USPS Board: Without Reform, Rate Increase in 2007

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If postal reform legislation does not pass, the U.S. Postal Service anticipates a further rate increase for 2007 in the mid-single digits, the USPS Board of Governors said yesterday.


This was part of a statement read by chairman James C. Miller III at the board's meeting in Newport Beach, CA.


The Postal Accountability and Enhancement Act passed 410-20 in the House of Representatives on July 26. However, the White House's recent threat of a veto if the final bill is not revenue-neutral conflicts with H.R. 22, the House bill, and S. 662, the bill reported out of the Senate committee, Miller said.


The Senate and House bills would have a slight negative effect on the federal budget, insiders said last week.


Consequently, Miller said in the statement that the governors reviewed how the postal service would operate without reform legislation and determined "that we would build on our recent progress in controlling costs and generating revenue." The governors anticipate a further increase for 2007 in mid-single digits and then target future annual increases at CPI or below, he said.


The governors discussed "the extreme difficulties the postal service would have meeting consumers' needs in the event new legislation were enacted that was revenue-neutral and that at the same time gave the board very limited authority to govern the organization as an efficient business enterprise," he said.


H.R. 22 strengthens the Postal Rate Commission by granting it subpoena power and a broader scope for regulation and oversight. It would be renamed the Postal Regulatory Commission.


On the fiscal front, chief financial officer Richard J. Strasser Jr. reported a net loss in the fiscal 2005 third quarter compared with the year-ago period as a result of higher fuel and retiree health benefits costs and workload-related increases in volume and deliveries.


Further, he said financial performance through nine months is nearly $250 million behind the net income assumption in the 2005 rate case.


Revenue for the third quarter, covering April 1-June 30, rose 1.7 percent to $276 million but expenses climbed $775 million, or 4.7 percent.


Revenue from First-Class mail declined $68 million. Standard mail revenue increased $161 million thanks to a rise of 1 billion pieces. Priority Mail volume increased 15.1 million pieces, boosting revenue $86 million.


"However, we are on target to have a sixth year of positive productivity," Strasser said.


Strasser cautioned that as the population grows, the rise in related deliveries will continue to add costs. Delivery points thus far this year have increased 2 million versus the same period last year, bringing total delivery points to 143.7 million.


Since Oct. 1 and through June 30, the postal service realized a net income of $1.7 billion compared with $2.8 billion in the same period in FY 2004.


Strasser said he expects revenue and volume to stay positive for the rest of the year. And though offset by continued productivity gains, expenses will be affected by increased fuel costs, producing a net loss in the final quarter of the year.


Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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