Year-End Postal Update Part 1: USPS Financial Reports, Postage Rate Updates and Postal Reform Legislation

Now that everyone has recovered from overdosing on turkey and football, it’s time to catch up on what’s happening in the postal world. Here’s the latest from the USPS as we turn the page on 2013.

Postal Finances

The good news in the Postal Service’s year-end financial reports for fiscal year 2013 was an $800-million spike in operating revenue from the previous year, the first increase since 2008. In addition, operating expenses were down $800 million from 2012. Rising income and declining expenses resulted in a much smaller operating loss compared to 2012 ($1 billion vs. $2.4 billion).

The decline in mail volume slowed in FY2013 – overall volume only decreased about 1% in 2013 compared to a 5% drop from 2011 to 2012, with Standard Mail volume rebounding 1.5% from 2012 levels.

Continuing the positive trend, the Postal Service has operating income of $289 million for the first month of FY2014, despite volume declines reflecting the lack of election mail this year compared to last year.

Postage Rates

As readers of this blog will know, the Postal Service proposed a two-part postage price increase for 2014. Its request consisted of a 1.6% increase based on the current rate of inflation (CPI) and a 4.3% “exigent” increase based on the decline in mail volumes since the Great Recession.

The Postal Regulatory Commission (PRC) has ruled on the CPI portion of the requested increase, saying the request meets the CPI cap, but cannot be concurrently implanted with planned Full-Service Intelligent Mail barcode requirements. The Postal Service had planned to make Full-Service a requirement for obtaining automation discounts beginning in January, but the PRC ruling stated that changing the requirements for automation discounts would result in many mailers not being eligible for the discounts. This would move them to non-automation pricing, resulting in a rate increase above the CPI cap.

The Postal Service subsequently announced it would postpone the Full-Service requirement, rather than scale back the requested increase based on the PRC’s logic. We expect to see the Full-Service requirement return in the near future (probably 2015), as the Postal Service continues to encourage mailers to adopt this information-rich technology as quickly as possible.

The exigent portion of the increase is still before the PRC. The Commission received comments on the proposal in late November and is currently reviewing that input. It remains unclear whether the government shutdown in early October, which delayed the start of these proceedings, will also delay the Commission’s ruling that is due at the end of this month. If the ruling is significantly delayed, the wait may impact the implementation of new rates currently scheduled for January 26. It is uncertain whether, given such a delay, the Postal Service would continue to implement the CPI increase in January and any exigent increase at a later date, or simply postpone both implementations.

Stay tuned. We’ll provide additional updates as they become available.

Legislation

Although the Postal Service is making progress on implementing portions of its five-year financial plan that don’t require Congressional approval, the progress toward comprehensive postal reform legislation has largely stalled. The House has passed a bill through committee (on a straight party-line vote), but so far has not scheduled any time to debate the bill before the full House.

The Senate committee reviewing their reform bill held hearings on the proposal in September, but has subsequently postponed two attempts to “mark-up” and pass the bill on to the full Senate. It appears Democrats are unhappy with several of the provisions in the bi-partisan measure, and the mailing industry strongly objects to a section of the bill that would phase-out the CPI cap on postage rates.

Given the contentiousness in the current Congress, it is unlikely anything will pass before the beginning of next year at the earliest. The mailing industry continues pressing Congress to get its job done to ensure a financially stable Postal Service, so we can get back to our primary job of expanding the use of mail for commerce and communications.

Make sure to stop back Friday for a preview of the 2014 USPS mailing promotions in Part 2 of our year-end postal update.

Image by Tim1965 (Own work) [CC-BY-SA-3.0 or GFDL], via Wikimedia Commons

Blog Author

Kurt Ruppel
Marketing Services Manager and graduate of Utah State University. Bringing the “all of us know more than any of us” business philosophy to IWCO Direct for more than 30 years (oy!). Two-time IWCO Direct President’s Award winner, bicycling enthusiast and Ohio State Buckeye Football fan.

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