Postal Service Eyes Huge Rate Hike

June 13, 2013       Don McNamara      

A proposal that would raise postage rates 10 percent – roughly 9 percent beyond the normal increase permitted by law — has caused the re-establishment of the Affordable Mail Alliance, a coalition of customers of the U.S. Postal Service (USPS).

According to the Alliance, the proposed increase would be as much as five times higher than the legally permitted rate.

A representative of the USPS denied that any decision has been made or timeline established for what is known as an exigent price change, or that any rate of increase has been settled on.

Ordinarily, postal rate increases are passed in January and are linked to the Consumer Price Index (CPI), said Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association and a spokesman for the Affordable Mail Alliance. The legal cap is 0.6 percent of the CPI.

“According to the provisions in the law, there can be an increase in excess of the cap in ‘extraordinary or exceptional’ circumstances,” Cerasale said. “We’ve learned that they’re considering an increase that is far above the CPI.”

Cerasale said that mobilization worked once before and will be tried again. “We fought this in 2010, and we decided to get together again to fight this new increase.” The organization, which includes nonprofit organizations as well as for-profits, successfully fought a proposed rate increase of 5.6 percent in 2010.

Cerasale estimated that the CPI will increase 2 percent in January and that the request is for an increase of 10 percent.

The Postal Service Board of Governors will either accept or deny the increase request from the USPS. The Alliance said that decision will be occurring “imminently.”

Then the Postal Regulatory Commission (PRC) will rule on the request, within 90 days of the request being made. It was the PRC that denied the request in 2010.

Cerasale said the USPS appears to be serious about this request, rather than simply floating a trial balloon.

“The Postal Service is losing money and working to cut costs,” Cerasale said. “They’re closing plants and post offices and consolidating. Our position is that they should be doing that even harder.”

“The Postal Service financial crisis has worsened (since 2010) due to the continuing decline of First-Class Mail volume and the lack of comprehensive postal reform legislation being enacted,” said Katina Fields, senior public relations representative for the USPS, in an email response to The NonProfit Times. “As a result, the Postal Service is considering all options to further reduce expenses and raise revenue, including a possible exigent price increase.”

Fields said the USPS has been working very hard to improve productivity and reduce costs.

“Since 2006, we have reduced the size of our workforce by 198,000 employees (28 percent), without layoffs,” she said.  “We have reduced our annual cost base by $15 billion.  We have consolidated more than 200 mail-processing facilities.  We are modifying hours of operation at 13,000 Post Offices.  We have eliminated 21,000 delivery routes.  These actions — while impressive from any perspective — are insufficient to resolve our financial crisis.”

The Alliance dismisses claims by the USPS that it will run out of cash without serious financial relief, saying the claim has been made for several years.

Fields said the USPS continues to lose $25 million a day and has reached its debt limit of $15 billion. It has already defaulted on retiree benefits of more than $11 billion and will default on $5 billion more in September of this year, she said.

She also said the USPS cannot count on receiving legislative action from Congress and must rely on cost-cutting, including renegotiating labor contracts.

Cerasale said that first class mail has been decreasing for several years now and that the financial woes caused by the recession are turning around.

“We don’t think the situation has met the requirements,” of extraordinary and exceptional, Cerasale said. He added that an increase such as that proposed by the USPS would hurt everyone, nonprofit and commercial mailers of every size, even the general economy and the USPS itself.

Cerasale said the Alliance plans to make sure the USPS is aware of the potential harm the increase would cause. It is calling on the USPS to continue to make structural improvements, such as more closings of local post offices.

“If they bust the cap, it will just start a death spiral,” Cerasale said.

Earlier this year, The Alliance of Nonprofit Mailers (ANM) settled a dispute with the USPS regarding rules for worksharing discounts. The Postal Regulatory Commission (PRC) accepted the agreement.

Worksharing discounts are price cuts given to mailers for taking some of the burden off of the post office by performing such actions as pre-sorting mail according to ZIP code. Six workshare discount rates, which went into effect January 27, were shallower for nonprofit mailers than commercial mailers; that is, nonprofit mailers receive less of a discount per piece of mail for the same work.

Section 403(c) of U.S. Code Title 39 prohibits discrimination among mail users unless the post office has a reasonable justification. In this case, the USPS said it could not equalize nonprofit and commercial rates “without setting the nonprofit base rate higher than would be most efficient and preferable from a policy perspective,” according to PRC Docket R2013-1.

The PRC accepted that explanation. ANM initiated a legal petition for review in January with the U.S. Court of Appeals, D.C. Circuit. ANM and the USPS came to a settlement, submitted to the PRC on March 13 and accepted at its Annual Compliance Review on March 28. As a result of the settlement, AMN moved to dismiss its petition for review.

According to the settlement, the Postal Service will identify each instance where nonprofit worksharing differs from commercial worksharing and provide a justification for the price difference. The PRC will review each instance. If it finds no suitable justification, the USPS will “provide an alternative schedule of nonprofit rates that (1) generates approximately the same total revenue as the rates proposed by the Postal Service, and (2) eliminates the noncompliance” with the title and section cited above.

However, no rebates were paid.

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This story is appended with content from an earlier story by NPT reporter Patrick Sullivan.

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