It’s the dog days of summer, and even Minnesota has been experiencing temperatures in the upper 90s. Summer travel for the IWCO Direct postal team has included industry association meetings and USPS-sponsored events such as the Mailer’s Technical Advisory Committee (MTAC) and Mailing Industry Area Focus Group Meetings. So it seems like a good time to sit back in the shade, sip a tall icy beverage, and ponder what’s hot in the postal world.
Postal Reform Legislation
This summer’s big news is that the House Oversight and Government Reform Committee passed two postal reform measures with bipartisan support. The primary bill, H.R. 5714, the Postal Service Reform Act of 2016 addresses healthcare and pension modifications including moving postal retirees into Medicare and adjusting retiree healthcare and pension prefunding to better reflect USPS demographics. This bill also would give the Postal Service a one-time rate increase (independent of the rate of inflation) of 2.15%. In addition, it makes changes to postal governance, allows the Postal Service the ability to offer more non-postal services, and encourages adoption of centralized delivery.
The second bill, H.R. 5707, the Postal Service Improvement Act of 2016, allows money in the postal pension and retiree health benefit funds to be invested in a wider array of conservative financial instruments, not just government bonds.
We are currently waiting for the bills to be “scored” by the Congressional Budget Office and for the Ways and Means Committee to provide feedback on the Medicare provisions of H.R. 5714. The bills could be taken up by the full House in September, but final passage, which isn’t certain, is not expected until after the election.
Kudos to the USPS Pricing and Costing and Product Development teams for the advanced communication on the structural changes that could be part of the next postage adjustment in January 2017. Having this information now will go a long way toward ensuring a smooth transition. Many of the changes involve streamlining overlapping rate cells that should simplify rate charts and postage statements. The change of most interest for mailers of Standard Mail Letters will be a slight narrowing of the “spread” between destination-entry and origin-entry rates.
The consumer price index (CPI) used to cap the annual inflation-based price adjustment is currently about 0.7%. To allow for the adjustment in destination entry rates and any additional inflation between now and September/October when the Postal Service files its rate case with the Postal Regulatory Commission, we recommend those doing 2017 planning budget for a postage increase of 1.0 to 1.5%.
We’ll also need to keep our eye on what happens with postal reform in Congress. If the House bill passes in its current form, we could see an additional 2.15% increase added to that. At this point, passage of postal reform through Congress isn’t certain enough that we recommend building this extra amount into 2017 budgets, but stay tuned as that could change over the fall.
Also, keep in mind that this will be the first postage price increase since May 2015, and in the interim the 4.3% exigent surcharge was rolled back in April of this year.
While there is a lot more postal information we have to share, this is a lot to soak in for a Friday. Enjoy your weekend and be sure to check back on Tuesday when we’ll provide updates on upcoming postal promotions and exciting changes the USPS CIO team is working on.
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