United States Postal Service operating cash was $23.373 billion on December 31, 2021. (U.S. Department of the Treasury Monthly Statement of the Public Debt.)
Here it is compared with the same date going back to 1990. (Three years did not report USPS cash.) When mail volume was growing from 1990-2006, and cost of service regulation was in effect, operating cash was much lower. Cash has grown rapidly during the price cap regime with required SEC reporting and expensing of estimated retiree health benefits. USPS cash earns very low interest on Treasury non-marketable securities, recently below 1%.
At the end of August 2021, when USPS raised monopoly mail rates by 6-9%, its cash was at $24.281 billion. To take this money from private sector mailers and invest it at less than 1% is a waste.
A government agency raising rates several times higher than inflation when it is sitting on $24 billion in cash is an indication that the “self-funded,” also known as “mailer-funded” profit-seeking business model for a public service is not working. It also shows that competent oversight and regulation of USPS is lacking.
At the moment, mailers should budget for rate increases similar to those imposed last August. The 2021 rate increases were driven mostly by the mail volume decline in 2020; this year’s hikes will be caused mainly by inflation.
As of now, USPS is projecting the Consumer Price Index (CPI) cap to be 4.755%. In its Annual Compliance Report, the agency calculated the mail density authority to be 0.583% and the retirement authority to be 1.071%, for cap of 6.409% on “compensatory”mail such as all First-Class and Marketing Mail Letters.
USPS plans to wait for the February CPI which comes out in mid-March and file the rates at the Postal Regulatory Commission (PRC) in early April. The earliest USPS could then implement would be early to mid-July. The Governors approve the date and rates and have not done so yet. We expect USPS to implement in mid-July, rather than the previous practice of near month-end.
The latest “rate authority” published by the PRC on December 10, 2021, shows a CPI cap of 3.264%. USPS is projecting that to increase to 4.755% with three more CPI releases. The upcoming CPI release dates are:
CPI Month Release Date
|December 2021 January 12, 2022|
|January 2022 February 10, 2022|
|February 2022 March 10, 2022|
The PRC would require non-compensatory products such as Marketing Mail Flats to be increased 2% more than the average, or a projected 8.409%. The non-compensatory class of Periodicals would have the option for USPS to add 2% to bring it to 8.409% which they likely will do.
We will keep you posted as we get closer to the April filing, but right now caps of 6.5% for “compensatory” and 8.5% for “non-compensatory” mail are likely. As always, individual rates for some types of mail will be more or less than the caps that apply to the weighted average of the “classes” of mail: First-Class, Marketing, and Periodicals.
A usually pro forma election of the chair of the USPS Board of Governors could be interesting this Wednesday.
USPS law includes:
The exercise of the power of the Postal Service shall be directed by a Board of Governors composed of 11 members appointed in accordance with this section. Nine of the members, to be known as Governors, shall be appointed by the President, by and with the advice and consent of the Senate, not more than 5 of whom may be adherents of the same political party. The Governors shall elect a Chairman from among the members of the Board.
It later continues:
The Governors shall appoint and shall have the power to remove the Postmaster General, who shall be a voting member of the Board. His pay and term of service shall be fixed by the Governors
The Governors and the Postmaster General shall appoint and shall have the power to remove the Deputy Postmaster General, who shall be a voting member of the Board. His term of service shall be fixed by the Governors and the Postmaster General and his pay by the Governors.
The Postal Service announced that it will hold an open virtual meeting on Wednesday, January 12 at 4:00 PM ET. The sole purpose appears to be the election of a chair and perhaps a vice-chair. The person the majority of the board re-elected to be chair at its November meeting, Ron Bloom (D), was not re-nominated by President Biden. Bloom’s service ended on December 8. President Biden nominated two new Governor candidates but they have not yet been confirmed by the Senate.
It would seem that the choice for chair will between current vice-chair Roman Martinez IV, a Republican nominated by President Trump, and a Democrat. The choice might be driven by who would best help passage of pending postal legislation to reduce retiree healthcare costs. The Governors normally elect one of their own rather than the Postmaster General as Chair.
The current membership of the Board of Governors:
Appointed by President Trump
Roman Martinez IV (R), Vice Chairman
John M. Barger (R)
Robert M. Duncan (R)
Donald L. Moak (D)
William D. Zollars (R)
Appointed by President Biden
Anton G. Hajjar (D)
Amber F. McReynolds (I)
Ronald A. Stroman (D)
Appointed by the Governors
Louis DeJoy, Postmaster General
Appointed by the Governors and Postmaster General
Douglas Tulino, Deputy Postmaster General
If the Senate confirms President Biden’s new nominees, Dan Tangherlini (D) will take Bloom’s seat and Derek Kan (R) will take John Barger’s place.
The Postal Service has been issuing weekly news releases that claim much improved mail delivery service versus last year. Nonprofit mailers are scratching their heads as they often do not see improved service for their mail. There are two main reasons for this.
First, USPS made both the goals and the standards easier to achieve. Halfway through fiscal year 2021, the agency lowered its service goal for First-Class Mail to 84.88% and to 86.62% for Marketing Mail and Periodicals. On October 1, the agency also lengthened the service standards for almost 40% of First-Class Mail.
Second, the mail that is measured for USPS aggregate service reports is only the highest quality automation-compatible mail prepared with approved Intelligent Mail Barcodes. USPS convinced the PRC in 2018 to change service measurement. It stopped using data supplied by an independent mail monitoring contractor sending and receiving seeded mail pieces. Now service measurement comes from USPS scanning of mail at its facilities.
Service measurement does not include an individual donor, member, subscriber, or bill-payer mailing back a First-Class envelope with Business Reply Mail (BRM) or a stamp. One large nonprofit has repeatedly experienced BRM containing thousands in donations sitting in a post office because one employee was out sick.
The Postal Service assumes final delivery when mail is scanned in the post office. With postal employee absenteeism rampant, USPS is delivering mail days after it reports it as delivered.