Consultation.--In preparing its report, the Federal 
     Trade Commission shall consult with the United States Postal 
     Service, the Postal Regulatory Commission, other Federal 
     agencies, mailers, private companies that provide delivery 
     services, and the general public, and shall append to such 
     report any written comments received under this subsection.
       (d) Competitive Product Regulation.--The Postal Regulatory 
     Commission shall take into account the recommendations of the 
     Federal Trade Commission in promulgating or revising the 
     regulations required under section 3633 of title 39, United 
     States Code.

   TITLE VIII--POSTAL SERVICE RETIREMENT AND HEALTH BENEFITS FUNDING

     SEC. 801. SHORT TITLE.

       This title may be cited as the ``Postal Civil Service 
     Retirement and Health Benefits Funding Amendments of 2004''.

     SEC. 802. CIVIL SERVICE RETIREMENT SYSTEM.

       (a) In General.--Chapter 83 of title 5, United States Code, 
     is amended--
       (1) in section 8334(a)(1)(B), by striking clause (ii) and 
     inserting the following:
       ``(ii) In the case of an employee of the United States 
     Postal Service, no amount shall be contributed under this 
     subparagraph.''; and
       (2) by amending section 8348(h) to read as follows:
       ``(h)(1) In this subsection, the term `Postal surplus or 
     supplemental liability' means the estimated difference, as 
     determined by the Office, between--
       ``(A) the actuarial present value of all future benefits 
     payable from the Fund under this subchapter to current or 
     former employees of the United States Postal Service and 
     attributable to civilian employment with the United States 
     Postal Service; and
       ``(B) the sum of--
       ``(i) the actuarial present value of deductions to be 
     withheld from the future basic pay of employees of the United 
     States Postal Service currently subject to this subchapter 
     under section 8334;
       ``(ii) that portion of the Fund balance, as of the date the 
     Postal surplus or supplemental liability is determined, 
     attributable to payments to the Fund by the United States 
     Postal Service and its employees, minus benefit payments 
     attributable to civilian employment with the United States 
     Postal Service, plus the earnings on such amounts while in 
     the Fund; and
       ``(iii) any other appropriate amount, as determined by the 
     Office in accordance with generally accepted actuarial 
     practices and principles.
       ``(2)(A) Not later than June 30, 2006, the Office shall 
     determine the Postal surplus or supplemental liability, as of 
     September 30, 2005. If that result is a surplus, the amount 
     of the surplus shall be transferred to the Postal Service 
     Retiree Health Benefits Fund established under section 8909a. 
     If the result is a supplemental liability, the Office shall 
     establish an amortization schedule, including a series of 
     annual installments commencing September 30, 2006, which 
     provides for the liquidation of such liability by September 
     30, 2043.
       ``(B) The Office shall redetermine the Postal surplus or 
     supplemental liability as of the close of the fiscal year, 
     for each fiscal year beginning after September 30, 2006, 
     through the fiscal year ending September 30, 2038. If the 
     result is a surplus, that amount shall remain in the Fund 
     until distribution is authorized under subparagraph (C), and 
     any prior amortization schedule for payments shall be 
     terminated. If the result is a supplemental liability, the 
     Office shall establish a new amortization schedule, including 
     a series of annual installments commencing on September 30 of 
     the subsequent fiscal year, which provides for the 
     liquidation of such liability by September 30, 2043.
       ``(C) As of the close of the fiscal years ending September 
     30, 2015, 2025, 2035, and 2039, if the result is a surplus, 
     that amount shall be transferred to the Postal Service 
     Retiree Health Benefits Fund, and any prior amortization 
     schedule for payments shall be terminated.
       ``(D) Amortization schedules established under this 
     paragraph shall be set in accordance with generally accepted 
     actuarial practices and principles, with interest computed at 
     the rate used in the most recent valuation of the Civil 
     Service Retirement System.
       ``(E) The United States Postal Service shall pay the 
     amounts so determined to the Office, with payments due not 
     later than the date scheduled by the Office.
       ``(3) Notwithstanding any other provision of law, in 
     computing the amount of any payment under any other 
     subsection of this section that is based upon the amount of 
     the unfunded liability, such payment shall be computed 
     disregarding that portion of the unfunded liability that the 
     Office determines will be liquidated by payments under this 
     subsection.''.
       (b) Credit Allowed for Military Service.--In the 
     application of section 8348(g)(2) of title 5, United States 
     Code, for the fiscal year 2006, the Office of Personnel 
     Management shall include, in addition to the amount otherwise 
     computed under that paragraph, the amounts that would have 
     been included for the fiscal years 2003 through 2005 with 
     respect to credit for military service of former employees of 
     the United States Postal Service as though the Postal Civil 
     Service Retirement System Funding Reform Act of 2003 (Public 
     Law 108-18) had not been enacted, and the Secretary of the 
     Treasury shall make the required transfer to the Civil 
     Service Retirement and Disability Fund based on that amount.

