Mailers Still Expect Rate Increase Push
"It looks like we [may be] filing for a rate increase of 10 [percent] to 15 percent as early as this summer, [but] we're not taking a potential rate hike as a given just yet," postmaster general William J. Henderson told a gathering at the forum. Henderson is retiring from his post at the end of May.
In February, the U.S. Postal Service's Board of Governors requested the preparation for an increase of as much as 10 percent to 15 percent. The rate case would be filed with the independent Postal Rate Commission, and increases were expected to take effect as early as the following spring. The USPS faces a potential loss of $2 billion to $3 billion this fiscal year, reflecting the organization's costs, which are rising faster than mail volume and revenue growth.
The postal service's net income for the first quarter -- Sept. 9 to Dec. 1 -- of fiscal 2001 was $246 million, or $142 million below plan. Revenue grew by $175 million to $15.4 billion, which was $159 million below plan. In addition, though mail volume grew 3.3 percent overall, First-Class, Priority and Standard mail saw declines in revenue. First-Class mail, in particular, grew only 0.2 percent in volume.
Meanwhile, a congressional hearing sponsored by Rep. Dan Burton, R-IN, chairman of the House Government Reform Committee, takes place in Washington this week. The USPS board and postal officials are expected to be grilled about the financial situation. The board is having its monthly meeting this week as well.
At the forum, Henderson said he has asked deputy postmaster general John Nolan "to explore alternatives to filing a double-digit rate hike this year. I know many of you have said there may be other options here, and John is going to help us take a close look at them."
At a different gathering at the forum, Nolan told mailers, "There is no way to avoid the fact that we're going to have to raise rates." But, he added, "we don't know timing, size or details of the next rate case."
Acting PRC chairman George Omas, who spoke at a breakfast meeting sponsored by the Alliance of Nonprofit Mailers, echoed Nolan's thoughts but was more specific on numbers.
"We are hearing the same things you are hearing, and that is that there will be a rate case filing this year, and it will be a $6 billion to $8 billion case," he said. "The case will probably call for rate increases [of] about 10 to 15 percent."
Bob McLean, executive director of the Mailers Council, said he is unhappy this year's quick announcement about the filing of another rate case was done without consulting postal customers.
"I think the postal service completely underestimated the reaction of the mailing community," he said, "but now that they have heard it, they are very sensitive to the situation."
Negative comments from Capitol Hill have helped as well, McLean said.
"The postal service has received so much criticism from [Capitol] Hill and elsewhere about their announcement of a 10 [percent] to 15 percent increase, and they now understand that this is not an option as far as their largest customers are concerned," he said. "We have succeeded in getting them to reconsider this move and talk to us first."
Members of the Ad Hoc Coalition Against the Postal Rate Increase denounced a rate increase during a news conference at the forum. The coalition includes taxpayer and consumer watchdog groups such as Citizens Against Government Waste, the Cato Institute and PostalWatch.
"We are here to emphasize that the U.S. Postal Service is headed for a massive train wreck, and postal management is apparently flipping the switch," said Leslie Paige, vice president of Citizens Against Government Waste. "If [the USPS] truly were a private business, as it pretends to be, it would have gone Chapter 11 years ago."
Rick Merritt, executive director of PostalWatch, said the postal service needs to "take its cue from the private sector. Now is not the time to raise rates, suspend capital projects, cut service or enter risky new markets. Now is the time to reduce its work force and refocus on its core mission -- delivering the mail."
Merritt said the USPS could gain financial viability without layoffs, an early-out program, rate increase or cutting services.
"All it needs to do is stop hiring people," he said.