What the USPS 10-year plan may have to say about future rate increases

What the USPS 10-year plan may have to say about future rate increases

The mailers were probably disappointed that the Postal Service’s new 10-year plan released yesterday, “Delivering for America,” did not reveal how big of a rate increase the Postal Service intends to make using the new authority it was granted by the Postal Regulatory Commission. While they wait in suspense, here’s a guess: 3.6 percent.

We already know that the calculations the Postal Service submitted to the PRC in February indicate the hike could be as large as 5.56 percent (on top of the CPI increase), but the new system allows some of the rate authority to be banked for future years, so the increase could be smaller. And that is just what the following analysis suggests.

This analysis is based on two tables and a couple of comments that appear in the 10-year plan. The tables show revenue and expenses under two scenarios, a base case using the status quo and an alternative that uses the revenue and cost savings under the Delivering for America plan. The tables contain numbers for projected volumes and revenues over the next ten years that can be used to estimate what the Postal Service is planning for future price increases under the new rate authority.

The Base Case assumes total mail and package volumes will fall to 82.6 billion by 2030 (Figure 28, p. 46), with 6.6 billion pieces of that in packages (p. 42). Market Dominant volumes in FY 2030 are thus projected to be around 76 billion pieces. The Base Case table also provides Market Dominant revenues for each year, with revenues in 2030 falling to $32.2 billion.

The Base Case assumes rate increases at the current CPI cap, which has been about 2 percent over the past few years. Using these assumptions, one can calculate what the Postal Service is projecting for annual volumes for Market Dominant products.

The “Delivering for America” Case uses the new rate authority to make its calculations (Figure 35, p. 51). It projects that revenues in 2030 will fall to $37.2 billion (as opposed to $32.2 billion in the Base Case).

If one assumes volumes over the next ten years turn out to be the same as in the base case (which is optimistic, since a rate increase may negatively impact volumes), one can calculate the average revenue per piece and the annual rate increases under both scenarios.

Here’s a table pulling these projections and estimates together. It uses the annual revenues as shown for both scenarios in the 10-year plan’s tables, the volume for FY20 as stated in the Revenue, Piece and Weight Report and for FY2030 as indicated by the 10-year plan, and a CPI of 2 percent. The other calculations are derived from these numbers.

The Postal Service appears to expect annual volume declines of about 4.5 percent for Market Dominant products —  significantly more than the 3 percent declines of the past decade, but within reason.

The bottom line shows that under the Base Case over the next ten years revenues will total about 361.6 billion compared to 392.5 billion under the “Delivering for America” Case — a difference of about $31 billion.

A table in the 10-year plan (Figure 29, p. 47) says the revenue impact of implementing the new rate authority will range from $35 billion to $52 billion. It’s not clear how the Postal Service came up with these larger estimates, but they may be based on a lower rate of volume decline over the next ten years. If the declines returned to an average of 3 percent annually (as in the past decade) and the rate increases were the same as in the above table, the additional revenue generated by the plus-CPI increases would be about $47 billion.

In any case, it appears that $30 billion is a conservative estimate for what the Postal Services sees the new rate authority bringing in.  Increasing Market Dominant revenues by this sum at the same time volumes are declining by about 4.6 percent a year would require rate increases averaging around 1.5 percent above a CPI of 2 percent.

Here’s how things might play out for the remainder of FY 2021 and for FY 2022.  Sometime over the next couple of weeks, the Postal Service announces a 3.6 percent rate increase, leaving 0.9 percent of the density-based rate authority (4.5 percent) banked for future use. The proposed increase needs to be approved by the Board of Governors and the PRC, and then there’s a 90 day notification period.

Let’s say the increase goes into effect as of August 1, 2021. During August and September (the last months of FY 2021), it would yield about $220 million in additional revenues. That’s just about the difference between the projections for FY 2021 in the Base Case ($39.4 billion ) and the “Delivering for America” case ($39.6 billion).

