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Postal Service Seeks Rate Increase to Help Close $20 Billion Budget Gap Postal Service Seeks Rate Increase to Help Close $20 Billion Budget Ga...

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Postal Service Seeks Rate Increase to Help Close $20 Billion Budget Gap

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(AP Photo/Matt Rourke)

The U.S. Postal Service said Wednesday it is seeking rate increases to raise $2 billion, but it might reconsider if Congress can take action to help close its $20 billion budget gap.

The new rates, if approved, would take effect Jan. 26. For instance, new pricing for single-piece first-class mail would include:

 
  • Letters weighing 1 ounce or less — 3-cent increase to 49 cents
  • Letters weighing over 1 ounce -- 1-cent increase to 21 cents per extra ounce
  • Letters to all international destinations (1 ounce) — 5-cent increase to $1.15
  • Postcards — 1-cent increase to 34 cents

New pricing for standard mail, periodicals, package services, and extra services also will be adjusted as part of an official rate-increase filing to the Postal Regulatory Commission, scheduled to occur Thursday, according to the announcement Wednesday. Those other pricing details were not yet available.

"Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges," explained Postal Service Board of Governors Chairman Mickey Barnett in a letter to some customers, released Wednesday.

"However, if these financial challenges were alleviated by the timely enactment of laws that close a $20 billion budget gap, the Postal Service would reconsider its pricing strategy," he also wrote. "We are encouraged by the recent introduction of comprehensive postal-reform legislation in Congress, and despite an uncertain legislative process, we are hopeful that legislation can be enacted this year."

 

The pricing changes would come as the result of a vote taken by the Postal Service's Board of Governors, meeting this week in Kansas City, Mo.

The Postal Service--a quasi-governmental entity--acknowledges that its price increases are normally capped at the rate of inflation as measured by the Consumer Price Index. That would mean an allowable increase of only about 2 percent.

But a 2006 law also allows the Postal Service to seek a higher rate increase beyond the CPI in instances of "exigent" circumstances—and that is what is being proposed now. Such requests are to be made to the Postal Regulatory Commission, which has 90 days to approve them.

The Postal Service says it is filing for such an "exigent" increase "due to extraordinary and exceptional circumstances which have contributed to continued financial losses."

 

"The Postal Service recorded a $15.9 billion net loss last fiscal year and expects to record a loss of roughly $6 billion in the current fiscal year, and has an intolerably low level of available liquidity even after defaulting on its obligation to make prefunding payments for retiree health benefits," the announcement states.

In 2010, the Postal Service submitted a request for an exigent rate increase of 5.6 percent—far above the CPI cap—that would have brought in more than $3 billion annually. But the mailers fought that increase in court and it was derailed.

In the letter to some customers Wednesday, Barnett described the "precarious financial condition" of the Postal Service and the "uncertain path toward enactment of postal-reform legislation" as primary reasons for seeking price changes above the CPI increase.

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Barnett also wrote that that the price adjustment above the CPI increase is necessary to ensure that the Postal Service will be able to maintain and continue the development of postal services of the type and quality that America needs.

Some of the same groups that lobbied against the previous hike said Wednesday they were disappointed by the latest request.

"The Board of Governors' request for an 'exigent' rate increase is a terrible substitute for badly needed legislative reform of the U.S. Postal Service," said Mary G. Berner, resident and CEO of MPA—The Association of Magazine Media.

The Greeting Card Association also issued a statement expressing concern.

"The GCA and its nearly 200 member companies are disappointed in today's filing by the Postal Service's Board of Governors," said Rafe Morrissey, GCA's Vice President of Postal Affairs. "Exigency rate increases were meant to respond to extraordinary circumstances and are no substitute for commonsense, structural reforms that will put the Postal Service on sound and sustainable fiscal footing."

"It is our hope that the Postal Regulatory Commission will, as it has in the past, deny this exigency rate increase," Morrissey said.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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