UPDATE 8/28/18: The President has announced his intention to nominate the following individuals to the USPS Board of Governors: Ron A. Bloom (for the remainder of a seven-year term expiring December 8, 2020) and Roman Martinez IV (for the remainder of a seven-year term expiring December 8, 2024). 
UPDATE: 8/29/18: The Senate has confirmed the President’s nominees, Robert M. “Mike” Duncan and David C. Williams, to serve on the USPS Board of Governors. This means that the USPS will be able to vote on approvals for rate changes and other changes. 

Randy Weiler, SPC’s Director of Postal Affairs and Logistics, is here to help you navigate the labyrinth of the USPS. There are many significant issues facing the USPS at the moment which complicate the future of pricing and the organization’s direction as a whole. USPS leaders have publicly stated that they are moving forward in preparation for a Consumer Price Index (CPI) postal rate increase, but the state of the postal Board of Governors complicates what typically would be a straightforward process. Also, the Task Force report requested by President Trump was due this month, and the Postal Regulatory Commission’s 10-year review will be arriving at the same time. Finally, the Postal Service Reform Act of 2018 has been introduced in Congress. All of these factors add up to a tangle of questions that Randy will answer in this Special Edition bulletin.

Every month, Randy fields your burning questions about mail and postal affairs in a Q&A format. You can email him at askrandy@specialtyprintcomm.com or post a question via Facebook or Twitter using the hashtag #AskRandyUSPS. We post the questions and his answers each month both here on the SPC blog and on social media. To see a full list of questions that Randy has answered, check the Ask Randy Index.

1) What is the role of the USPS Board of Governors? What is the current status of the Board of Governors positions being filled?

The USPS Board of Governors consists of 9 Presidential Nominated Governors, the Postmaster General, and the Deputy Postmaster General. The Board directs and controls USPS expenditures, review its practices, conducts long-range planning, and sets policies on all postal matters. Currently, the Postmaster General and the Deputy Postmaster General are the only active members of the Board of Governors.

The Senate Homeland Security and Government Affairs Committee approved the nominations of David C. Williams and Robert M. Duncan to be Postal Service Governors. A third nominated governor, Calvin R. Tucker, withdrew his nomination. At this time, no floor vote has been scheduled.

If the two nominees are approved by the Senate, the USPS could consider seeking their approval to file rate changes and promotions with the Postal Regulatory Commission (PRC).

2) President Trump ordered a Task Force on the USPS to prepare a report on proposed structural changes to the Postal Service, which was due August 9th. What is expected to come from this report?

Based on the below Executive Order, one would reasonably expect recommendations for administrative and legislative reform to the USPS, which may include the privatization of the Postal Service.

The Task Force reportedly has completed its findings and has presented them to the White House for review. The White House likely will not release the findings for at least a couple of weeks.

Sec. 3. Evaluation. The Task Force shall conduct a thorough evaluation of the operations and finances of the USPS, including:

(i) the expansion and pricing of the package delivery market and the USPS’s role in competitive markets;
(ii) the decline in mail volume and its implications for USPS self-financing and the USPS monopoly over letter delivery and mailboxes;
(iii) the definition of the “universal service obligation” in light of changes in technology, e-commerce, marketing practices, and customer needs;
(iv) the USPS role in the U.S. economy and in rural areas, communities, and small towns; and
(v) the state of the USPS business model, workforce, operations, costs, and pricing.

Sec. 4. Recommendations for Reform. The Task Force shall develop recommendations for administrative and legislative reforms to the United States postal system.

(a) Such recommendations shall promote our Nation’s commerce and communication without shifting additional costs to taxpayers. The recommendations shall be developed in a manner that is consistent with the proposed plan to reorganize the executive branch as required by Executive Order 13781 of March 13, 2017.
(b) Such recommendations shall also consider the views of the USPS workforce; commercial, non-profit, and residential users of the USPS services; and competitors in the marketplace.

3) What is the expected outcome of the Postal Regulatory Commission (PRC) 10 year review?

The Postal Regulatory Commission completed a 10 year review of USPS pricing in December 2017 and recommended significant price increases. This included continuing the current annual Consumer Price Index (CPI) adjustment but adding 2% for the next 5 years. Additionally, products (for example, Periodicals and Flats) that have current rates that do not meet costs would be required to add an additional 2% to their increased rates. After the recommendations were presented to the PRC they allowed for a 90 day comment period, which has since passed.

There is some hope that the PRC recommendations won’t happen or will be tempered before any final ruling on the proposal is issued.  Reportedly, 3 of the 4 current Commissioners have expressed reservations with the proposal. There is no timetable for when the PRC will announce a final ruling.

4) The Postal Service Reform Act of 2018 was introduced in the Senate in March. How will this bill impact mailers?

This bill addresses many issues that have been affecting the USPS since the onset of declining mail volumes. For example:

  • Roughly half of the now expired exigent postage increase will be implemented while further increases will be frozen until a new rate system is finalized by the PRC.
  • The existing payment schedule requiring the USPS to pre-fund future retiree health care obligations will be eliminated, canceling any outstanding payments and amortizing payments over 40 years.
  • A new Postal Health Benefits Program will be created within the Federal Employee and Retiree Health Benefits Program.
  • The USPS will be permitted to introduce new non-postal products and services, ship alcohol, and partner with state and local government in service offerings.
5) Are any postal increases expected before the end of 2018 or at the beginning of 2019?

Typically, all USPS rate increases are announced at least 90 days prior to their implementation date.

That being the case, given how late we are into the year, I do not expect any USPS postal rate increases for the balance of 2018.

As for the beginning of 2019, I do suspect that something is going to happen. There are whispers that one of the Board of Governor nominees may face confirmation. If confirmed, I expect at least a CPI rate increase to be announced. If so, based on the current CPI, postage rates would increase approximately 3%.

I started out with a rosy prognosis, but there may be a more severe rate hike. Much depends on the Presidential Task Force. I believe that the findings and recommendations of the Task Force will steer action on the Postal Service Reform Act of 2018 and the PRC implementation of any recommendations resulting from their 10 year study. Timing and impact are currently unknown, but there is certainly a lot cooking.

 

Randy Weiler
Director Postal Affairs and Logistics

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