Let’s assume this increase remains in effect until January 2022, at which time the Postal Service uses some of its banked rate authority to add another 0.6 percent to the regular CPI increase of 2 percent. For the remainder of FY 2022, the additional rate authority would thus be 4.2 percent. For FY 2022, this would yield about $1.6 billion in additional revenues — the difference between the two scenarios ($38.9 and $40.5 billion).

This is all just speculation, of course.  The Postal Service should be announcing the new rate increase sometime soon, and the guessing game will be over.

This week marks the 51st anniversary of the largest wildcat strike in U.S. labor history: The Great Postal Strike of 1970

This week marks the 51st anniversary of the largest wildcat strike in U.S. labor history: The Great Postal Strike of 1970

March 18th marks the day fifty-one years ago when postal workers walked off the job in New York City in what soon became the largest wildcat strike in U.S. labor history. Last March we posted this article by postal historian Phil Rubio, author of Undelivered: From the Great Postal Strike of 1970 to the Manufactured Crisis of the U.S. Postal Service. The article is as good as ever, so we’re posting it again this year.


Photo by Natalie M. Anderson

For eight days in March 1970, over 200,000 postal workers staged an illegal “wildcat” strike — the largest in United States history — for better wages and working conditions. Picket lines started in New York and spread across the country like wildfire. Strikers defied court injunctions, threats of termination, and their own union leaders.

In the negotiated aftermath, the U.S. Post Office became the U.S. Postal Service, and postal workers received full collective bargaining rights and wage increases, all the while continuing to fight for greater democracy within their unions. Using archives, periodicals, and oral histories, Philip Rubio shows how this strike, born of frustration and rising expectations and emerging as part of a larger 1960s-1970s global rank-and-file labor upsurge, transformed the post office and postal unions.

In this post, Dr. Rubio writes about the importance of commemorating the nationwide postal wildcat strike on the day of its fiftieth anniversary. You can also read his 2015 blog post, which includes a more detailed account of the strike, here.

 

The Great Postal Wildcat Strike Jubilee

“Wildcats” are strikes not authorized by the unions, but this strike was also illegal, as a 1912 law bars federal government workers from striking.  Nevertheless, for eight days over 200,000 workers struck the U.S. Post Office Department across the country in a dozen states and hundreds of post offices.  They struck for a living wage and job dignity.  The strike forced passage of the 1970 Postal Reorganization Act (PRA) that transformed the post office into a self-supporting government/corporate hybrid called the U.S. Postal Service (USPS) in 1971.  President Richard Nixon and Congress ended further strike threats by extending pay raises and full collective bargaining rights to postal workers—the only federal employees who enjoy those rights to this day.  Their strike also initiated a process of greater democratization of the National Association of Letter Carriers (NALC), and the new American Postal Workers Union (APWU, product of five unions merging in 1971).

Unfortunately, our society has largely forgotten the 1970 postal strike.  What historians choose to research and publish matters, and amazingly, this strike has so far gained little attention from labor historians.  It has fallen to strike veterans, the postal unions, and labor activists to keep that memory alive and mark that date in anticipation this year of the strike’s “jubilee” (also known as the fiftieth anniversary).

Remembering how that landmark rank-and-file rebellion happened is no mere exercise in nostalgia.  Not only can it refresh our collective memory and help us revise a fuller picture of that period of American labor history, but it also teaches us the possibilities as well as the limitations of labor action today.

I devoted a chapter to the strike in my previous book for UNC Press in 2010—There’s Always Work at the Post Office: African American Postal Workers and the Fight for Jobs, Justice, and Equality.  Even then, I thought the strike’s history needed a fuller telling.  It is also a story that I felt needed connecting to the 2009 postal financial crisis, which I argue in my new book that Congress and the George W. Bush administration politically manufactured—although its effects have been very real. Read more.

“Save the Post Office” launches new Service Performance Dashboard

"Save the Post Office" launches new Service Performance Dashboard

With all the attention to delivery delays over the past several months and the Postmaster General’s plans to relax delivery standards — as well as calls for more transparency about postal operations — this seems like a good time to launch a Service Performance Dashboard.

