Yesterday the Postal Service filed a request for an exigent (emergency) price increase with the Postal Regulatory Commission (PRC). While the PRC now has 90 days to hold hearings and act on the request, with a decision expected in early October, we at IWCO Direct join nearly every mailing industry coalition partner in rejecting the Postal Service’s contention that an exigent price increase is justified within the language of the 2006 Postal Accountability and Enhancement Act (PAEA).
First the details. This proposal reflects an average 5.6% increase, but varies widely across postal products. Here are the projected increases:
Presorted First-Class Mail
Automated Letters: 6.3%
Automated Flats: 16.2%
Automated Letters: 4.6%
High-density/Saturation Carrier Route Letters: 4.9%
Automated Flats: 5.8%
The proposal also includes a reduction in the destination-entry discounts for Standard Mail of $1/M, which will magnify the increase felt by mailers taking advantage of this discount to control their postage costs.
The hardest hit types of mail in the proposal were Periodicals (8.0%), Package Services (6.7%) and Standard Mail Parcels (23.3%!).
Although the Postal Service refers to this exigent request as “modest,” it greatly exceeds the inflation-based cap established in the PAEA, which as of the end of May stood at 0.757%.
Why An Exigent Rate Increase Doesn’t Make Sense
More than eight million jobs are tied directly or indirectly to the continued financial viability of the United States Postal Service, but raising prices for postage rate payers at this time will only drive more volume away from the Postal Service and cause more marketers to rethink their use of direct mail. This proposed price increase isn’t the answer to the Postal Service’s financial challenges. A better approach would be to address the inequities in pension and retiree healthcare funding that are burdening the Postal Service unnecessarily.
Most of the Postal Service’s current economic woes are driven by the requirement that the agency fully pre-fund retiree healthcare obligations, even though no other agency of the federal government has this obligation, nor is it common practice in the private sector. The payment schedule set in the PAEA requires the Postal Service to pay more than $5 billion each year into its Retiree Health Benefit Fund – in addition to the more than $2 billion it pays for current retiree health benefits, even though the fund already has accumulated a balance of $35 billion.
Moreover, the Postal Service’s Office of Inspector General (OIG) has shown that the Postal Service massively overpaid into the Civil Service Retirement System from 1972 to 2009. An independent study authorized by the PRC affirmed the OIG’s finding, declaring that “an adjustment of $50 billion to $55 billion would be equitable.” If this overpayment is applied to the pre-funding of retiree health benefits, that obligation would be fully funded, eliminating the requirement for additional annual payments from the Postal Service.
In addition, an exigent increase is not justified because the recent economic recession and the resulting drop in mail volumes does not qualify as the sort of “emergency” envisioned by Congress when it enacted the PAEA. Postal Service management has the flexibility to manage its business, just as members of the mailing industry have had to manage our businesses to adapt to changing economic conditions.
Join Us In Opposing The Exigent Rate Increase
We urge our customers to join us in opposing this unnecessary and unjustified price increase and in calling on our Congressional representatives to correct the inequities in pension and retiree healthcare funding that are the driving forces behind recent Postal Service financial difficulties. You can learn more about this issue and find out who to contact by visiting the Affordable Mail Alliance.
– Bob Rosser
Director of Postal Affairs, Products and Services
– Kurt Ruppel
Marketing Services Manager
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