Postal Updates

By Bill McAllister, Washington Correspondent

U.S. letter rate will increase to 49¢ on Jan. 26

December 27, 2013 08:10 AM

The price of mailing a first-class letter will jump to 49¢ — a 3¢ increase — and postcards will rise 1¢ to 34¢ under an emergency rate increase that goes into effect Jan. 26.

The 3¢ increase in the first-class stamp rate is the largest jump since June 20, 2002, when rates climbed to 37¢ from 34¢.

When the emergency increase request was filed in September, postal governors described it as “a last resort” after Congress failed to enact legislation that would have given the deficit-ridden agency financial relief.

The Postal Regulatory Commission endorsed the six percent increase by a two-to-one vote on Christmas Eve, Dec. 24, but it declared the emergency portion of the increase will be a temporary “surcharge” that could evaporate in two years.

The decision, likely to spur massive sales of forever stamps at the current 46¢ rate, was welcomed by the cash-hungry United States Postal Service, but USPS officials were appalled that the exigent rate increase would not be permanent.

The commission declared it should last less than two years — long enough for the USPS to make $2.8 billion in added profit.

That would cover the loss of 25.3 billion pieces of mail that the USPS suffered between 2008 and 2011 “as a result of the Great Recession,” the commission ruled.

“The Postal Service is disappointed in the Postal Regulatory Commission’s split decision to limit the duration of a modest exigent rate increase,” the USPS said in a statement. “We are reviewing the decision in an attempt to determine the basis for the Commission’s decision,” it said, hinting at a possible court appeal of that portion of the decision.

Tony Conway, executive director of the Alliance of Nonprofit Mailers, said the surcharge would increase prices an average 0.9¢ per piece for standard (advertising) mail and 1.1¢ per piece for periodicals.

First-class letters were scheduled to increase 1¢ to 47¢ as part of an annual inflation-driven rise previously approved by the commission Nov. 21.

Citing its dwindling first-class mail volumes and the impact of the recent recession, the Postal Service had added an emergency rate increase request that would add a 4.3 percent increase and $1.8 billion to its bottom line.

When it first sought emergency relief in 2010, the commission rejected the request. It said Postal Service officials had failed to “quantify” losses that could be attributed to the recession. This time there was a better, but not perfect, analysis of the severe losses that the Postal Service has suffered, the commission said. It said those revenue losses are approaching $40 billion.

Postal Service officials had argued that the emergency rates should be made permanent, but the commission disagreed.

“The Postal Service asserts that because its present and forecasted liquidity position is dangerously low, the proposed exigent rate adjustments are necessary for it to continue to provide adequate postal services,” the commission decision noted. “However, the Postal Service states that even if the request is approved it will continue to incur large net losses each year.”

The service indicated it believed the surcharge could offer it sufficient liquidity to last into 2017.

It also told the commission that “if the adjustments are approved, it does not expect to rescind the exigent rate adjustments ‘until such time as Congress enacts comprehensive reform legislation.’”

In 2013, Congress showed little inclination to enact postal legislation that would have eased the agency financial crisis.

The emergency increase, ironically, may lessen the lawmakers’ desire to tackle what many say is an extremely unpopular issue: cutting postal services more deeply.

The next move in the postal financial drama will be up to the U.S. Postal Service board of governors. They will have to vote on whether to accept the commission’s decision and whether to appeal part of it.

They will also have to move quickly if the agency wants to immediately implement the new, higher rates on Jan. 26, as it is now empowered to do.

A dissenting vote on the commission came from Robert Taub, who said he feared that the commission had failed to reasonably measure both the mail volume lost from the recession and “the continuing financial harm” the USPS is suffering from that loss.

Commissioner Mark Acton joined with PRC Chair Ruth Goldway to give the emergency request a majority. But Acton warned that “financial uncertainty will continue its reign [over USPS] into the foreseeable future.”

A magazine group was highly critical of the decision.

Mary G. Berner, president of the Association of Magazine Media, called the ruling “counterproductive” and said “it does nothing to fix USPS’s systemic problems.”

“Making this increase a “surcharge” is a small comfort to our members, who will have to start paying in late January,” she said.