Marketers should not be surprised at being hit with sharp increases in postal rates if Congress, postal unions, and regulators cannot agree on a self-sustaining survival plan for the U.S. Postal Service (USPS). The heads-up was delivered to Direct Marketing Association (DMA) members yesterday by Postal Regulatory Commission general counsel Steven Sharfman.
“It could be coming within the next 12 to 18 months,” Sharfman warned. “It’s just that no one talks about it.”
The USPS finds itself in troubled waters, attempting to cut costs and right itself in the middle of a government breakdown. “It is losing a great deal of money, and most of the fat is cut,” Sharfman told attendees at the DMA in DC conference in Washington DC. “There’s little desire to spend money on Capitol Hill, so if they need to bail out the Postal Service, it’s possible mailers will be asked to pay more money.”
The USPS last year closed several processing centers and post offices and curtailed hours at rural post offices, carving $500 million to $600 million from its budget. Future cuts, however, could be in a holding pattern. Postmaster General Patrick Donahoe wants to continue shuttering facilities, but the USPS’s original directive from the PRC was to wait a year to evaluate the effect of the first round of closures before making more. And with a possible government shutdown looming, it’s possible that Donahoe’s plan to eliminate Saturday mail delivery could be temporarily shelved.
“Congress has been asked to consider keeping six-day delivery as part of a rider in an appropriations bill to keep the government open,” said Sharfman, who noted that six-day delivery was a condition in the 2012 bill.
It’s possible that Donahoe could still get his way on the issue, however, depending on how Congress interprets Saturday delivery. “They are still planning on delivering packages on Saturday, and some contend that fills the requirement,” says Jerry Cerasale, SVP of government affairs for DMA.
A precipitous rise in rates is likely to have a profound effect on marketers’ direct mail efforts. “If rates go up, our customers are going to have decisions to make,” said conference attendee Patrick Henderson, director of government affairs for Quad Graphics. “They have a set amount of money budgeted for both printing and postage. Something has to get cut, so they have to make decisions about how to modify their mailing. They also could also say, ‘The heck with this,’ and look into moving their budgets into other channels.”
Sharfman foresees little urgency on the part of Congress to address postal reform legislation barring a major crisis, such as the USPS being unable to meet its payroll. His assessment is that the USPS can continue operations with funds on hand for another 12 months before any drastic action is taken—such as an unplanned rate increase.
“It’s something that’s always a possibility,” says Cerasale.
