Business worries Postal Service will broadly raise rates to make more revenue

Private-sector groups are growing increasingly worried that the Postal Service's board is going to consider a broad rate increase next month, a move they say would amount to an attack on some of the agency’s best customers.

Industries that heavily use the mail, like magazines, catalog marketers and banks, say that a sharp hike in the postage rate would drag down their bottom line.

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Mailers also insist that, while they understand the USPS's board of governors has to look for ways to firm up a dire financial situation, approving a rate increase would be counterproductive for the agency, and little more than a temporary substitute for the long-term changes the service desperately needs. 

A postal rate increase of as much as 10 percent could produce a short-term revenue burst for the struggling service, mailers say, but could be a long-term loser once companies rely less on the mail.

“We’re not hostile to the governors. They’ve got a fiduciary responsibility, and so we understand that they feel backed into a corner,” said Art Sackler of the Coalition for a 21st Century Postal Service, a group that includes Bank of America, Verizon and the National Retail Federation.

But private-sector groups argue that it’s also far from the right time for the service’s board of governors to consider such a move, citing new momentum on Capitol Hill for postal legislation and a decline in red ink at the agency this fiscal year.

Sackler and other industry veterans also say a rate increase would be disastrous for a sector that was hit hard by the recession.

“The Internet and mobile technology have become, and will continue to be, the drivers of diminishing communications by paper,” the Affordable Mail Alliance, a coalition of nonprofits, businesses and other groups, wrote to the board last week. “As a result, previously accepted views that the mail is price insensitive are no longer appropriate.”

The USPS’s board of governors has announced that it will hold a private meeting on Sept. 5 that will touch on a range of issues, including pricing.

The mailing industry is worried that the board could approve a so-called exigent rate increase at that time and has prodded the board for meetings to discuss the issues a rate increase would cause.

Dave Partenheimer, a spokesman for the Postal Service, told The Hill only that “the governors continue to explore the possibility of filing for price adjustments later this year. No final decisions have been made.”

Under a 2006 law, the USPS is generally limited from increasing the price of stamps beyond the rate of inflation. But the agency can seek a bigger rate increase if it faces extraordinary circumstances, a request that must be ratified by its regulator.

The Postal Service unsuccessfully sought an exigent increase in 2010, amid declining mail volume and a weak economy. 

Officials in the mailing industry say that they don’t believe the Postal Service is facing the exceptional circumstances needed to trigger this sort of rate increase this time around, either. The Postal Regulatory Commission would have 90 days to consider a request if the agency did file for a rate increase.

“An exigency increase was meant to respond to extraordinary circumstances — a Katrina-type national disaster,” Rafe Morrissey of the Greeting Card Association told The Hill. “I’m not sure that the lack of legislation was something that was originally intended here.”

Mailing industry coalitions also maintain that a push for a rate increase would eat into their efforts to lobby for more fundamental changes at the agency, and that the short-term revenue from a rate increase would lessen the appetite for postal reform on Capitol Hill.

“If they do this, everybody in the mailing industry is going to be distracted and are going to take their eyes off the ball on the Hill,” Sackler said.

But by openly discussing price increases, postal officials are arguably reiterating to both Congress and the mailing industry that it’s time to get postal legislation across the finish line.

The USPS lost a record $15.9 billion in fiscal 2012, mostly from defaults on required prepayments for future retirees’ healthcare. The agency’s losses have declined, to $3.9 billion, in the first nine months of the current fiscal year.

House Oversight Committee Chairman Darrell Issa (R-Calif.) already has pushed a postal bill through his panel on a party-line vote this year.

Sens. Tom Carper (D-Del.) and Tom Coburn (R-Okla.) also introduced a bipartisan measure shortly before the August recess, and both lawmakers and aides said Tuesday that the idea of a rate increase underscored the need for Congress to act.

“The only way to prevent USPS from soaking its customers with rate increases or taxpayers with subsidies is to pass comprehensive reform legislation that allows it to adapt to America’s changing use of mail,” Issa told The Hill in a statement.

A spokeswoman for Carper, the Senate Homeland Security Committee chairman, added that a postal bill would be the best assistance for the agency, though she added that the Delaware Democrat “understands the Board of Governors’ desire to take whatever steps that it can do on its own to keep the lights on at the Postal Service.”

But lawmakers and stakeholders still have to bridge considerable gaps over how much relief to give the Postal Service from their healthcare prepayments and issues like Saturday delivery, and whether to move away from door-to-door and curb service of mail.

Fredric Rolando, the president of the National Association of Letter Carriers, underscored that point by saying that a rate increase wouldn’t be necessary if the mailing industry joined them in fighting for legislation that repealed the prefunding requirement.

"The nation's largest mailers should join us and others in raising the alarm about pre-funding, instead of recklessly endorsing bills that would maintain it at the cost of dismantling the Postal Service's networks on which they rely,” Rolando told The Hill in a statement.