The Big Postal Hike is Dead, But Rates Could Jump Up to 2 Percent Next Year

Wednesday, October 13th, 2010 | Postage Regulations | Comments Off on The Big Postal Hike is Dead, But Rates Could Jump Up to 2 Percent Next Year

Question is not if, but when.

by MATT KINSMAN at FolioMag.com

Last week the magazine industry celebrated the Postal Regulatory Commission’s unanimous decision to deny the United States Postal Service’s attempt to break its existing CPI cap and raise rates for periodical mailers by 8 percent and First-Class mail stamps to 46 cents.

It was a huge win for periodicals mailers-many of whom would have been drive out of business by such a hike. But the fact remains that the industry is still likely to see a postal rate increase within the cap, and possibly (although unlikely) renewed efforts by the USPS to float the 8 percent rate hike again. The question is whether the increase comes earlier in the year-in which case the jump will be relatively small-or later in the year, in which case the rate hike could be larger.

“The USPS is still allowed to raise rates up to the CPI cap without approval from the PRC,” wrote Making Magazines president Terry Coate Jr. in a blog. “The CPI is expected to be in the area of 2.5 percent. . .Expect a rate increase of 2.5 percent and be pleasantly surprised if it doesn’t happen.”

Not so fast, says Jim Cregan, executive vice president for government affairs at MPA. “Our economists tell us it could be in the neighborhood of 1.5 percent if the postal service were to move quickly and do it in first few calendar months of 2011. If they decide to wait until May, the increase could be a little higher. The economists seem to agree that range would be 1.5 percent to 1.8 percent with a maximum increase of 2 percent, with the way inflation is running.”

“Keep in mind that USPS did not implement a CPI-based increase this year, so it has more than a year’s worth of admittedly modest CPI increase in the bank,” adds David Straus, American Business Media’s Washington counsel and postal expert.

There is a slight chance the USPS could even refile the case. “They could try presenting the case in a different way to convince the commission to bust the cap,” says Cregan. “However, the consensus of opinion that is they will exercise their authority under the cap sometime in early 2011.”

PRC RULING ON PRICE FILING

Thursday, October 7th, 2010 | News, Postage Regulations | Comments Off on PRC RULING ON PRICE FILING

POSTMASTER GENERAL ISSUES STATEMENT

Here is the statement of Postmaster General John Potter on today’s Postal Regulatory Commission ruling:

We are disappointed to learn that the Postal Regulatory Commission (PRC) has denied our price filing. But we are encouraged by their acknowledgment and understanding of the larger financial risk we face through the mandated prefunding of Retiree Health Benefits.

Clearly, the Postal Service is a viable business. Maintaining that status requires elimination of several legislatively-imposed constraints that hamper our ability to operate efficiently and profitably.

Specifically: 1) enable us to alter frequency of delivery consistent with use of the mail; 2) allow us to close unprofitable post offices; 3) restructure our obligation under a 2006 law to prefund retiree health benefits, an obligation not applicable to any other private or government entity; 4) permit us to create and offer products and services beyond mail; 5) assure that arbitrators consider the financial health of the Postal Service when agreement cannot be reached with our labor unions; and 6) resolve overfunding of our pension systems. Legislation has been introduced in Congress to address these issues.

We will need to take a much closer look at the ruling from the PRC in order to make an informed decision about what options we have and what may be the best course of action for our customers, our employees, our stakeholders and the American public.

The Postal Service ends the current fiscal year with approximately $2 billion cash and available credit, meeting all our end-of-year financial obligations, including a $5.5 billion payment to the Retiree Health Benefit Fund as required by law.

As we have stated repeatedly throughout the year, the Postal Service sought a deferral of this $5.5 billion payment to minimize the risk of defaulting on our financial obligations in Fiscal Year 2011. Unfortunately, no legislative action has been taken at this time.

The financial risk remains. We will carefully manage every dollar we spend in the upcoming fiscal year. Our current forecast shows that we will not have sufficient cash to make the $5.5 billion payment due on Sept. 30, 2011, and any major disruption, whether in volume loss or unforeseen circumstances, could cause us to default on financial obligations earlier in FY11.

In the midst of financial and regulatory challenges, the Postal Service achieved record productivity gains in 2010 and a reduction of over 100,000 career employees and cost savings of over $10 billion during the last three years.

As always, service to our customers remains our number one priority. No financial challenge or uncertainty will change that. We will continue to work with Congress and our stakeholders to implement necessary changes to ensure a viable Postal Service for decades to come.

John E. Potter
Postmaster General of the United States
CEO of the U.S. Postal Service

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