Get Ready for Roller-Coaster Postage Rates
A court order Friday will probably mean higher postage costs than expected for publishers next year. But postage rates might actually decrease for a brief period this summer before rising again.
Welcome to what might become known as The Season of Roller Coast Postal Rates.
We knew going into 2015 that this would be a strange year for postal rates (See D. Eadward Tree's 2015 Postal & Paper Price Forecast), but Friday's court ruling could make it even weirder than the old crystal ball told us.
Postal rates for most mail -- including the periodicals, standard, and first classes -- usually undergo a predictable annual adjustment based on changes in the rate of inflation. But three events make 2015 different:
- May 31st price change: This year's inflation-based adjustment included a host of rate restructurings and rules revisions that had mailers a bit baffled at first. What has become increasingly clear is that the impact of the complex changes varied widely from publisher to publisher.
- Surcharge expiration: Any day now, the U.S. Postal Service is likely to announce that the 4.3% "exigent" surcharge will expire 45 days later.
- Court ruling: A federal appeals court muddied the water on Friday by ruling that the surcharge was valid but was insufficient to compensate the USPS for its losses from the recent recession.
Let's take a closer look at each of these developments:
May 31st Rate Change
The headlines said that prices of most types of business postage, including the periodicals class, rose 1.9% on May 31st. They were wrong. That was the average rate hike. The rate structure was rejiggered so greatly that some publications are reporting large increases, while others are actually paying less.
The hardest hit were lightweight publications that contain little or no advertising. That was one reason advertising-free Consumer Reports decided to shut down two newsletters, one of which faced a postal hike of nearly 14%, according to The Chronicle of Philanthropy.
Because the new rules and incentives make apples-to-apples comparisons of the old and new rates difficult, many publishers are still not sure exactly what the new rates will cost them.
The exigent surcharge, which was implemented in January 2014 to repair the financial damage the recent recession did to USPS, is supposed to expire when it has added $2.8 billion to the agency's coffers. To give the Postal Service and its customers time to revise their software and make other adjustments, postal officials must state at least 45 days in advance when they project that the surcharge should expire.
So don't stock up on Forever Stamps: Their value is slated to drop from 49 cents to 47 cents when the surcharge expires.
Mailers groups asked the appeals court to declare that the surcharge was invalid, while the Postal Service's appeal argued to the same court that the surcharge should be permanent.
After a September 2014 hearing, all parties hoped and expected the court to issue an "expedited" ruling by the end of last year. But instead the judges let the matter gestate for 9 months; their timing could make the ruling especially disruptive to postal operations and mail-dependent industries.
The court agreed with the Postal Regulatory Commission's creation of a temporary surcharge, but said the commission's "count once" method did not "recognize the cost to the Postal Service of lost mail volume beyond the year in which it first disappeared."
"For example, a worker laid off during the recession might cancel her cable subscription, and no longer pay her monthly bill by mail," the judges wrote. "The Commission would count that change as a loss of no more than twelve pieces of mail" even "if it takes her four years to find a new job and resubscribe."
The court sent the case back to the PRC, directing it to correct that error. As a result, mailers are likely to end up paying billions more in surcharges.
In a logical world, the PRC would figure out how much additional compensation the Postal Service is due and then just keep the current surcharge in place until that number is met. But nothing is quite so simple or logical in Washington.
PRC staff will need time to come up with a "count more than once" methodology that calculates the Postal Service's recession losses, and the PRC will have to translate that into a surcharge. And no doubt postal officials and mailers groups will want to have their say.
It seems almost certain that the Postal Service will have to provide 45-day notice of the surcharge's expiration before the PRC can develop and approve its approach.
From a sanity standpoint, the best we can hope for is that the PRC will have everything in place in time for the Postal Service to withdraw the expiration notice, so that the current surcharge is left in place until it reaches its new revenue goal.
But with the way Washington works (or doesn't work), there could well be a hiatus between expiration of the current surcharge and implementation of the new one. And there are no guarantees that the new surcharge will be "only" 4.3%.