     SEC. 803. HEALTH INSURANCE.

       (a) In General.--Chapter 89 of title 5, United States Code, 
     is amended--
       (1) in section 8906(g)(2)(A), by striking ``shall be paid 
     by the United States Postal Service.'' and inserting ``shall 
     be paid first from the Postal Service Retiree Health Benefits 
     Fund up to the amount contained in the Fund, with any 
     remaining amount paid by the United States Postal Service.''; 
     and
       (2) by inserting after section 8909 the following:

     ``Sec. 8909a. Postal Service Retiree Health Benefit Fund

       ``(a) There is in the Treasury of the United States a 
     Postal Service Retiree Health Benefits Fund which is 
     administered by the Office of Personnel Management.
       ``(b) The Fund is available without fiscal year limitation 
     for payments required under section 8906(g)(2)(A).
       ``(c) The Secretary of the Treasury shall immediately 
     invest, in interest-bearing securities of the United States 
     such currently available portions of the Fund as are not 
     immediately required for payments from the Fund. Such 
     investments shall be made in the same manner as investments 
     for the Civil Service Retirement and Disability Fund under 
     section 8348.
       ``(d)(1) Not later than December 31, 2006, and by December 
     31 of each succeeding year, the Office shall compute the net 
     present value of the future payments required under section 
     8906(g)(2)(A) and attributable to the service of Postal 
     Service employees during the most recently ended fiscal year.
       ``(2)(A) Not later than December 31, 2006, the Office shall 
     compute, and by December 31 of each succeeding year, the 
     Office shall recompute the difference between--
       ``(i) the net present value of the excess of future 
     payments required under section 8906(g)(2)(A) for current and 
     future United States Postal Service annuitants as of the end 
     of the fiscal year ending on September 30 of that year; and
       ``(ii)(I) the value of the assets of the Postal Retiree 
     Health Benefits Fund as of the end of the fiscal year ending 
     on September 30 of that year; and
       ``(II) the net present value computed under paragraph (1).
       ``(B) Not later than December 31, 2006, the Office shall 
     compute, and by December 31 of each succeeding year shall 
     recompute, an amortization schedule including a series of 
     annual installments which provide for the liquidation by 
     January 31, 2046, or within 15 years, whichever is later, of 
     the net present value determined under subparagraph (A), 
     including interest at the rate used in that computation.
       ``(3) Not later than January 31, 2007, and by January 31 of 
     each succeeding year, the United States Postal Service shall 
     pay into such Fund--
       ``(A) the net present value computed under paragraph (1); 
     and
       ``(B) the annual installment computed under paragraph 
     (2)(B).
       ``(4) Computations under this subsection shall be made 
     consistent with the assumptions and methodology used by the 
     Office for financial reporting under subchapter II of chapter 
     35 of title 31.
       ``(5) After consultation with the United States Postal 
     Service, the Office shall promulgate any regulations the 
     Office determines necessary under this subsection.''.
       (b) Technical and Conforming Amendment.--The table of 
     sections for chapter 89 of title 5, United States Code, is 
     amended by inserting after the item relating to section 8909 
     the following:

``8909a. Postal Service Retiree Health Benefits Fund.''.

     SEC. 804. REPEAL OF DISPOSITION OF SAVINGS PROVISION.

       Section 3 of the Postal Civil Service Retirement System 
     Funding Reform Act of 2003 (Public Law 108-18) is repealed.

     SEC. 805. EFFECTIVE DATES.

       (a) In General.--Except as provided under subsection (b), 
     this title shall take effect on October 1, 2005.
       (b) Termination of Employer Contribution.--The amendment 
     made by paragraph (1) of section 802(a) shall take effect on 
     the

[[Page S5999]]

     first day of the first pay period beginning on or after 
     October 1, 2005.

                TITLE IX--COMPENSATION FOR WORK INJURIES

     SEC. 901. TEMPORARY DISABILITY; CONTINUATION OF PAY.

       (a) Time of Accrual of Right.--Section 8117 of title 5, 
     United States Code, is amended--
       (1) by striking ``An employee'' and inserting ``(a) An 
     employee other than a Postal Service employee''; and
       (2) by adding at the end the following:
       ``(b) A Postal Service employee is not entitled to 
     compensation or continuation of pay for the first 3 days of 
     temporary disability. A Postal Service employee may use 
     annual leave, sick leave, or leave without pay during that 3-
     day period.''.
       (b) Technical and Conforming Amendment.--Section 8118(b)(1) 
     of title 5, United States Code, is amended to read as 
     follows:
       ``(1) without a break in time, except as provided under 
     section 8117;''.

     SEC. 902. DISABILITY RETIREMENT FOR POSTAL EMPLOYEES.

