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Anatomy of an Exigent Postal Rate Hike

The only other time the U.S. Postal Ser­vice (USPS) asked for an exigent rate increase, one of 5.6% in 2010, it was turned down by the Postal Regulatory Com­mission (PRC). The PRC’s reasoning was that the exceptional circumstance singled out by the USPS as the basis for the request—a de­cline in mail volume brought on by the reces­sion—was not valid. Rather, ruled the PRC, the rate adjustments “represent an attempt to address long-term structural problems not caused by the recent recession.”

This September, when Postal Board of Gov­ernors Chairman Mickey Barnett announced a request for a 4.3% exigent increase, those long-term structural problems had become the exceptional circumstance. Noting a net loss of $27 billion at the Post Office over the past two years, fueled largely by $16.7 billion in defaults on payments into its retiree health­care fund, Barnett argued that “under cur­rent laws, the Postal Service simply lacks the authority to fully pursue financially respon­sible and appropriate strategies for controlling costs and generating new revenue that are far preferable to price increases.”

The message is clear: If Congress can quick­ly pass legislative reform relieving the USPS’s obligation to fund retiree healthcare benefits for most of the rest of the century, the exigent request would be withdrawn. Even the four major postal employee unions are in favor of lightening USPS’s financial responsibility.

The PRC must rule on the exigent increase by the end of the year, and if they approve it, it takes effect on January 27, 2014. The Senate’s Homeland Security and Governmen­tal Affairs Committee, chaired by Sen. Tom Carper (D-DE) has held hearings on its pro­posed Postal Reform Act and is making a val­iant effort to bring it to a vote in time to head off the rate increase. On the House side, Rep. Darrell Issa’s (R-CA) Oversight and Govern­ment Reform Committee has not displayed the same urgency to get its reform bill vetted. Add to that a government shutdown and a Congress preoccupied with Obamacare, and the sum total may be significantly higher post­al bills for direct mailers. Combined with the annual CPI rate adjustment, mailers can ex­pect a total increase of 5.9% come February.

More means less

Such a turn of events would almost certainly have a negative impact on the USPS’s Stan­dard Mail volume, which the agency already expects to remain flat through 2017 without an exigent increase. “Mailers apply a simple one-to-one ratio to decrease mailings in rela­tion to rate increases,” says Quad Graphics Director of Postal Affairs Joe Schick. If that’s true, the Postal Service could be looking at a 6% drop in standard mail volume in 2014 should the proposed increase be instituted.

Much can still happen to prevent this from becoming reality. The best hope of mailers is that the PRC denies the exigency request, which is a strong possibility. In the Senate committee hearings, PRC Chairman Ruth Goldway expressed a preference for holding to the CPI-based rate cap. Should PRC ap­prove the rate increase, the Affordable Mail Alliance, a consortium of business mailers, is sure to file suit in an effort to block it. If the Commission denies it, USPS will most likely issue a court challenge. Either eventuality would create more time for Congress to pass reform, the best hope for all parties concerned.

Absent legislative intervention, the Postal Service will likely limp along for a few months unable to invest for the future, with its em­ployees and customers uncertain of what that future holds,” Sen. Carper said in an October committee hearing. “It can only limp this way for so long.”

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