When I last wrote about what was happening with the Postal Service, the agency was in the midst of an overwhelming holiday peak season, during which a COVID-driven drop in employee availability combined with record parcel volume had resulted in extreme delivery challenges in several parts of the country. I am happy to report that service performance is recovering. Trucks are no longer waiting hours (or days) to be unloaded at USPS facilities, the backlog of parcels and mail is clearing the system, and with the exception of areas impacted by recent winter storms, Marketing Mail letters currently entering the system are being delivered within service standards, or at most, within a day of service standards. We continue to monitor our end-to-end logistics network and are working proactively with the Postal Service to ensure our clients’ mail continues to be delivered in a timely manner.
While we don’t expect it to be as chaotic as 2020, to use a Minnesota euphemism, 2021 promises to be a very “interesting” year for those of us who follow postal operations and policy. Let’s take a look at the potential for progress on postal reform, a postage rate increase, and a few other key postal affairs we’re currently tracking:
Postal Reform Legislation
Several members of the U.S. House, including Brian Fitzpatrick (R-PA), who represents our Warminster facility, have reintroduced the USPS Fairness Act. This bipartisan legislation provides the Postal Service much-needed financial relief by ending the agency’s burdensome prefunding mandate on future retiree health benefits. While this bill would address one of the primary challenges facing the Postal Service, it doesn’t provide the comprehensive reform the Postal Service sorely needs. We support this measure as a first step toward that comprehensive reform, but it doesn’t take us all the way there.
A discussion draft is now circulating among members of the House Oversight and Government Reform Committee. Known as the Postal Service Reform Act of 2021, this bill focuses primarily on service performance and allowing USPS retirees to take better advantage of the Medicare benefits they, and the Postal Service, have paid into during their employment. The mailing industry, as well as other postal stakeholders, are actively engaged with the committee in shaping this bill.
Changes in committee leadership make us more optimistic about the chances for postal reform in the Senate than we have been in recent years. The Homeland Security and Government Affairs Committee is now chaired by Gary Peterson (D-MI), who is much more focused on strengthening the Postal Service than was the previous chair, although the committee seems to be letting their House counterpart take the lead in developing the first round of reform legislation.
Postal Service Governance and Management
As a result of the recent election, we are seeing changes to the entities that direct and regulate the Postal Service. Both the USPS Board of Governors (BOG) and the Postal Regulatory Commission (PRC) are now chaired by Democrats. In addition, the Washington Post has reported President Biden will nominate Ron Stroman, the Postal Service’s recently retired deputy postmaster general; Amber McReynolds, the chief executive of National Vote at Home Institute; and Anton Hajjar, the former general counsel of the American Postal Workers Union, to fill three vacant seats on the BOG.
Postmaster General (PMG) Louis DeJoy has come under criticism for operational changes he has initiated during his short tenure with the Postal Service. Although several members of Congress have called for his removal, DeJoy has indicated he wants to continue working to stabilize USPS finances. Since the PMG serves at the pleasure of the BOG, how all of this would play out if the BOG shifts to a Democratic majority is still an open question. We’ll certainly keep you updated as this situation evolves.
Mid-Year Postage Rate Increase?
The recent PRC ruling in their review of postage rate setting granted the Postal Service additional rate authority beyond the CPI-based rate cap. Based on formulas in the PRC ruling, USPS has calculated that they have 4.25% rate authority based on lower mail densities (it’s so large because of the pandemic depressing volume last year) and 1% to cover employee retirement obligations (a total of about 5.25%). They can also add an additional 2% for any products that aren’t covering costs (periodicals and catalogs). The PRC has to review and approve the proposed rate authority as part of their Annual Compliance Determination, which won’t be done until late March.
The Postal Service had to make the calculations and present to the PRC before December 31, 2020 in order to use the rate authority this year, but so far they have NOT said whether they will use the authority, and if they do use it, whether they will use all of it or just a portion. (They don’t have to take all of it all at once, they can bank some to use later.) The Postal Service is expected to release a 10-year strategic plan before the middle of March, and we anticipate the agency will provide clearer guidance on how it will use this authority in that plan. Speculation is that there may be a postage rate increase mid-year.
The mailing industry has challenged the PRC ruling allowing the rate authority in the DC District Court, but it may take a year or more to resolve all the court cases. The mailing industry also asked the Court to stay the ruling. That action is still pending. The industry continues to press the Postal Service to, at a minimum, delay any increase until January 2022 when the regular CPI-based increase would go into effect, to at least allow mailers time to plan for a larger increase in their budgets. We will continue to monitor the situation and provide updates as they become available.
If you have questions about any of the postal affairs topics we’ve covered, reach out to your IWCO Direct account team or contact me here. And keep reading SpeakingDIRECT—we’ll continue to share developments in the postal world as the year progresses.