Higher Rates, Slower Service Highlights USPS 10-Year Plan

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The U.S. Postal Service plays an integral part in serving the needs of citizens throughout the nation, delivering letters, newspapers, marketing pieces and packages to individuals and businesses across the country. However, large decreases in mail volume along with a substantial increase in operational costs have led USPS to lose $87 billion over the last 14 years.

On March 22, Postmaster General Louis DeJoy unveiled his new ten-year strategic plan for the Postal Service, “Delivering for America,” to tackle the agency’s growing fiscal crisis and position itself for an increased market share in the package business. The plan will impact all users of the postal system, with clear and potentially serious implications for newspaper publishers that rely on the postal system for newspaper delivery.

The 58-page plan outlines strategies to be imposed beginning later this year that will save USPS from a projected $160 billion loss over the next decade. The plan focuses on several initiatives such as reducing air transportation in favor of trucks, shortening post office hours, and integrating the postal retiree health benefits system into Medicare. Meanwhile, postage rates will increase for most mail products and delivery times will lengthen for mail services, including going from a three-day to a five-day service standard for First-Class mail.

Congressional Democrats have expressed outrage over the Postal Service’s plan – specifically in response to the idea of raising rates while slowing down service. Rep. Gerry Connolly (D-VA) declared that Postmaster General DeJoy “has put forth a draconian plan that guarantees the death spiral of the United States Postal Service,” and Rep. Stephen Lynch stated the plan “runs contrary to the Postal Service’s mission to provide prompt, reliable, and efficient mail services to the American people.”

The Postal Service’s ability to raise postal rates—outside of the annual increases usually implemented in January – became available in November 2020 when the Postal Regulatory Commission (PRC) overturned a Congressionally-mandated inflationary price cap for monopoly mail like First Class, Periodicals and Marketing Mail. In 2006, the “Postal Accountability and Enhancement Act” (PAEA) capped price increases on postal rates to not exceed the Consumer Price Index (CPI). Over the last 14 years, the CPI has averaged roughly 2 percent. However, the PRC deemed the inflationary cap an obstacle to the financial stability of the Postal Service, which was one of many factors that the PRC was required to consider during a mandated review of the nation’s postal rate-setting system.

The repeal of the rate cap gives USPS greater pricing flexibility that could result in newspapers throughout the country seeing a rate increase at 7.5 percent or higher for the delivery of newspapers and newspapers’ Total Market Coverage products – ad inserts to non-subscribers. An increase of this magnitude could force many newspapers out of the mail, and even cause some small market and rural newspapers to shut down.

On April 13, the Alliance, along with six other mailer organizations, filed a brief challenging the PRC’s decision to eliminate the CPI-based price that has kept postal rates stable and predictable. The brief argues that the PAEA does not support the Commission’s decision to remove the cap and the agency acted arbitrarily by basing its decision on the Postal Service’s condition in December 2017, rather than its condition today. COVID-19 has caused an enormous surge in package volume and revenue for USPS, but the PRC did not consider this surge or that more mail volume will leave the system due to the pandemic’s impact on business mailers. The PRC also didn’t consider the $10 billion appropriation that Congress recently provided USPS through the CARES Act. According to a recent analysis by the Greeting Card Association, the Postal Service is operating in the black with $52 million in net income for the Fiscal Year 2021 (October-February). USPS had projected that it would experience a net income loss of $2.4 billion over the same period.

As the USPS financial crisis and the debate over removing the cap on postal rates intensify, the subject of postal revenue and costs is headed to Congress, where legislative intervention surrounding the Postal Service’s finances will arise.

Congress is set to step in to improve the financial condition of the Postal Service, which mailers hope will ease pressure on USPS and reduce the need to squeeze revenues from monopoly mailers who may seek other alternatives if their postage costs go up. Representative Carolyn Maloney (D-NY), chairwoman of the House Committee on Oversight and Reform, will soon introduce legislation that bolsters the USPS financial position by integrating postal retiree health benefits into Medicare and by repealing a congressional mandate for USPS to pre-fund its retiree healthcare costs. These provisions would save the Postal Service an estimated $57 billion in liabilities over the next decade. 

On April 21, the Alliance sent a letter to Chairwoman Maloney, Ranking Republican Jim Comer, and other members of the Committee encouraging the committee to include a provision that would require the PRC to conduct another time-limited review of the rate-setting system, in which the effects of the pandemic are examined. The PRC’s decision to remove the cap was based on data from 2017. Re-examining the rate-setting system with more recent data would provide a more accurate analysis of the Postal Service’s finances. Furthermore, another review would demonstrate how the USPS is in a stronger financial and operational position than when the PRC first issued the rate proposal, and thus show how the PRC’s decision to remove the cap is unnecessary.

Citizens rely on affordable and dependable postal services and, while “Delivering for America” outlines many promising changes, increasing costs and lengthening delivery windows will hurt many individuals and businesses. It is consequently imperative that Congress steps in to prevent the implementation of this harmful plan so that the USPS can ensure reliable, equitable, and accessible services for many years to come.

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