Large USPS postal rate increases might lie ahead
Washington Postal Scene by Bill McAllister
Fresh from securing a multimillion dollar relief package from Congress, is Postmaster General Louis DeJoy about to embark on a series of big postal rate increases?
That’s what leaders of two of the largest mailing organizations are warning their members might lie ahead.
Blame the sudden rise of inflation, a Postal Regulatory Commission ruling last year and DeJoy’s vow to use all rate increase authority he has for the possibility that postal rates could jump as much as 18 percent to 20 percent in the 18 months between January 2021 and July 2022.
“Nothing like this has happened before,” said Stephen Kearney, executive director of the Alliance of Nonprofit Mailers.
Kearney has predicted that what lies immediately ahead in April is a rate increase application by the United States Postal Service of 6.5 percent to 8.6 percent on mail to be effective in July.
Add to this the likelihood that mailers could face yet another rate hike in January 2023 under a plan for twice-a-year increases that DeJoy created.
Michael Plunkett, president of the Association for Postal Commerce, is also worried over the impact on his members.
“The available rate authority has been determined and I agree with [Kearney]. We expect USPS to use all of it — irrespective of the necessity or the consequences.”
David Partenheimer, a Postal Service spokesman, declined to comment on the rate increase speculation.
In response to a plea from the Postal Service, a federal appeals court last year endorsed a rate case that allows the USPS to bust through the old Consumer Price Index that limited postal rate increases to no more than the rate of inflation.
Before Congress approved major postal relief legislation in March, Kearney said, “USPS told us they were planning to use the full authority.”
“They have not backed off that,” he added.
A former senior Postal Service executive, Kearney noted that the Postal Service’s presidentially appointed board of governors will have to approve any rate change before it goes to the Postal Regulatory Commission.
“It’s time for them to exercise wise leadership,” Kearney said.
The nine-member board still has five governors appointed by former President Donald Trump who have expressed loyalty to DeJoy.
The Trump-appointed governors also have voiced support for the postmaster general’s 10-year Delivering for America mail plan, which calls for rate increases to help erase the Postal Service’s deficits.
President Joe Biden, who has not been happy with DeJoy, has two more appointees to the board of governors who are awaiting Senate confirmation. But they might not be seated before April when the USPS is expected to announce the next rate increase.
Kearney has told the USPS that “they must use the option to defer at least some of the authorized rate increases.”
The agency does not need all the money that a boost in postage rates could bring, Kearney has said.
The USPS is sitting on $24 billion in cash, received $10 billion in COVID-19 pandemic relief from Congress and will benefit from the just-enacted Postal Service Reform Act of 2022, Kearney said in a March 11 alert to his members.
“USPS might decide on some moderation in use of the authority, if for no other reason that the agency will receive congressional blowback if it doesn’t,” Kearney also said in the March 11 alert.
Kearney has said the alliance’s members are already making plans for how to cope with sharply higher rates.
The Mercy Home for Boys and Girls in Chicago is an example he has cited.
This year the charity has budgeted about $3.5 million in postage for its direct mail campaign, said Lynn Storey, Mercy Home’s director of direct marketing.
“That’s equivalent to 19 percent of all the money we currently spend on direct care for our kids,” Storey said.
“If costs increase twice a year for the next 5 years as suggested and the PRC employs its full rate authority, Mercy Home will be spending 29 percent of its program budget on postage alone,” she said.
“The situation as it stands is a very real threat to the future of the nonprofit industry,” Storey said.
Kearney agrees and says it’s up to the board of governors.
“If they do use the full authority it will accelerate discussions and plans are already underway at nonprofits to reduce their use of USPS,” he said.
“The $24 billion they [USPS] have now is earning 1% or less which translates to a negative real return after inflation,” Kearney said. “Nonprofits can do much more good with their money than having it waste away in a government account.”
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