Business Costs & Regulation

No Big Postal Rate Hike -- for Now

Dramatic changes -- like whether to drop Saturday delivery -- are now in Congress' hands.

Businesses can figure on a tiny bump-up in postage rates next year -- no more than 2% for invoices, direct mail ads, magazines, catalogs, etc., and a 1¢ hike in first-class stamps to 45¢ -- the most the U.S. Postal Service (USPS) could impose unilaterally. Look for the increases to take effect by next May.

Firms dodged a mammoth postage rate hike of nearly 6% on average next year and up to a 20% jump for catalogs, oversized envelopes and magazines that the USPS sought on an emergency basis, citing steep declines in revenues due to the recession.

A business coalition turned the tide. It convinced the independent Postal Regulatory Commission that mail volumes are picking up along with the recovery. USPS efforts to cut labor costs will reduce the expected red ink next year to manageable levels.

Still, the Postal Service’s operations and rate outlook is up in the air. Mail volumes have stopped their freefall for now, holding at about 150 billion pieces annually, but they will erode further as electronic commerce siphons off billing notices, promotions and advertising.

Look for Congress to grapple with ideas to remake the USPS, just four years after a major overhaul was adopted to give the semi-public postal company more flexibility in operations and pricing. One likely option: An elimination or cut in the USPS’ $5-billion or so annual payment to pre-fund retirees’ health care benefits. Congress mandated the payment as part of reform legislation enacted in 2006. The money, sent to Treasury, is counted as federal income to reduce the deficit. USPS is the only agency to have this requirement.

Lawmakers will have to decide the fate of Saturday mail delivery. It was slated to end next year as a big cost saving measure, but Congress put a hold on that idea until January 2012. Also under consideration: a long-term plan to reduce mail delivery to just three days, closing hundreds of post offices and turning over all parcel and overnight delivery services to private carriers.

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