POSTAL: Expect rate hike by 2001

On Sept. 10, the U.S. Postal Service ended its fiscal year in the black for the fifth consecutive time; spurred by the past year’s $700 million cost reduction program, the agency posted a $200 million surplus. Nonetheless, the USPS has no plans to back off from its previous intention to raise postal rates in early 2001.

Several sources – both within the USPS and on the outside – believe that Postmaster General William Henderson wants to kick off the rate case as early as this month, and no later than January or February 2000. The agency “is prepared to start the rate case in November, although by the time the Board of Governors approves the filing, it looks like it will be January,” says one source. Assuming the rate case lasts its usual 10 months, it would run through next fall, culminating with the Postal Rate Commission (PRC) making a “recommended decision.” Within a few weeks after that, the postal Board of Governors (BOG) would make a final decision based on the PRC recommendation. Then, according to several sources in the Postal Service, the USPS would give mailers the rest of next year and early 2001 to prepare for the implementation of the new rates in the first quarter of 2001.

Although the USPS won’t comment on the size of the rate hike, the increase for catalogs could range from 4% to 10%, according to several sources outside the agency. “If the USPS bases the rate case on ’98 as its test year, the case would turn out less favorably for mailers than it would if based on fiscal year ’99,” says Gene Del Polito, president of Advertising Mail Marketing Association, due to 1998’s lower mail volume and higher costs.

But in light of the agency’s surplus, many feel that it shouldn’t be thinking of raising rates. “To even consider a postage hike at this time is moronic,” says Mike Muoio, president of Oshkosh, WI-based gifts cataloger Miles Kimball. “All rate increases do is hold down mail volume.”