       (a) Total Disability.--Section 8105 of title 5, United 
     States Code, is amended--
       (1) in subsection (a), by adding at the end the following: 
     ``This section applies to a Postal Service employee, except 
     as provided under subsection (c).''; and
       (2) by adding at the end the following:
       ``(c)(1) In this subsection, the term `retirement age' has 
     the meaning given under section 216(l)(1) of the Social 
     Security Act (42 U.S.C. 416(l)(1)).
       ``(2) Notwithstanding any other provision of law, for any 
     injury occurring on or after the date of enactment of the 
     Postal Accountability and Enhancement Act, and for any new 
     claim for a period of disability commencing on or after that 
     date, the compensation entitlement for total disability is 
     converted to 50 percent of the monthly pay of the employee on 
     the later of--
       ``(A) the date on which the injured employee reaches 
     retirement age; or
       ``(B) 1 year after the employee begins receiving 
     compensation.''.
       (b) Partial Disability.--Section 8106 of title 5, United 
     States Code, is amended--
       (1) in subsection (a), by adding at the end the following: 
     ``This section applies to a Postal Service employee, except 
     as provided under subsection (d).''; and
       (2) by adding at the end the following:
       ``(d)(1) In this subsection, the term `retirement age' has 
     the meaning given under section 216(l)(1) of the Social 
     Security Act (42 U.S.C. 416(l)(1)).
       ``(2) Notwithstanding any other provision of law, for any 
     injury occurring on or after the date of enactment of this 
     subsection, and for any new claim for a period of disability 
     commencing on or after that date, the compensation 
     entitlement for partial disability is converted to 50 percent 
     of the difference between the monthly pay of an employee and 
     the monthly wage earning capacity of the employee after the 
     beginning of partial disability on the later of--
       ``(A) the date on which the injured employee reaches 
     retirement age; or
       ``(B) 1 year after the employee begins receiving 
     compensation.''.
                                  ____



                                         United States General

                                            Accounting Office,

                                 Washington, DC, February 6, 2004.
     Hon. Susan M. Collins,
     Chairman, Committee on Governmental Affairs, United States 
         Senate.

