Obama Proposes Postage Increase, End to Saturday Delivery

President Obama proposed today a special increase in postage rates and an end to Saturday delivery as part of a plan to right the U.S. Postal Service’s finances.

The Obama Administration’s Fiscal Year 2013 budget plan would also end the “pre-payments” for retiree health insurance and return the overpayments into a retirement fund, which have been the major sources of its recent budget deficits.

“USPS faces long-term, structural operating challenges that have been exacerbated by the precipitous drop in mail volume in the last few years due to the economic crisis and the continuing shift toward electronic communication,” the plan says. “Bold action is needed to ensure that USPS can continue to operate in the short-run and achieve viability in the long-run.”

One part of USPS’s short-run relief would be allowing it “to seek the balance of the modest one-time increase in postage rates it proposed in 2010.” Obama released a deficit-reduction plan in September that contained similar language.

Those 2010 rate increases, which were rejected by the Postal Regulatory Commission, would have instituted average rate hikes of about 5.8% for most classes of mail and even larger increases for the Periodicals class. They would have been on top of the usual inflation-based increases for such mail classes as First Class, Standard, and Periodicals.

The plan refers to giving “USPS the ability to better align the costs of postage with the costs of mail delivery while still operating within the current price cap.” But it does not address such specific cost-control issues as early retirements, layoffs, closing post offices and distribution centers, or relaxing service standards.

By providing relief on the pre-payment and pension issues and allowing for the special price increase, the plan would presumably put the Postal Service in a better position to offer early-retirement incentives to downsize its workforce in light of declining mail volumes.

Here is Obama’s five-point plan:

1) Restructure Retiree Health Benefit pre-funding in order to accelerate moving these Postal payments to an accruing cost basis and reduce near-year Postal payments;

2) Provide USPS with a refund over two years of the $10.9 billion positive credit balance in Postal contributions to the FERS program;

3) Reduce USPS operating costs by giving USPS authority, which it has said it will exercise, to reduce mail delivery from six days to five days starting in 2013;

4) Allow USPS to increase collaboration with State and local governments; and

5) Give USPS the ability to better align the costs of postage with the costs of mail delivery while still operating within the current price cap, and permit USPS to seek the balance of the modest one-time increase in postage rates it proposed in 2010.

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