In a blow to mailers, Sam Winters, chairman of the U.S. Postal Service's Board of Governors, told the Postal Rate Commission last week that the board would reject the PRC's request for updated 1997 financial data from the USPS and ask the commissioners to continue using 1996 figures in the rate case.
Winters also urged the commission to decide on the case by May 10, as required by law.
According to mailing industry representatives, the new data would have resulted in a more accurate rate recommendation and would have possibly eliminated an increase. But the board's decision means the case will continue as planned, and a rate increase of 4.5 percent across the board will be implemented.
In his letter to PRC chairman Ed Gleiman, Winters also wrote that the governors think the “moderate adjustment proposed in [the board's] July 1997 filing [to the PRC] is appropriate. It will enable the postal service to continue to invest in the facilities, equipment and systems necessary to hold down costs and to continue the improvements in service quality that we have experienced in recent years.
“The 1-cent increase requested for the basic First-Class rate as part of the overall increase … is not only the smallest increase ever requested but also is only half of the inflation rate,” Winters wrote.
Gleiman said the PRC plans to “transmit a recommended decision within the 10-month period. We are going to do our job. Period. End of discussion.”
This decision comes soon after the PRC wrote to the board asking it to submit updated data. The PRC said a unique set of circumstances — including the incorporation of only one-quarter of the postal service's figures after 1996's reclassification overhaul and USPS' net operating surplus of $1.26 billion — warranted the request.
The PRC wrote that most of the fiscal 1996 figures may offer “an outcome that does not sufficiently reflect actual events, thereby causing many mailers to pay inappropriate rates.”
PRC legal adviser Steve Sharfman said, “As we started to project forward as part of the process of rate-making, we realized that the results weren't as accurate as we would like. As a result, we decided that rates developed using 1997 numbers after the reclassification had been in effect will be much more reflective of actual numbers and, as result, much fairer to mailers.”
Most mailers and mailing organizations said the PRC's request made a lot of sense and that it was a bold and courageous move.
“The PRC introduced a strong dose of reality into the process,” said Carey H. Baer, direct marketing consultant and chairman of the Advertising Mail Marketing Association, New York. “It's beginning to look like the postal service will make about $1 billion in 1998 without a rate increase. Plus, because of reclassification, the cost information is significantly out of date.”
Baer said the letter let the board take another look at the costing data and say, “Look, we are doing extremely well. Reclassification is working, we are getting the efficiencies that we expected, overall volume is remaining strong, and we want to share this good fortune with the mailing community and the postal service.”
Neal Denton, executive director of the Alliance for Nonprofit Mailers, Washington, said the board “missed a golden opportunity to demonstrate to all of us and their customers that they can be trusted with rate case flexibility. I imagine it was management — as opposed to the governors — who gave them this ill-advised response.”
Although an increase will take place, mailers can be hopeful that the rate case still could be delayed. Winters wrote that if the governors “decide that recommended rates should be put into effect, the board's discretion over the timing of the rate implementation provides an additional means to provide for the best transition to new rates.”
This is good news for the Direct Marketing Association, which has asked the PRC to urge the postal service to postpone any increase this year.
“The [governors] said that they have the authority to delay [rate implementation], and they clearly have not ruled out delaying their rates, which is basically the DMA's position,” said Jerry Cerasale, the DMA's senior vice president of government affairs. “We don't think rates should be implemented anytime before January 1999 because of the current financial status of the postal service.”