     Need for Comprehensive Postal Reform
       Dear Chairman Collins: This letter responds to your request 
     for our views on the need for postal reform and is based upon 
     our prior testimonies related to this issue. In summary, we 
     believe that comprehensive postal reform is urgently needed. 
     The ability of the Service to remain financially viable is at 
     risk because its current business model--which relies on mail 
     volume growth to cover the costs of its expanding delivery 
     network--is not well aligned with 21st century realities. 
     Since we placed the Postal Service's transformation efforts 
     and financial outlook on our High-Risk List in April 2001, I 
     have testified on several occasions about the governance, 
     financial, operational, and human capital challenges that 
     threaten the Service's ability to carry out its mission. If 
     not effectively addressed in a timely manner, these 
     challenges serve to threaten the Service's ability to remain 
     self-supporting while providing affordable, high-quality and 
     universal postal services to all Americans.
       The following key trends serve to reinforce our view that 
     enactment of postal reform legislation is needed:
       Declining mail volume: Total mail volume declined in fiscal 
     year 2003 for the third year in a row--a historical first for 
     the Service, which has depended on rising mail volume to help 
     cover rising costs and mitigate rate increases. First-Class 
     Mail volume declined by a record 3.2 percent in fiscal year 
     2003 and is projected to decline annually for the foreseeable 
     future. Some of this decline is due to technology advances 
     (e.g. E-mail, digital phones, faxes, and electronic bill 
     payments) that are likely to increase in the future. This 
     trend is particularly significant because First-Class Mail 
     covers more than two-thirds of the Service's institutional 
     costs.
       Changes in the mail mix: The Service's mail mix is changing 
     with declining volume for high-margin products, such as 
     First-Class Mail, and increasing volume of lower-margin 
     products, such as some types of Standard Mail. These changes 
     reduce revenues available to cover the Service's 
     institutional costs.
       Increased competition from private delivery companies: 
     Private delivery companies dominate the market for parcels 
     greater than 2 pounds and appear to be making inroads into 
     the market for small parcels. Priority Mail volume fell 13.9 
     percent in fiscal year 2003 and over the last 3 years has 
     declined nearly 30 percent. Once a highly profitable growth 
     product for the Service, Priority Mail volume is declining as 
     the highly competitive parcel market turns to lower-priced 
     ground shipment alternatives. Express Mail volume is 
     declining for the same reason. In addition, United Parcel 
     Service (UPS) and FedEx have established national retail 
     networks through UPS's acquisition of MailBoxes Etc., now 
     called UPS Stores, and FedEx's recent acquisition of Kinko's.
       Subpar revenue growth: The Service's revenues are budgeted 
     for zero growth in fiscal year 2004, which would be the first 
     year since postal reorganization that postal revenues have 
     failed to increase. However, as the Service has recognized, 
     even the zero-growth target will be challenging. In the 
     absence of revenue growth generated by increasing volume, the 
     Service must rely more heavily on rate increases to cover 
     rising costs and help finance capital investment needs.
       Declining capital investment: The Service's capital cash 
     outlays declined from $3.3 billion in fiscal year 2000 to 
     $1.3 billion in fiscal year 2003, which was the lowest level 
     since fiscal year 1986, and far below the level of the late 
     1990s, when the Service spent more than $3 billion annually. 
     Capital cash outlays are budgeted to increase to $2.4 billion 
     in fiscal year 2004, but this level may not be sufficient to 
     enable the Service to fully fund its capital investment 
     needs. In the longer term, it is unclear what the Service's 
     needs will be to maintain and modernize its physical 
     infrastructure, as well as how these needs will be funded.
       Renewed difficulties in substantially improving postal 
     productivity: The Service's productivity increased by 1.8 
     percent in fiscal year 2003 but is estimated to increase by 
     only 0.4 percent in fiscal year 2004. In the absence of mail 
     volume growth, substantial productivity increases will be 
     required to help cover cost increases generated by rising 
     wages and benefit costs and to mitigate rate increases.
       Significant financial liabilities and obligations: Despite 
     the passage of legislation that reduced the Service's pension 
     obligations, the Service has about $88 billion to $98 billion 
     in liabilities and obligations that include $47 billion to 
     $57 billion in unfunded retiree health benefits. Under the 
     current pay-as-you-go system, the Service may have difficulty 
     financing its retiree health benefits obligation in the 
     future if mail volume trends continue to impact revenues 
     while costs in this area continue to rise. The Service has 
     recently proposed two options to Congress, so the Service 
     could prefund this obligation to the extent that it is 
     financially able.
       Uncertain funding for emergency preparedness: The Service 
     requested $350 million for emergency preparedness for fiscal 
     year 2004, which it did not receive, and $779 million for 
     fiscal year 2005. If the money is not appropriated, funding 
     for this purpose may have to be built into postal rates.
       Challenges to achieve sufficient cost cutting: The Service 
     achieved additional cost cutting to compensate for below-
     budget revenues in fiscal year 2003. Despite this progress, 
     in the longer term it is unclear whether continued cost-
     cutting efforts can offset declines in First-Class Mail 
     volume without impacting the quality of service.
       Although we have discussed numerous actions that the Postal 
     Service can take within its existing authority to improve its 
     overall efficiency and effectiveness, we do not believe that 
     incremental steps toward postal transformation can resolve 
     the fundamental and systemic issues associated with the 
     Service's current business model. To avoid the risk of a 
     significant taxpayer bailout or dramatic postal rate 
     increases, we believe that Congress should enact 
     comprehensive postal reform legislation that includes the 
     Service's overall statutory framework, resolution of issues 
     regarding the Service's pension and retiree health benefits 
     obligations, and whether there is a continued need for an 
     escrow account.
       The key areas of the Service's statutory framework that 
     need to be addressed include:
       Clarifying the Service's mission and role by defining the 
     scope of universal service and the postal monopoly and by 
     clarifying the role of the Service in regard to competition 
     and its regulatory functions.
       Enhancing governance, transparency, and accountability by 
     delineating public policy, operational, and regulatory 
     responsibilities; by ensuring managerial accountability 
     through a strong, well-qualified corporate-style board that 
     holds its officers responsible and accountable for achieving 
     real results; and by defining appropriate reporting 
     mechanisms to enhance the Service's transparency and 
     accountability for financial and performance results.
       Improving flexibilities and oversight by balancing 
     increased flexibility for the Service--through streamlining 
     the rate-setting process and allowing a certain amount of 
     retained earnings--with appropriate oversight by a 
     independent regulatory body to protect postal customers 
     against undue discrimination, to restrict cross-subsidies, 
     and to ensure due process. In addition, the Service

[[Page S6000]]

