Postal Migraine

Mailers may be happy about postal reform. But it hasn't relieved all their worries.

They're concerned, for example, about the 2009 rate hike.

Yes, we know — the Postal Accountability and Enhancement Act (PAEA) requires predictable annual increases tied to the Consumer Price Index. Everyone wanted that, right?

But inflation is rising, and next year's hit could exceed the 2.9% doled out to mailers this year, postal watchers say.

Worse yet, the U.S. Postal Service is having financial problems (isn't everyone?). In August it reported a $1.1 billion loss for the third quarter. And it could lose almost double that for the year, according to remarks attributed to Postmaster General Jack Potter.

As a result you can expect the USPS to raise rates in 2009 “to the maximum allowed under the new law,” says Bob McLean, executive director of the Mailers Council. “When you're losing a couple of billion dollars a year, that's what you can expect.”

How high will the increase be? It could reach 4% or 5%. The postal service also could file “an exigent rate case as permitted under PAEA,” adds Tony Conway, executive director of the Alliance of Nonprofit Mailers.

Why would it do that? Because the annual loss could total $3 billion next year. After all, standard and first class mail fell by 5.5% apiece during this year's second quarter, and that falloff could accelerate as the economy gets worse.

“And there's no guarantee that mail levels will rise after bad times are over,” Conway warns.

Another factor is the $5 billion the USPS has to pay this year to cover employee retirement health insurance.

“Expecting $5 billion out of a postal system that's losing mail volume and revenue and facing a very rotten economy puts a hell of a strain on it,” says Gene Del Polito, president of the Association for Postal Commerce.

So how does the USPS' future look?

In December the Postal Regulatory Commission will report to Congress on universal postal service and the mail monopoly.

“This is huge,” McLean says, “because the report essentially will define what the postal service is supposed to be doing and what it's not supposed to be doing.”

He continues: “Universal service can be interpreted in a number of ways. Does it mean that every American gets mail? Probably everybody would agree on that. Does it mean we get mail six days a week? Or is it five? Or is it fewer than five?”

But not everyone is worried.

“I don't expect anything earthshaking to come out of that report,” Conway says.