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We as mailers need a viable and effective postal service.

The exigent postal rate increase proposed back in July was denied by the Postal Regulatory Commission (PRC) on September 30. The news is a great relief to all mailers, especially periodical and catalog mailers. The proposed rate increase had many mailers scrambling to figure out how to absorb the latest financial burden in a sluggish economy.

 The USPS rate increases over the last three years were tied to the Consumer Price Index. This was one result of Postal Reform Act passed at the end of 2006. Since the CPI has only increased 0.6%, the USPS requested an exigent rate increase to help offset a looming financial crisis. The USPS is projecting nearly $240 billion in losses over the next decade. The denial is a serious blow to the USPS financial plan.

 The USPS has proposed a number of measures to meet the projected losses. Internal cost cutting focused on reducing the number of employees, and putting that number more in line with declining mail volume. Unfortunately, mail volume declined much quicker than they could reduce the workforce. USPS was able to cut $6 billion in costs, but it didn’t make up for the $7.7 billion in losses. The USPS is also looking to consolidate facilities, go to a 5 day a week delivery schedule, relief from (and refund of?) the overpayment to the employee pension plan and no longer be required to prefund employee heath benefits. The latter two require congressional approval and the first has been opposed by individual congress people not wanting to lose offices in their district. The USPS will now face a steeper uphill battle counteracting the proposed shortfall.

 Many believe (which apparently includes the PRC) that the USPS financial circumstances were at least partially of their own making. The PRC cited this saying they believed these financial difficulties would have happened regardless of the economy. The PRC did not feel the USPS met the criteria for an exigent increase. All of the following conditions must be met to approve an exigent increase request:

      1. Due to either extraordinary or exceptional circumstances;

      2. Reasonable, equitable, and necessary under best  practices of honest, efficient, and economical management; and,

      3. Necessary to maintain and continue the development of postal services of the kind and quality adapted to the needs of the United States. 

  New and more rigid regulations combined with the internet and the economic downturn helped to drive mail volume down. The new rate structure for periodicals three years ago (which added things like container charges), the huge increase in rates for standard flats a few years ago and more recently the change in preparation requirements for letter sized booklet mailers (coming soon for self mailers), the stricter droop test (poorly timed with many publications a fraction of the size they were years ago) have all combined to make mailing less attractive for mailers. Those that depend on mailing are forced to reduce the quantity or charge customers more to meet the increased processing costs.

  The latest proposal would have heaped a 5% increase on catalog mailers, an 8% increase on periodicals and a 23% increase on standard parcel mailers. This would have resulted in more job losses and possibly put some mailers out of business. The poor timing of this increase was sure to have had a serious if not disastrous effect on businesses.

 Hopefully this will force the USPS (and Congress) to take a hard look at their operations. The likely result will be conditions that will adversely affect the mailer and the USPS. Despite how we feel about USPS handling of these circumstances, we as mailers need a viable and effective postal service. 

-Guest Post by Bill Carter, Distribution Manager at J.B. Kenehan

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October 1, 2010 - Posted by | Mailing, Publishing | , , , , , , , , , , , , , , ,

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