The Postal Service itself publishes a useful service performance dashboard, but it shows only quarterly performance scores, and it just goes back a year. The Postal Service has also started a second dashboard that uses its new organizational structure of divisions and regions, but at this point it only shows FY2021 Q1.  For more detailed reports, you need to dig around in the website of the Postal Regulatory Commission, and the reports there usually need to be downloaded in order to see them. Some of the PRC’s reports, like those requested recently from the USPS as part of the annual compliance review (discussed in this post), are almost impossible to find if don’t know where to look.

The “Save the Post Office” Dashboard provides easy access to the recent performance reports shared by the Postal Service not only with the PRC but also with Congress, the courts (as part of litigation involving mail delays), and FOIA requests. The Dashboard has quick links to the reports, many of which are weekly rather than quarterly, and we’ve posted them on Google Drive so you don’t have to download to view them. The Dashboard also includes some charts showing trend lines over the past couple of years. In addition, the Dashboard page has a brief explanation of what “service standards,” “service performance” and “service targets” are all about.

There’s a link to the Service Performance Dashboard on the top menu, and a link is here.

The Postal Service wants to slow down the mail, Congress says not so fast

The Postal Service wants to slow down the mail, Congress says not so fast

By Steve Hutkins

The House Committee on Oversight and Reform has just posted a discussion draft of postal reform legislation in advance of Wednesday’s hearing with Postmaster General DeJoy and the Chairman of the Board of Governors, Ron Bloom. The draft has three main sections — one about creating a Postal Service health benefits program that includes Medicare, one on reforming the Retiree Health Benefit Fund obligation, and a third on service standards for on-time delivery.

The section on service standards comes first, and it is obviously a response to all the problems with poor service over the past seven months. It includes more stringent service performance reporting than currently shared with the Postal Regulatory Commission and the public, a tougher line on what happens when the Postal Service fails to meet the standards, and changes to the PRC’s advisory opinion process for reviewing a change in standards (including a report to Congress). The draft legislation concludes this section as follows:

“The United States Postal Service may not revise the service standards for market-dominant products in effect on the day before the date of enactment of this Act in a manner that lengthens delivery times before the date on which the report required by subsection (c) is submitted to Congress.”

The Committee’s meeting on Wednesday is clearly going to address the past problems with service performance and what to do about them moving forward. (There’s more about the delays here.) It’s also clear that the Committee is aware of the Postmaster General’s plans to change service standards, as was reported recently in a great scoop by the Washington Post, and the Committee wants to head the PMG off at the pass.

Aside from the few clues in the Post’s article, we haven’t heard anything about what these changes in service standards might be. Perhaps the Postmaster General will reveal more in Wednesday’s hearing. While we wait, let’s speculate.  Read More

Back to the Future: The USPS, PRC and Mailers revisit the meaning of PAEA

Back to the Future: The USPS, PRC and Mailers revisit the meaning of PAEA

By Steve Hutkins

Earlier this week a group of mailers’ associations continued their effort to convince the DC Circuit Court to stop the Postal Service from increasing rates under the new authority it was recently granted by the Postal Regulatory Commission.

The Postmaster General has told the mailers that another rate increase, based on the new authority, is “imminent.” The exact size of the increase has not yet been revealed, but the Postal Service’s calculations indicate it could be as large as 5.56 percent. Market Dominant revenues in 2020 were about $42 billion, so a full increase could mean $2.3 billion in additional costs for mailers.

In December, the Mailers filed appeals on the PRC’s order approving the new system in the DC Circuit. On January 27, 2021, they proceeded to file a request for a stay seeking to prevent the order from being implemented while the court heard the appeal. On February 8, the Commission filed its brief opposing the request for a stay, and the Postal Service filed its own opposition as well. On Tuesday of this week (February 16), the Mailers filed their reply. (For more background about the case, see this previous post and this one too.)

The issues in the case are numerous and complex, but the crux of the matter appears to be something like this:

The current rate system was established in 2006 under the Postal Accountability and Enhancement Act. The key passage (39 U.S.C. §3622) says, “The Postal Regulatory Commission shall, within 18 months after the date of enactment of this section, by regulation establish (and may from time to time thereafter by regulation revise) a modern system for regulating rates and classes for market-dominant products.”

