The USPS Proposed Rate Hike — What Does It All Mean?
October 03, 2013 - by Mike DeFlavia
There has been a lot of news about the US Postal Service over the last few weeks. Here’s the latest – and a breakdown of what it all means.
First, the news from October 2, 2013. As expected, the USPS defaulted on a $5.6-billion payment for retiree health benefits. Why was this expected? The Postal Service has defaulted on these payments before and is trying to get Congress to change the way this benefit must be funded.
So, this is not news of great concern. But what about the proposed postage increase?
As you know, the USPS is seeking an “exigency” postal rate increase on top of the statutory CPI allowances. The headlines said overall “postage increasing 5.9%.”
Now to translate that into English. The USPS is allowed to increase postal rates in line with the Consumer Price Index (CPI). This will mean a 1.6% increase in January.
Then, if the USPS feels there are exigent circumstances, it can request an additional increase. It is in fact asking for a 4.3% additional increase overall, which would vary by types and classes of mail.
So, if (and read more about the “if” below) this additional increase is approved, first-class postage will increase from $0.46 to $0.49 (a 6.5% increase), while a regular automation piece of non-profit mail could increase from $0.17 to $0.183 (a 7.6% increase!).
But what is the “if”? These are currently only recommendations that must be reviewed by the Postal Regulatory Commission (PRC), which must make a decision in 90 days. And that 90-day period ends December 25, 2013.
The question of whether the USPS even meets the criteria to file an exigency case will be contested by industry groups (including several to which we belong) that will fight on your behalf. But it is not clear how the government shutdown will affect this decision period.
Even if the PRC feels it has a case, it has several options:
- Approve the rates as submitted
- Return its own suggestions for rates
- Delay the increase
- Reject it completely
But now, the real question: How might this increase affect you and your budget?
Until the fight is over, and the PRC makes a decision, we are not sure. The 2014 budgets we have prepared for non-profits include a postal increase (as well as a paper increase); however, we will reassess everything when the final rates are set.
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