Business

Red-Letter Day: Postal Service Seeks ‘Exigent’ Rate Increase

In a move that has many industry groups on alert, the U.S. Postal Service is recommending a nearly 6 percent increase on mass-mailing and periodical services—citing emergency circumstances caused by its dire financial situation.

Don’t let the pennies fool you—the U.S. Postal Service’s decision to push for an exigent rate increase is no small change.

Granted, it may not be as drastic as some cost-saving proposals that have come from USPS recently (see: dropping Saturday mail), but several organizations whose members depend on mass mail have raised concern about the proposed rate increase.

Pain for Mass MAilers

The requested three-cent price hike for first-class postage is relatively minor for consumers, but the pain would come in the form of higher mass-mail and periodical rates, say associations and industry groups whose members would take the hit.

The exigent increase would amount to a 5.9 percent across-the-board rate hike for mass mailings, packages, and periodicals. While 1.6 percent of that corresponds to the rate of inflation, an additional 4.3 percent increase has been proposed by the U.S. Postal Service Board of Governors.

The move is allowed by a 2006 law that gives the Postal Service room to ask for increases as high as 10 percent in emergency circumstances. The USPS Board of Governors argues the service’s dire financial situation, caused partly by the need to prepay retiree health benefits, constitutes such a circumstance.

“Under current laws, the Postal Service simply lacks the authority to fully pursue financially responsible and appropriate strategies for controlling costs and generating new revenue that are far preferable to price increases,” said Mickey D. Barnett, the chairman of the USPS Board of Governors, in a statement.

While printers have been forced to consolidate, trim costs, and become more competitive, rising USPS prices adversely affect printing, as businesses tend to migrate to digital solutions in an attempt to save money.

With USPS facing a $20 billion shortfall, the requested exigent increase, which would bring in a projected to bring in $2 billion annually, must be approved by the independent Postal Regulatory Commission (PRC).

How It Could Hurt

The threat of an exigent increase on postal rates has been a longstanding concern for many mass mailers, though they received a brief reprieve earlier this month when the USPS board delayed a decision on seeking one.

One industry expert, Jim Federico, vice president of sales at Offset Impressions, told Associations Now that the rate hike could make matters worse for an industry already struggling with postage costs—and it could push mass-mailers in another direction.

“While printers have been forced to consolidate, trim costs, and become more competitive, rising USPS prices adversely affect printing, as businesses tend to migrate to digital solutions in an attempt to save money,” he said.

Federico said other solutions, such as ending Saturday mail delivery, would likely be more effective.

Industry reaction

Among the loudest voices speaking out against the rate increase is the magazine industry. Mary G. Berner, president and CEO of MPA – The Association of Magazine Media, even raised the possibility of litigation.

“We are deeply disappointed that, despite the facts, the Board of Governors chose to seek a counterproductive rate increase instead of working with the industry to secure meaningful, long-term reforms through congressional action,” Berner said in a statement. “MPA, on behalf of the magazine industry, will aggressively oppose the proposed rate increase through all channels, including litigation at the PRC.”

MPA is a leading member in the Affordable Mail Alliance, a coalition organized specifically to fight an exigent increase.

Another alliance member, the Direct Marketing Association, called the USPS decision counterproductive and potentially damaging to the industry, as a 2007 increase was.

“Rather than lowering prices at times of weak sales—a common practice in businesses across the United States—the Board of Governors has misguidedly decided that raising prices will help cure its lack of sales,” DMA stated. “On the contrary, the problem of decreased mail volume will only worsen as mailers cease to rely upon the United States Mail to reach consumers.”

Meanwhile, the Greeting Card Association, whose members would feel the effects of a first-class stamp price increase acutely, pointed out that it had outlined numerous alternatives for reducing the Postal Service’s deficit without resorting to price increases.

“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,” said Rafe Morrissey, the GCA’s vice president of postal affairs, in a press release.

What concerns would a postal rate increase raise for you? Tell us your take in the comments.

(iStock/Thinkstock)

Ernie Smith

By Ernie Smith

Ernie Smith is the social media journalist for Associations Now, a former newspaper guy, and a man who is dangerous when armed with a good pun. MORE

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