Section 3622(d)(1) goes on to say, “The system for regulating rates and classes for market-dominant products shall — (A) include an annual limitation on the percentage changes in rates to be set by the Postal Regulatory Commission that will be equal to the change in the Consumer Price Index.”

Section (d)(3) then says that ten years after the enactment of PAEA, the Commission will review the system and determine if it’s fulfilling the objective enumerated in the statute. If it’s not, the Commission shall “make such modification or adopt such alternative system for regulating rates and classes for market-dominant products as necessary to achieve the objectives.”

In other words, PAEA directed the Commission to create a modern rate system and said that the system needed to include the CPI rate cap. PAEA also said the Commission should review the system after ten years and possibly change it or adopt a new one.

The Mailers argue that section (d)(1) means that any new system developed by the Commission must continue to include the price cap. The Commission and the Postal Service argue that section (d)(1) means that the price cap had to be a component of the initial rate system in 2007, but it did not need to be a part of the alternative system developed ten years later.

The statute is arguably ambiguous on this issue, and the opposing briefs develop various reasons why one interpretation is better than the other.

In most cases of major legislation like PAEA, there’s a report by the Congressional committee responsible for crafting the legislation, and one could turn to it for help in determining legislative intent. During an earlier version of PAEA, back in 2004, there was such a Senate Committee Report, but no report about the final version has been published. The Senate staff probably wrote such a report, but for some reason it has never been released. If it were available now, it might address what Congress intended. And if if were formally approved by the Senate Committee on Governmental Affairs, the report could also become significant in the mailers’ appeal.

As it is, a lot of weight falls on remarks made to the Senate by Susan Collins, one of the architects of PAEA, on December 8, 2006, the day before PAEA would be passed by the Senate.  Read More

The 2020 Mail Delays: Stats & Charts

The 2020 Mail Delays: Stats & Charts

By Steve Hutkins

The Postal Regulatory Commission’s annual compliance review ordinarily focuses on postal rates, but this year, due to widespread reports of mail delays over the past several months, the Commission has been scrutinizing on-time service performance. Over the past few weeks, the Commission and its newly appointed Chairman have filed a number of information requests seeking data from the Postal Service about the scope and causes of these delays.

According to the service performance data provided by the Postal Service, the delays began at a modest level in March 2020 when the pandemic started, deepened noticeably in July when the Postal Service implemented cost-cutting operational changes, improved modestly in the fall, and then got much worse in December with the holiday mail crush.

As for the causes of the delays, the Postal Service has blamed COVID — the surge in packages, employee availability problems, more dependence on surface transportation because of a lack of available space on aircraft, and so on. It has also cited bad weather, the need to prioritize election mail and other factors. The Postmaster General has acknowledged that operational changes made in July caused delays, but the Postal Service says the system adjusted to these changes in a matter of weeks and they were not a factor in the delays that followed.

The various causes are difficult to isolate and quantify, particularly because they interact and compound each other. So the reports submitted to the Commission do not provide a simple explanation of what’s behind the poor service, but they can shed some light on the question and perhaps suggest paths toward a solution.  Read More

The 2020 Mail Delays: Stats & Charts

The 2020 Mail Delays: Stats & Charts

By Steve Hutkins

The Postal Regulatory Commission’s annual compliance review ordinarily focuses on postal rates, but this year, due to widespread reports of mail delays over the past several months, the Commission has been scrutinizing on-time service performance. Over the past few weeks, the Commission and its newly appointed Chairman have filed a number of information requests seeking data from the Postal Service about the scope and causes of these delays.  Read More

Communities and Postal Workers United (CPWU) Winter 2021 Newsletter

Communities and Postal Workers United (CPWU) Winter 2021 Newsletter

The CPWU Winter 2021 Newsletter has articles about why Postmaster General DeJoy should be dumped, the possible implications of the Senate going Democrat, and the contrast between DeJoy’s vision and what a public vision of the Postal Service looks like. Read the newsletter here.