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

Letter carrier Nancy Konstance collects last-minute tax returns outside the Main Post Office in Philadelphia, on Monday, April 17, 2006.  Taxpayers were given two extra days this year to file.   (AP Photo/Matt Rourke)
National Journal
Billy House
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Billy House
Sept. 25, 2013, 9:22 a.m.

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.

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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