Postal Legislation in a Post-Rates World

As anyone who follows postal policy and/or operations knows, postage rates are due to roll back some 4.3% on average on April 10, 2016.  The rollback will be caused by lifting the so-called "exigency surcharge" imposed to compensate the Postal Service for the large volume of mail lost due to the extraordinary circumstance of the Great Recession.  This removal is a milestone in at least two critical ways.

First, the Postal Service has never in its long, proud history done a general price cut.  Notwithstanding that this is one proven way to boost business when confronting major demand problems, and a means toward capturing market share, USPS has never taken the risk.  Now, that risk is being forced upon it.  This price reduction will constitute a test of the foregoing proposition, albeit not an unvarnished one:  looming in 2017 is a mandated review of the postal ratesetting system by the Postal Regulatory Commission.  Changes the Commission might accept and implement could more than offset this price cut in a year or less.  This will discourage some from building their mailed communications volume.

Second, and potentially gamechanging, is the impact of this price cut on legislation.  Notwithstanding what the Commission might do in 2017, it remains vital for Congress to act on statutorily-imposed obligations that threaten to keep the USPS balance sheet indefinitely in a very bright shade of red.  Leading the obligation pack is a requirement shared by no other entity of the federal government, and very few in state government or the private sector:  prefunding its retiree health premiums.  To date, that has on paper cost USPS $5.5 billion or more annually.  Unsurprisingly, a distressed Postal Service has defaulted on three, going on four, of these payments.

Attempts to date to find a broad compromise that might satisfy all stakeholders (mailers and suppliers, the postal unions and the Postal Service itself), as well as the public, have foundered on the rocks of postal rates.  A broad constituency within the mailing and supplying community opposes any extension or permanency of the exigency surcharge; this group strongly supports the currently scheduled removal of the surcharge.  Another set within the community is willing to concede some or all of the surcharge in an extension in order to reach a broad compromise.  Efforts to date to reconcile these two views have failed, and the prospects for legislation are therefore dim at this moment.

However, once the surcharge removal has occurred on April 10, a great many more mailers and suppliers are expected to switch to the no extension or permanency column.  Therein lie the seeds for progress.  Once the removal has occurred, the possibility for much greater unity among mailers and suppliers on other potential legislative solutions presents itself.  Call it a "post-rates" environment.

A post-rates bill might address many of the avenues for stabilizing USPS finances that do not involve adjusting rates.  Assuming some progress might be made with other stakeholders, fixing the prefunding obligation and addressing other more broadly acceptable changes could be the basis for a bill that might ease everyone's pain in 2017.  And by that, we include the impact on mailers of a large and compounding increase, the likely reduction of volume that would prompt, and therefore the negative impacts on postal workers and the system itself.

It is in everyone's interest to do a non-rates fix from a unified point of view, and leave rates to 2017 and the Commission.  The end result would be the broad compromise envisioned as necessary by virtually anyone who has taken the time to examine the situation.  Anything less should set alarm bills ringing for all concerned.