Donahoe Says Forget Exigent Case; It’s CPI

Nov 15, 2011 12:27 AM  By

Despite the U.S. Postal Service’s decision to pursue an exigent rate increase, Postmaster General Patrick Donahoe said during a Nov. 10 webinar that the 2012 rate increase will be according to the Consumer Price Index (CPI).

“Our interest is CPI rates because they provide for a stable Postal Service,” he said during the webinar. “That is critical. The key for this industry is affordability and predictability. And that (an exigent increase) will hurt everybody. CPI gets us to where we need to be.”
Under the Postal Accountability and Enhancement Act of 2006 (PAEA), postal rate hikes are capped at inflation as measured by the Consumer Price Index (CPI). This would mean rate hikes would be capped at an estimated 0.6%. The USPS was seeking an average price increase of 5.6% in the exigent rate case. (Standard Mail flats would have gone up 5.1% if the rate case passed.)

During the webinar, Donahoe also touched on the mandated annual $5.5 billion pre-payments toward retiree health benefits and described not only a resolution, but an elimination of this issue is forthcoming.

“We’ve been saddled with this retiree health benefit issue,” Donahoe said. “I’m going to get that thing resolved one way or another. The Sword of Damocles is hanging over our heads and the entire industry. Our goal is to resolve the pre-funding and that means eliminate it. If we don’t resolve that, the Postal Service won’t be financially healthy going forward.”

Donahoe cited a revealing statistic that has crippled First-Class Mail. In 2000, about 5% of Americans paid their bills online; that figure now stands at 60%.

Besides ridding the USPS of the annual prepayments for retiree health benefits, Donahoe hopes the Postal Service can create a new health insurance plan for employees at the start of fiscal year 2013 at a cost of about $1.3 billion.

Donahoe also touched on the possible savings of moving from door-to-door delivery to curbside delivery. In a July report, the USPS Office of Inspector General said the USPS could save $4.5 billion annually by doing this.