     needs additional flexibility to rationalize its 
     infrastructure and reshape its workforce. Any such additional 
     flexibility should be accompanied by appropriate safeguards 
     to prevent abuse along with enhanced transparency and 
     accountability mechanisms.
       Making needed human capital reforms such as (1) determining 
     the Service's responsibility for pension costs related to 
     military service, funding retiree health benefits, and 
     determining what action to take on the escrow account 
     established in recent pension legislation; (2) deciding 
     whether postal workers' compensation benefits should be on 
     par with those in the private sector; and (3) clarifying pay 
     comparability standards.
       We believe that Congress now has a rare opportunity to 
     assure the Service's long-term financial viability through 
     comprehensive postal reform legislation that addresses the 
     Service's key structural and systemic deficiencies, its 
     unfunded obligations, including its retiree health benefits 
     obligation, and the escrow requirement. Key legislative and 
     administrative actions in connection with transforming the 
     Postal Service can also serve as positive examples for other 
     key government transformation efforts.
       As agreed with your office, unless you publicly announce 
     the contents of this report earlier, we plan no further 
     distribution until 30 days from the date of this letter. At 
     that time, we will provide copies to interested congressional 
     committees. We will also make copies available to others on 
     request. In addition, the report will be available at no 
     charge on the GAO Web site at http://www.gao.gov.
 For additional information about this report, please 
     contact Mark L. Goldstein, Director, Physical Infrastructure 
     Issues at (202) 512-2834 or at [email protected]. Please 
     contact me if I can be of any further assistance to help make 
     comprehensive postal reform a reality.
           Sincerely yours,
                                                  David M. Walker,
                         Comptroller General of the United States.

   Mr. CARPER. Mr. President, I rise today to join Senator Collins in 
introducing the Postal Accountability and Enhancement Act of 2004, 
legislation that makes the reforms necessary for the Postal Service to 
thrive in the 21st Century and to better serve the American people.
   This bill is based in part on S. 1285, the comprehensive postal 
reform legislation I introduced nearly a year ago. S. 1285 was itself 
based on ten years of work on postal reform in the House of 
Representatives, led by Congressman, John McHugh from New York. It is 
also inspired by the work of the postal commission formed by President 
Bush last year, called the President's Commission on the United States 
Postal Service, which studied all aspects of the Postal Service and 
made recommendations on how it could be modernized.
   When I rose to introduce S. 1285 last June, the House Government 
Reform Committee had only recently failed to report out the latest 
version of the McHugh reform bill and the President's Commission was 
only weeks away from issuing its final recommendations. Along with a 
number of other observers, I feared that the McHugh bill's fate might 
have spelled the end of postal reform for some time. I also feared that 
the Commission's recommendations would focus on some of the more 
extreme reform proposals floated in the past, such as postal 
privatization. While the Commission did make a handful of 
recommendations that I believe go too far, I was pleased to see that 
its work largely mirrored the provisions in S. 1285 and the various 
House reform bills we have seen in recent years.
   I'd like to begin, then, by thanking Congressman McHugh  and his 
colleagues on the House Government Reform Committee for its visionary 
leadership on postal reform over the years. I'd also like to thank the 
members of the President's Commission, especially co-chairs James A. 
Johnson and Harry J. Pearce, for their service. Postal reform is a 
difficult issue. It is also a vitally important issue for every 
American who depends on the Postal Service every day. Their willingness 
to listen to all sides of the debate and to craft what is, for the most 
part, a set of balanced reform recommendations is admired and 
appreciated. The work they have done has brought to light a number of 
the key issues facing the Postal Service and has made it possible to 
get a bipartisan postal reform bill signed into law this year.
   Senator Collins also deserves our thanks and applause for her hard 
work on this issue. Under her leadership, the Governmental Affairs 
Committee held a series of eight excellent hearings on postal reform 
over the past few months. She and I and our staffs have also held 
countless meetings with the various stakeholders for more than a year 
now. Everyone with an interest in the Postal Service was given an 
opportunity to have their say, and I think that's reflected in the 
balanced bill we're introducing today.
  It's always a pleasure working with Senator Collins. We've worked 
together on a number of issues over the years--from welfare reform to 
homeland security and the future of passenger rail in our country. Her 
dedication to bipartisanship, and simply doing the right thing, is rare 
these days. It's a honor to be introducing this historic bill with her 
today.
  Let me also express to Senator Lieberman, our Committee's Ranking 
Member, my appreciation for giving me the opportunity as a freshman 
Senator to work so closely on one of the most important issues to come 
before Governmental Affairs. The support he and his staff have offered 
us throughout this process has been invaluable.
  Some of our colleagues may wonder why we need postal reform. They 
probably receive few complaints about the service their constituents 
get from the Postal Service and its employees. In fact, a survey 
conducted by the President's Commission indicated that the American 
people like the Postal Service just the way it is. We must keep in 
mind, however, that, despite the fact that the mailing industry, and 
the economy as a whole, have changed radically over the years, the 
Postal Service has, for the most part, remained unchanged for more than 
three decades now.
  In the early 1970s, Senator Stevens and others led the effort in the 
Senate to create the Postal Service out of the failing Post Office 
Department. At the time, the Post Office Department received about 20 
percent of its revenue from taxpayer subsidies. Service was suffering 
and there was little money available to expand.
  By all accounts, the product of Senator Stevens' labors, the Postal 
Reorganization Act signed into law by President Nixon in 1971, has been 
a phenomenal success. The Postal Service today receives virtually no 
taxpayer support and the service its hundreds of thousands of employees 
provide to every American, every day is second to none. More than 
thirty years after its birth, the Postal Service now delivers to 141 
million addresses each day and is the anchor of a $900 billion per year 
mailing industry.
  As we celebrate the Postal Service's successes, however, we need to 
be thinking about what needs to be done to make them just as successful 
in the years to come. When the Postal Service started out in 1971, no 
one had access to fax machines, cell phones and pagers. No one imagined 
that we would ever enjoy conveniences like e-mail and electronic bill 
payment. Most of the mail I receive from my constituents these days 
arrives via fax and e-mail instead of hard copy mail, a marked change 
from my days in the House and even from my more recent days as Governor 
of Delaware.
  This continuing electronic diversion of mail, coupled with economic 
recession and terrorism, has made for some rough going at the Postal 
Service in recent years. In 2001, as Postmaster General Potter came 
onboard, the Postal Service was projecting its third consecutive year 
of deficits. They lost $199 million in fiscal year 2000 and $1.68 
billion in fiscal year 2001. They were projecting losses of up to $4 
billion in fiscal year 2002. Mail volume was falling, revenues were 
below projections and the Postal Service was estimating that it needed 
to spend $4 billion on security enhancements in order to prevent a 
repeat of the tragic anthrax attacks that took several lives. The 
Postal Service was also perilously close to its $15 billion debt 
ceiling and had been forced to raise rates three times in less than two 
years in order to pay for its operations, further eroding mail volume.

