Postal Rate Hike May Be Lower Than Expected

For months mailers and pundits have whispered that a double-digit postal rate increase was all but inevitable in 2006. But new rumors put the increase at something like 6% for next year, followed by a 4%-5% hike in 2007.

Jerry Cerasale, the Direct Marketing Association’s senior vice president for government affairs, is among those who believe that a increase of 6% on average is more likely than the previously rumored 18%. Better-than-expected revenue during the past few quarters and results from an ongoing series of expense reductions have left the USPS in solid fiscal standing. In fact, Cerasale says, the U.S. Postal Service likely wouldn’t need to raise prices at all were it not for a $3.2 billion fixed escrow funding requirement: “Because there is no money available for civil service organizations to absorb such a debt, the money has to come from somewhere.”

A 6% rate hike doesn’t mean that the cost of all mail services would increase that amount, however. At times, standard mail rates have been hit with higher rate increases than first class. Some estimate that while the price of the first class stamp might go up by just two cents, or 5.4%, advertising mail rates could increase by 12%.

The Postal Service has refused to comment on its upcoming rate case, which is likely to be unveiled this spring. In a statement last week, the DMA cautioned, “It is important to emphasize that the most recent speculation is just that: speculation. The ultimate outcome is intertwined with postal reform legislative proposals, including the disposition of the existing escrow provision and questions of how quickly the Postal Service and, in turn, postal rate payers will be required to cover long-term, unfunded liabilities.”

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