Big Mailers Bracing for Steep Rate-Hike Request From Postal Service

U. S. Postal Service letter carrier Terry Caldwell, of Topsham, Maine, background, delivers mail in Bath, Maine, Monday, Dec. 5, 2011. The Postal Service, which has been losing money for five years, announced Monday that it would close 252 out of 461 mail processing centers across the country starting next April. (AP Photo/Pat Wellenbach)
National Journal
Billy House
Aug. 27, 2013, 3:30 p.m.

A co­ali­tion of magazine, news­pa­per, print­ing, and dir­ect-mar­ket­ing groups warns that the U.S. Postal Ser­vice may de­cide next week to re­quest that postal rates be raised sig­ni­fic­antly — per­haps by as much as 10 per­cent — un­der the claim of “ex­i­gent” cir­cum­stances.

The Board of Gov­ernors for the Postal Ser­vice, which is bleed­ing money, con­tin­ues to ex­plore “the pos­sib­il­ity of fil­ing for price ad­just­ment later this year,” spokes­man Dave Parten­heimer said Tues­day.

But he said no fi­nal de­cision has been made.

However, the board is sched­uled to meet in a private tele­con­fer­ence Sept. 5 with the top­ic of “pri­cing” in­cluded on its agenda. Fear­ing the board plans to vote to re­quest an across-the-board rate in­crease that far ex­ceeds in­fla­tion, the Af­ford­able Mail Al­li­ance of more than 50 com­mer­cial or­gan­iz­a­tions that rep­res­ent news­pa­pers, magazines, and dir­ect mail­ers has launched a pree­mpt­ive lob­by­ing ef­fort.

“The Af­ford­able Mail Al­li­ance un­der­stands that the Board of Gov­ernors will be con­sid­er­ing a po­ten­tial ex­i­gency rate in­crease on your con­fer­ence call on Sept. 5,” de­clared let­ters by the group to the board’s chair­man, Mickey Barnett, and oth­er board mem­bers.

Not­with­stand­ing the Postal Ser­vice’s on­go­ing fin­an­cial pre­dic­a­ment, warns those let­ters, a sig­ni­fic­ant rate in­crease could be self-de­feat­ing to re­cov­er­ing postal fin­an­cial sta­bil­ity, caus­ing “severely ad­verse and likely ir­re­voc­able con­sequences for mail volume and rev­en­ue.”

Postal rate in­creases are capped at in­fla­tion, as meas­ured by the Con­sumer Price In­dex. That would mean an al­low­able in­crease of about 2 per­cent for late Janu­ary 2014 im­ple­ment­a­tion.

But a 2006 law also al­lows the Postal Ser­vice to seek a high­er rate in­crease bey­ond the CPI in in­stances of “ex­i­gent” cir­cum­stances. In craft­ing that lan­guage, Sen. Susan Collins, R-Maine, has said she en­vi­sioned ex­treme cir­cum­stances, like ter­ror­ist at­tacks or nat­ur­al dis­asters.

Such re­quests are to be made to the Postal Reg­u­lat­ory Com­mis­sion, which has 90 days to act on them. In 2010, the Postal Ser­vice sub­mit­ted such a re­quest for an ex­i­gent rate in­crease of 5.6 per­cent — far more than the CPI cap — that would have brought in more than $3 bil­lion more an­nu­ally.

But the mail­ers fought that in­crease in court, and it was de­railed.

The Postal Ser­vice con­tin­ues to hem­or­rhage money — as much as $19 bil­lion since early 2012. And there are ex­pect­a­tions that ef­forts to use “ex­i­gent” cir­cum­stances as a basis for a sig­ni­fic­ant rate in­crease are be­ing re­kindled.

The high­er costs would hit every­one, in­clud­ing in­di­vidu­als who put a stamp on a piece of mail. However, the AMA’s let­ters spell out that the mail­ing in­dustry and its sup­pli­ers are re­spons­ible for $1.3 tril­lion in sales an­nu­ally, and nearly 8 mil­lion private-sec­tor jobs.

“This is not a solu­tion,” said Mary Bern­er, pres­id­ent and CEO of the As­so­ci­ation of Magazine Me­dia, in an in­ter­view.

Rather, she said it will in­stead pro­duce a “lose-lose situ­ation” for Postal Ser­vice con­sumers and the ser­vice it­self. Some magazines, she said, could end up abandon­ing mail use al­to­geth­er and con­cen­trate even more on di­git­al ef­forts, or even go out of busi­ness. A 10 per­cent in­crease would add about $300 bil­lion in costs to the in­dustry, she said.

Bern­er said her group is among those sup­port­ive of ef­forts in Con­gress to come up with “real re­forms” rather than what she says are such short-term ef­forts to ad­dress the Postal Ser­vice’s worsen­ing fin­an­cial situ­ation. However, she said that at­ten­tion and ef­fort will be di­ver­ted from those cur­rent le­gis­lat­ive ef­forts by the re­newed leg­al chal­lenges sure to be moun­ted if the Postal Ser­vice pur­sues an­oth­er “ex­i­gent’ in­crease.

In the House, the Over­sight and Gov­ern­ment Re­form Com­mit­tee already has passed along party lines its new ver­sion of a postal-re­form bill sponsored by Chair­man Dar­rell Issa, R-Cal­if. A bill also has been in­tro­duced by Sens. Tom Carp­er, D-Del., and Tom Coburn, R-Okla., the chair­man and rank­ing mem­ber, re­spect­ively, of the Sen­ate Home­land Se­cur­ity and Gov­ern­ment­al Af­fairs Com­mit­tee.

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