  Good things have happened since 2001, though. First, General Potter 
has led a commendable effort to make the Postal Service more efficient. 
Billions of dollars in costs and have been taken out of the system. 
Thousands of positions have been eliminated through attrition. 
Successful automation programs have yielded great benefits. Perhaps 
more dramatically, the Postal Service also learned that an unfunded 
pension liability they once believed was an high as $32 billion was 
actually

[[Page S6001]]

$5 billion. Senator Collins and I responded with legislation, the 
Postal Civil Service Retirement System Funding Reform Act, signed into 
law by President Bush last year, which cuts the amount the Postal 
Service must pay into the Civil Service Retirement System each year by 
nearly $3 billion. This has freed up money for debt reduction and 
prevented the need for another rate increase until at least 2006.
  Aggressive cost cutting and a lower pension payment, then, have put 
off the emergency that would have come if the Postal Service had 
reached its debt limit. But cost cutting can only go so far and will 
not solve the Postal Service's long-term challenges. These long-term 
challenges were laid out in stark detail earlier this year when 
Postmaster General Potter and Postal Board of Governors Chairman David 
Fineman testified before the House Government Reform Committee's 
Special Panel on Postal Reform. Chairman Fineman pointed out then that 
the total volume of mail delivered by the Postal Service has declined 
by more than 5 billion pieces since 2000. Over the same period, the 
number of homes and businesses the Postal Service delivers to have 
increased by more than 5 million. First Class mail, the largest 
contributor to the Postal Service's bottom line, is leading the decline 
in volume. Some of those disappearing First Class letters are being 
replaced by advertising mail, which earns significantly less. Many 
First Class letters have likely been lost for good to the fax machine, 
e-mail and electronic bill pay.
  Despite electronic diversion, the Postal Service continues to add 
about 1.7 million new delivery points each year, creating the need for 
thousands of new routes and thousands of new letter carriers to work 
them. In addition, faster-growing parts of the country will need new or 
expanded postal facilities in the coming years. As more and more 
customers turn to electronic forms of communication, letter carriers 
are bringing fewer and fewer pieces of mail to each address they serve. 
The rate increases that will be needed to maintain the Postal Service's 
current infrastructure, finance retirement obligations to its current 
employees, pay for new letter carriers and build facilities in growing 
part of the country will only further erode mail volume.
  As I've mentioned, the Postal Service has been trying to improve on 
its own. They are making progress, but there is only so much they can 
do. Even if the economy begins to recover more quickly and the Postal 
Service begins to see volume and revenues improve, we will still need 
to make fundamental changes in the way the Postal Service operates in 
order to make them as successful in the 21st Century as they were in 
the 20th Century.

