Exigent Rate Is Likely to Be Baked Into New Postal Reform

Sen. Tom Carper’s relentless mission to pass postal reform this year appeared to have several backers at today’s hearing of the Senate Homeland Security and Governmental Affairs Committee. All senators and witnesses seemed to be in agreement that the Postal Service needed immediate relief from its obligation to pre-pay retiree health benefits. They also seemed united around the belief that the 4.3% exigent surcharge due to expire in April needs to be kept to ensure adequate cash flow for a thriving Postal Services.

“By all accounts, the income being generated by this increase is now the only thing keeping the Postal Service’s head above water,” said Carper in his opening statement at the hearing titled “Laying Out the Reality of the U.S. Postal Service.”

Most of those giving testimony held similar views. Postmaster General Megan Brennan named moving retirees onto Medicare as the most important provision in Carper’s new iPOST bill, but she ranked keeping rates at current levels a close second. “Continuation of the exigent pricing surcharge is crucial to our financial health,” she said. “Removing it will reduce our revenues by $2 billion a year, further worsening our already precarious financial condition.”

Acting Postal Regulatory Commission Chairman Robert Taub said the recent 10% hike in competitive product rates would be insufficient to fill the revenue gap left by the surcharge removal, and ex-Treasury Restructuring Chief James Millstein held that the Postal Service would be unable to live up to its statutory obligation to be self-sustaining when the surcharge expires. “The first job is to keep the patient alive, in this case making sure it has sufficient cash revenue to sustain its business,” Millstein said.

Frederic Rolando, president of the National Association of Letter Carriers, expressed the view that both the expiration of the exigent rate and further CPI rate increases should be suspended until the PRC performs its scheduled review of the rate-making process in 2017. Many mailers, who seek rate predictability and high service levels most of all, are willing to go this way, one of them being hearing witness Chip Hutcheson.

“We at first opposed exigency, but today we agree that they can keep that increase if it improves service,” said Hutcheson, president of the National Newspaper Association. “We asked publishers what they’d prefer if they had to choose between low rates or improved service. Seventy-seven percent of them said to let the Postal Service keep [the exigent rate] but don’t let them do it again and definitely, definitely improve service.”          

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