USPS Postal Reform May Finally Happen

It’s early yet, but according to a report in the Washington Post, there is strong bi-partisan support for a new round of Postal Reform. As one would expect from a compromise, there are good and bad points from whatever viewpoint you may hold.

Some key items, Saturday delivery would continue (which is a major advantage for USPS in the parcel delivery space). Stamp prices would increase 1 cent (beyond the recent annual increase). It’s not stated in the article, but this would likely include a similar modest increase for commercial mailers. Postal employees would participate in Medicare, eliminating a great portion of the pension and healthcare issues that have plagued the organization.

The main point is, if it holds together this time, the USPS may finally have the reform legislation that’s been needed for many years. Then we can all get on with the business of using the postal system without having all the uncertainty hanging over us.

New Rates Effective January 22, 2017

The 2017 rate increase is almost upon us. Any mailings presented after January 22, 2017 will use the new rates and fee. While the rates are tied to inflation, and First Class stamps are going up from 47 to 49 cents, they have adjusted the rates differently in various categories. For example Non-Profit postage had a slight decrease, while Bound Printed Matter goes up about 1%.

Here’s a link to the USPS Proposed Rates page.

There are also various rules changes associated with the increase. For example, you cannot use FTP to transmit SSF and EVS files soon, but that’s another story.

As you’ve probably heard, the USPS is in deep financial trouble. They’re losing billions of dollars every year. This report from the Government Accountability Office (GAO) – Testimony Before the Committee on Oversight and Government Reform in the House of Representatives on May 11, 2016 outlines many of the challenges they face. In many cases, it may be worse than you know. Here are some key points…

• Despite declines in service levels, labor compensation and benefits account for 80% of USPS expenses. This puts them in a bind to further reduce expenses.
• First Class mail (letters, statements, invoices, etc) is the most profitable class of mail. Volume has declined from about 98 billion pieces of mail in 2006, to about 62 billion in 2015.
• As the USPS is major fulfillment service for online shopping, package volume is rising. However, USPS calculates they need $2.50 in new package revenue to offset each $1.00 lost in First Class Mail volume due to higher processing costs.
• The mandate to 100% pre-fund the retirement accounts of all past, current and future employees is often cited as the key contributor to USPS losses. However, you may not have heard that USPS has defaulted on $28.1 billion in these payments since 2007, which makes all that red ink a few shades darker.
• Even without this pre-funding requirement, the USPS would still have lost $10.8 billion during the same time period due to reduced mail volume.

While Congress will have the final say in what, if any, reforms will take place, in Postmaster General, Megan Brennan’s Written Testimony to the Committee, she outlines the position of the USPS. She outlines the major elements of their plan as follows..

• Require full Medicare integration for parts A, B and D, for postal retiree health plans (This would lower USPS exposure by moving some of the burden for retiree health benefits onto Medicare).
• Restore the exigent price increase for market-dominant products (taking back the April 2016 price decrease).
• Calculate all retirement benefit liabilities using postal-specific salary growth and demographic assumptions (they dispute the way the payments are currently calculated).
• Provide some additional product flexibility (more control over the services they offer, and what they can charge for them).

Even if they do get this entire wish list, Brennan admits it won’t be enough to solve all the USPS woes, to which the answer is more price increases. Unfortunately, we feel this will mean further declines in volume, which will lead to larger losses.

We’ll keep you posted if there are any developments from Congress, but don’t expect anything until at least November after the elections.

NPF 2016 Coming to Nashville, TN March 20-23

The National Postal Forum will meet in Nashville, TN March 20-23, with the exhibit floor being open on March 21 – 23. The NPF is the premier show to demonstrate and learn about the latest in mailing technology and techniques.

There are educational sessions discussing USPS, postal news, Direct Mail, and general business subjects, with several professional certifications offered. The exhibit floor allows you to explore the latest in the world of mailing and printing hardware and software.

The NPF is always a good show. You should catch it any time it’s near you.

USPS Announces Rate Change for April 2016

New prices are now available on the USPS website to take effect in April 2016. Before you panic, this is actually great news. The USPS has appealed to the Postal Regulatory Commission (PRC), but most likely it will go into effect.

A little history. Back in 2013, part of the rate increase was a 4.3% “exigent” (emergency) rate increase. This was to help the USPS deal with the unusual circumstances caused by the Great Recession. The PRC agreed to the increase, but only allowed it to be temporary and based on reaching certain revenue goals. Unless the USPS can convince the PRC otherwise, this exigent increase will be allowed to expire when those revenue goals are met. This is forecast to happen in mid-April.

This rate decrease will effect “market dominant” products, which include First Class, Standard Mail, Bound Printed Matter, Periodicals, etc. It will not effect “market competitive” products like Priority Mail and Parcel Post.