  This is where the Postal Accountability and Enhancement Act comes in. 
First, our bill begins the process of developing a modern rate system 
for pricing Postal Service products. The new system, to be developed by 
a strengthened Postal Rate Commission, re-named the Postal Regulatory 
Commission, would allow retained earnings, provide the Postal Service 
significantly more flexibility in setting prices and streamline today's 
burdensome ratemaking process. To provide stability, predictability and 
fairness for the Postal Service's customers, rates would remain within 
an inflation-based cap to be developed by the Commission.
  In addition, the new rate system will allow the Postal Service to 
negotiate service agreements with individual mailers. The Postal Rate 
Commission in recent years did approve a service agreement the Postal 
Service negotiated with Capital One, but the process for considering 
the agreement took almost a year and the Postal Service's authority to 
enter into such agreements is not clearly spelled out in law. The 
Postal Accountability and Enhancement Act allows the Postal Service to 
enter into agreements if the revenue generated from them covers all 
costs attributable to the Postal Service and will result in no less 
contribution to the institutional costs of the Postal Service than 
would have been generated had the agreement not been entered into. No 
agreement would be permitted if it resulted in higher rates for any 
other mailer or prohibited any similarly situated mailer from 
negotiating a similar agreement.
  The new rate system also includes some important safeguards meant to 
prohibit worksharing discounts that exceed costs avoided by the Postal 
Service. Now, worksharing on the part of mailers has been an important 
part of the productivity improvements at the Postal Service in recent 
years. Mailers should get credit in the form of a discount for work 
they do to their mail, such as presorting and barcoding or transporting 
mail deeper into the postal system. The discounts they receive, 
however, should have some rational relation to the benefit the Postal 
Service gets from the worksharing. The Postal Service should continue 
to be free to use discounts to incent mailers to be more efficient. 
They also should not be forced to impose large rate increases on 
workshared mail in order to comply with a strict prohibition on 
discounts in excess of costs avoided. Discounts in excess of costs 
avoided, however, should be temporary and reasonable. Our worksharing 
language strikes a good balance in that it prohibits the Postal Service 
from outsourcing work that could be performed cheaper in house while 
maintaining pricing flexibility.
  The second major provision in the Postal Accountability and 
Enhancement Act requires the Postal Regulatory Commission to set strong 
service standards for the Postal Service's Market Dominant products, a 
category made up mostly of those products, like First Class mail, that 
are part of the postal monopoly. The Postal Service currently sets its 
own service standards, which allows them to pursue efforts like the 
elimination of Saturday delivery, a proposal floated three years ago. 
The new standards set by the Commission will aim to improve service and 
will be used by the Postal Service to  establish performance goals, 
rationalize its physical infrastructure and streamline its workforce.

   In a rate system featuring rate caps, as any system established 
under the Postal Accountability and Enhancement Act must, I believe it 
is especially important that the Regulatory Commission, not the Postal 
Service, be charged with determining the appropriate level of service 
postal customers should receive. This will prevent the Postal Service 
form cutting service as a way to keep rates below the cap. The Postal 
Service should be forced to look to productivity enhancements, not 
poorer quality service, to find savings.
  Third, the Postal Accountability and Enhancement Act ensures that the 
Postal Service competes fairly. The bill prohibits the Postal Service 
from issuing anti-competitive regulations. It also subjects the Postal 
Service to state zoning, planning and land use laws, requires them to 
pay an assumed Federal income tax on products like packages and Express 
Mail that private firms also offer and requires that these products as 
a whole pay their share of the Postal Service's institutional costs. 
The Federal Trade Commission will further study any additional legal 
benefits the Postal Service enjoys that its private sector competitors 
do not. The Regulatory Commission will then find a way to use the rate 
system to level the playing field.
   Fourth, the Postal Accountability and Enhancement Act improves 
Postal Service accountability, mostly by strengthening oversight. 
Qualifications for membership on the Regulatory Commission would be 
stronger than those for the Rate Commission so that Commissioners would 
have a background in finance or economics. Commissioners would also 
have the power to demand information from the Postal Service, including 
by subpoena, and have the power to punish them for violating rate and 
service regulations. In addition, the Commission will make an annual 
determination as to whether the Postal Service is in compliance with 
rate law and meeting service standards and will have the power to 
punish them for any transgressions.
  Fifth, the Postal Accountability and Enhancement Act revises two 
provisions from the Postal Civil Service Retirement System Funding 
Reform Act in an effort to shore up the Postal Service's finances in 
the years to come. As our colleagues may be aware, that bill requires 
the Postal Service, beginning in 2006, to deposit any savings it enjoys 
by virtue of lower pension payments into an escrow account. In this 
bill, we eliminate that requirement in

[[Page S6002]]

order to allow the Postal Service to spend the money that would have 
gone into escrow according to the plan submitted by the Postal Service 
in September of last year, which called for using most of the savings 
to begin paying down the Postal Service's $50 billion retiree health 
obligation. The bill Senator Collins and I are introducing today also 
reverses the provision in the Postal Civil Service Retirement System 
Funding Reform Act that made the Postal Service the only Federal agency 
shouldered with the burden of paying the additional pension benefits 
owed to their employees by virtue of past military service.
  Finally, and most importantly, the bill preserves universal service 
and the postal monopoly and forces the Postal Service to concentrate 
solely on what it does best--processing and delivering the mail to all 
Americans. Our bill limits the Postal Service, for the first time, to 
providing ``postal services,'' meaning they would be prohibited from 
engaging in other lines of business, such as e-commerce, that draw time 
and resources away from letter and package delivery. It also explicitly 
preserves the requirement that the Postal Service ``bind the Nation 
together through the mail'' and serve all parts of the country, urban, 
suburban and rural, in a non-discriminatory fashion. Any service 
standards established by the Postal Regulatory Commission will continue 
to ensure delivery to every address, every day. In addition, the bill 
maintains the prohibition on closing post offices solely because they 
operate at a deficit, ensuring that rural and urban customers continue 
to enjoy full access to retail postal services.
  The President's Commission, while calling for the preservation of 
universal service and the postal monopoly, opened the door for future 
changes by recommending that the Regulatory Commission be given the 
authority to make them themselves. While I believe that Congress will 
find it difficult to roll back universal service or limit the postal 
monopoly in the future if it is deemed necessary to do so, I believe 
the recommendation from the President's Commission would give too much 
power to a relatively small, political body. In order to keep Congress 
focused on the Postal Service's future, however, our bill asks the 
Regulatory Commission to report every three years on the state of 
universal service and the postal monopoly. When necessary, they would 
also make recommendations to Congress when they feel like one is 
necessary.
  We have a once-in-a-generation opportunity this year to enact 
meaningful postal reform legislation. The House Government Reform 
Committee marked up its version of the Postal Accountability and 
Enhancement Act last week by a unanimous 40-0 vote. The President has 
indicated his support for a bill, releasing a set of postal reform 
principles at the end of last year calling on Congress to make some key 
changes to the way the Postal Service operates. We now have everyone 
from the National Association of Letter Carriers to former opponents of 
reform like UPS supporting our efforts, as well as those in the House. 
I know there are still some concerns about certain provisions in our 
bill, but I look forward to working with Senator Collins and each of 
our colleagues in the coming weeks to continue this momentum and get a 
bill through Congress that can be signed into law this year.
  It's amazing to me to think that the Postal Service, something 
Senator Stevens was able to put together at the beginning of his 
career, could have lasted so long and had such an impact on every 
American. I'm hopeful that the model Senator Collins and I have set out 
in this bill today can last at least that long and have just as 
positive an impact on our nation and our economy as the Postal Service 
did so many years ago.
  Mr. STEVENS. Mr. President, I am pleased to join Chairman Collins and 
Senator Carper as an original cosponsor of S. 2468, the Postal 
Accountability and Enhancement Act. In 2002, the President formed a 
Commission to evaluate the operations of the United States Postal 
Service. Earlier this year, the President's Commission issued a 
comprehensive report filled with suggestions on how to improve the 
Postal Service. Senator Collins became actively engaged on the issue of 
postal reform and held a series of hearing this year on postal reform. 
This bill is the product of the postal reform hearings held before the 
Government Affairs Committee.
  I expect I will have suggestions on this legislation as the bill 
moves through the legislative process. However, I support Senator 
Collins's commitment to postal reform. I look forward to working with 
her and Senator Carper in Committee and on the Senate floor to ensure 
the success of this legislation.
  Mr. AKAKA. Mr. President, I am pleased to join with Senator Collins 
and Senator Carper, who today have introduced the Postal Accountability 
and Enhancement Act. I commend both of my Governmental Affairs 
Committee colleagues for their leadership in crafting a postal reform 
bill.
  For some time, the General Accounting Office has warned that the 
long-term financial outlook for the U.S. Postal Service was at risk 
without significant changes. At the request of the Governmental Affairs 
Committee, the U.S. Postal Service developed a transformation plan that 
offered its vision for the future. Late in 2002, a Presidential Postal 
Commission was convened, which issued a number of recommendations in 
2003.
  Over the past 6 months, I have participated in a series of hearings 
chaired by Senator Collins which examined the recommendations of the 
Postal Commission. I commend Senator Collins for guaranteeing that the 
divergent views were seriously considered throughout our eight 
hearings. I also wish to commend my colleague from Delaware, Senator 
Carper, for his strong and early commitment to postal reform.
  I support modernizing the U.S. Postal Service to ensure that its 
mission of providing 6 days a week universal service at an affordable 
rate is preserved. Although the legislation introduced today responds 
to many of the recommendations and concerns we heard in our hearings, 
it wisely rejects others. However, like most bills, there are 
provisions that trouble me. I am particularly concerned with the 
sections relating to worksharing and changes to the Federal Employees' 
Compensation Act (FECA). I will continue to work with the bill's 
sponsors to address these provisions, which I believe do not promote 
cost savings for the Postal Service or fairness for postal workers.
  I look forward to working with my colleagues on this legislation to 
guarantee that the U.S. Postal Service will be in position to best 
serve the public in the 21st century, be a model employer, and protect 
the retirement future of its employees.
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